Contract Law - Seventh Circuit Upholds Verdict Based On Oral Contract

MMG FINANCIAL CORPORATION v. MIDWEST AMUSEMENTS PARK, LLC, Court of Appeals, 7th Circuit 2011 - Google Scholar

This case was decided by the Seventh Circuit on January 5, 2011.

The Plaintiff, MMG Financial, brought suit against Midwest Amusements Park, LLC on the ground that Midwest has failed to pay for 24 go-karts that Midwest financed. The go-karts were originally sold by another company, Team Hurricane, but they were financed by MMG Financial. Thus, this is a routine equipment financing transaction. What makes the case unusual is that the parties drafted, but did not sign, a comprehensive written agreement which laid out the terms of the deal.

The sales agreement identified Midwest as the purchaser of the go-karts; MMG Financial as the finance company and Team Hurricane as the dealer. The price was to be $89,502.12 and the balance was to be paid over 24 months at an interest rate of 24%.

Midwest (which did business under the name Gronvall) did not sign the agreement, but it took delivery of the go-karts.

Midwest never made any payments for the go-karts.

MMG filed suit and Midwest filed a counterclaim alleging that MMG had never paid the original vendor of the go-karts.

At trial Midwest disputed that there was a contract. It also argued that MMG breached the contract by failing to pay for the go-karts. The evidence of the breach was an email from a CRG (the manufacturer of the go karts) that MMG had failed to pay for the go-karts. The district court excluded the email on the ground that it was hearsay.

The district court granted summary judgment to MMG on Midwest's counterclaim because Midwest was unable to point to any admissible evidence that MMG had breached the financing agreement. As the Seventh Circuit noted, "the evidence Midwest offered to establish that MMG had failed to pay Cameron Motorsports for the go-karts is classic hearsay...the testimony of its own employees repeating what Cameron Motorsports had told them." The statements were offered "to prove the truth fo the matter asserted, namely that MMG had not paid Cameron Motorsports for the go-karts shipped to Midwest." Slip Opinion at 8. Thus, Midwest was unable to point to any evidence showing that MMG breached the contract.

Comment: the plaintiff was able to prove to the jury that the parties accepted the draft sales agreement, even though it was never signed. This demonstrates that, in a rare case, the failure to obtain the signature on an agreement can be overcome with testimony and proof.

Edward X. Clinton, Jr.