Charlene Hicks—Senior Attorney, National Legal Research Group 

            To date, no consensus has been reached among courts throughout the United States on the question as to whether a creditor’s issuance of an IRS Form1099-C results in the extinguishment of the reported debt in favor of the debtor. Form 1099-C bears the title “Cancellation of Debt,” and, according to the IRS, a creditor should issue this form to the debtor for any year in which a debt is cancelled. Depending on the state in which the debtor resides, a creditor’s issuance of a Form 1099-C may have the effect of barring further collection efforts and of completely discharging the reported debt.

Charlene Hicks—Senior Attorney, National Legal Research Group

     Although the law generally does not allow a contracting party to bring a tort claim against another party to the same contract, this protection does not extend to persons or entities that are classified as "strangers" to the contract. Thus, a contracting party may maintain a viable claim for tortious interference with contractual relations against a stranger to the agreement. In practice, however, the performance of a contract is often contingent on the acts and approval of persons or entities that did not formally enter into the agreement. This makes it difficult to distinguish between a protected contracting "party" and an unprotected "stranger."

Emily Abel—Senior Research Attorney, National Legal Research Group

            The Virginia Supreme Court recently reiterated its position that in Virginia, the source-of-duty rule prohibits suing in tort when the only basis for the duty breached lies in contract. In MCR Federal, LLC v. JB&A, Inc., 294 Va. 446, 808 S.E.2d 186 (2017), decided on December 14, 2017, the seller of a government contracting business brought breach of contract and fraud claims against the buyer of their firm. As part of the parties' agreement, the buyer warranted that there were no adverse suits, investigations, or government actions against it at the time the parties signed the contract. The contract also required that the buyer deliver to the seller a "bring down certificate" reaffirming those warranties at closing.

            While the warranties were accurate at the time of contracting, they were no longer accurate at the time of closing. In the period between contracting and closing, the United States Air Force launched an investigation into the buyer for their actions pertaining to a contract unrelated to the contract between seller and buyer and suspending the buyer from government contracting. Because of this investigation, the business did not meet earnings thresholds set forth in the contract, which resulted in the seller not receiving additional payments. The seller sued the buyer, claiming the "bring down certificate" produced at closing was a breach of contract and fraud because it did not reveal the Air Force investigation. After a lengthy bench trial, the circuit court found in favor of the seller on both the fraud and breach of contract claims.

Jim Witt—Senior Attorney

            There is no question that law of a particular country develops in the context of the country's culture, religion, and customs.  A case recently decided by the Supreme Court of Taiwan illustrates this point.  See https://www.taiwannews.com.tw/en/

news/3332521.  The plaintiff, identified as Luo (surname), brought a contract action against her second son, Chu, alleging that he owed her nearly US$1  million for raising him and financing his training at dental school (Chu's brother also completed dental training; he settled a similar claim with the plaintiff).  She claimed that she and her husband had run a dental clinic but that, after the couple's divorce, she raised her sons as a single mother.  As she was concerned that her sons would not provide for her in her old age, she had each son, at age 20, sign a written agreement, providing that her sons would pay her 60% of their net profits until the total reached 50 million new Taiwanese dollars (nearly US$1.7 million).  It is implicit in the Confucian tradition of filial piety that children support their aging parents.

Charlene Hicks, Senior Attorney, National Legal Research Group

            In what has been termed a groundbreaking opinion, the Second Circuit recently held that the federal Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227(b), bars a consumer-buyer from revoking his or her contractual consent to receive creditor calls concerning the underlying contract or account.  The case, Reyes v. Lincoln Automotive Financial Services, 861 F.3d 51 (2d Cir. 2017), provides creditors with a strong defense against consumers who issue complaints about the creditors’ debt collection processes.

            In the case, Alberto Reyes Jr. (“Reyes”) leased a new Lincoln MKZ luxury sedan from a Ford dealership. The lease was financed by Lincoln. One provision of the lease stated that Reyes expressly consented to electronic or verbal contact from Ford and Lincoln and their agents, affiliates, and representatives. Id. at 53-54. This contact included manual calling methods, prerecorded voice messages, texts, and emails to any email or telephone number that Reyes provided, “now or in the future, including a number for a cellular phone or wireless device[.]” Id. at 54. In his lease application, Reyes provided Lincoln with his cell phone number.

Paul Ferrer, Senior Attorney, National Legal Research Group

      All states have a statute of frauds, based on the original Statute of Frauds enacted in England in 1677, barring actions upon some types of promises unless evidenced by a writing signed by the party to be charged with the promise. The promises typically covered by a state’s statute of frauds include "any promise to answer for the debt, default, or misdoing of another," and "any agreement that is not to be performed within one year from the making thereof." Ky. Rev. Stat. Ann. § 371.010(4), (7). In Chin v. Chin, 494 S.W.3d 517 (Ky. Ct. App. 2016), the Kentucky Court of Appeals held that neither of these provisions barred a claim by parents ("the Chins") against their son ("Raymond") for breach of an oral contract to repay a college loan that the parents had taken out for his benefit.

     In that case, Raymond attended college at the Rose-Hulman Institute of Technology, a top-ranked engineering college that carried a price tag of about $54,000 per year in 1999. At the time, Raymond’s father was making $55,000 per year as a teacher, while his mother was making $18,000 per year as an aide. The Chins obtained a Parent PLUS loan to pay for Raymond’s college expenses, which ultimately totaled more than $58,000 (Raymond received a partial scholarship). Although the Chins signed for the loan, Raymond orally agreed that he would be responsible for paying the loan, and would repay any amounts the Chins had already paid, as soon as he had a job.

Charlene Hicks, Senior Attorney, National Legal Research Group

     In Kingdomware Technologies, Inc. v. United States, 136 S. Ct. 1969 (2016), the United States Supreme Court recently declared that the Department of Veterans Affairs (the "VA") is required to give priority to veteran-owned businesses in the bidding process for government contracts as long as two or more veteran-owned small businesses may reasonably be expected to submit fair and reasonable bids. This unanimous decision should provide a boon to veteran-owned businesses and should also give government agencies pause in assessing bids for contract work.

     The Kingdomware dispute originated shortly after the enactment of the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the "VA Act"). The VA Act provides that the VA must restrict bid competitions to veteran-owned companies as long as the "rule of two" is satisfied. Specifically, 38 U.S.C. § 8127(d) states:

Anne Hemenway—Senior Attorney, National Legal Research Group

     A personal service contract, such as one between an artist and a manager or between a recording group and a record company, may be rejected or assumed under the U.S. Bankruptcy Code. Generally, such management or promotional agreements are considered to be executory contracts under 11 U.S.C. § 365(a). An executory contract under § 365 is not specifically defined, but the term commonly refers to a contract that has performance due from both the debtor and the contracting party. In re Gen. Datacomm Indus., 407 F.3d 616 (3d Cir. 2005). Professor Vern Countryman's definition in Executory Contracts in Bankruptcy: Part I, 57 Minn. L. Rev. 439, 460 (1973), is considered to be the definitive definition of an executory contract.

     A trustee or debtor-in-possession has a right to assume or reject executory contracts under § 365 within the time frames set forth in § 365(d), but the agreement remains in effect pending the actual act of assumption or rejection. In re Nat'l Steel Corp., 316 B.R. 287 (Bankr. N.D. Ill. 2004). If a personal service contract is rejected, it is considered breached under § 365(g) as of the date immediately preceding the date the bankruptcy petition was filed.