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Keywords

contractbreach of contracttrialnovation
contractappealtrialappellant

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Lowe v. Smith, Not Reported in S.W. Rptr., 2016 WL 5210874, 90 UCC Rep.Serv.2d 1040

Facts

Jeff Lowe sold his convenience store, J & K Market, to John and Karen Smith in July 2012. The sale included a line of credit that the Smiths agreed to assume, but after experiencing issues with inventory and equipment, they only paid interest on the line of credit for eighteen months. Lowe filed a complaint for breach of contract after the Smiths stopped making payments, leading to a trial where both parties presented conflicting accounts of the sale and its terms.

Mr. Lowe acquired J & K in September 2010 and operated it himself until he sold it to Appellants in July 2012. Sometime after J & K began operation, Mr. Lowe opened up a line of credit with American City Bank (“line of credit”) to pay for the operating costs of the business including buying the necessary equipment and inventory.

Issue

Did the trial court err in concluding that a binding contract existed between the parties and in its findings regarding breach, modification, and novation of the contract?

Appellants raise the following issues on appeal, which are taken from their brief and restated as follows: 1. Whether the trial court erred in its conclusion that a binding contract existed between the parties.

Rule

Under the Uniform Commercial Code (UCC) as adopted in Tennessee, a contract for the sale of goods may be formed in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of such a contract.

Under the UCC, formation of contracts for the sale of goods is governed by Tennessee Code Annotated Section 47-2-204.

Analysis

The trial court found that a binding contract existed despite the Smiths' claims of misunderstanding regarding the inclusion of real estate in the sale. The court applied UCC principles to determine that the parties had entered into an enforceable agreement, and it rejected the Smiths' arguments for modification or novation, finding insufficient evidence to support their claims.

The trial court found that a binding contract existed between the parties. Specifically, Appellants contend that there was no meeting of the minds when the Bill of Sale was signed because they believed that the sale of the “business” included the sale of the real estate, when, in reality, Mr. Lowe had no ownership interest in it.

Conclusion

The appellate court affirmed the trial court's decision, concluding that the trial court did not err in its findings and that the Smiths were required to pay the remaining balance on the line of credit after accounting for their breach.

The appellate court affirmed the trial court's decision, concluding that the trial court did not err in its findings and that the Smiths were required to pay the remaining balance on the line of credit after accounting for their breach.

Who won?

Jeff Lowe prevailed in the case because the court found that the Smiths breached the contract by failing to make the required payments on the line of credit.

Jeff Lowe prevailed in the case because the court found that the Smiths breached the contract by failing to make the required payments on the line of credit.

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