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Question about a open book contract in construction.

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Not IC

Junior Member
What is the name of your state? Guam

If there is a ongoing relationship under an open book contract say 12 years where payments are made monthly and additional costs are allowed only with permission does the balance continue on with the contract? The contract has an automatic renewal clause that was relied on the entire time. The customers monthly payment was $5,800 with allowable additional costs. The increases were added to the balance and the monthly payment stayed the same. The contract is now over because my father passed away. I have spoken to a lawyer here locally and his opinion is it a breach of contract case and we can only collect 4 years back. The law here is 4 years on a written contract accruing when the right to action occurs and 4 years for an open book account accruing on the last item of the account. If its under the open book account law wouldn't the balance continue on while they were making payments the entire time? The law also says its 4 years after the last item of the account and there was never a closing of the account or cancellation of the contract. I realize his passing away ended the contract, but is there a final step needed to close the account? Also could a waiver of rights and estoppel clause preventing the other party from taking a different position once they required the work have an effect on the statute of limitations?
 


adjusterjack

Senior Member
we can only collect 4 years back.
Common mistake. A statute of limitations is a deadline for filing a lawsuit, not for collecting a debt. Did you look up the statute and read it before you posted here?

It's addressed by the Guam Code - Title 7 Civil Procedure and Judiciary Chapter 11: Time for Commencing Actions.

11303. Within Four Years --.
(a) An action upon any contract, obligation or liability founded upon an instrument in writing.
(b) An action to recover
(1) upon a book account whether consisting of one (1) or more entries;
(2) upon an account stated based upon an account in writing, but the acknowledgment of the account stated need not be in writing;
(3) a balance due upon a mutual, open and current account; provided, however, that where an account stated is based upon an account of one (1) item, and where an account stated is based upon an account of more than one (1) item, the time shall begin to run from the date of the last item.
11304. Book Account Defined.
The term book account means a statement which constitutes the principal record of one (1) or more transactions between a debtor and a creditor arising out of a contract of some fiduciary relation, and which shows the debits and credits in connection therewith, and against whom and in favor of whom the entries are made, is entered in the regular course of business as conducted by the creditor or fiduciary, and is kept in a reasonably permanent form and manner and is
(1) in a bound book, or
(2) on a sheet or sheets fastened in a book or to a backing but detachable therefrom, or
(3) on a card or cards of a permanent character or is kept in any reasonably permanent form and manner.


I have no way of knowing whether your opinion is correct that this was a book account because I can't read the contract from here and I have no idea what provision were made for payment, hence no clue as to when the breach occurred.

Wild guess for the two cents that it's worth. If the $5800 was paid regularly and the other party had permission to defer payment of the additional amounts until some future date then there is no breach until that date arrives and no payment is made. On the other hand if no date was specified I hope the contract called for payment on demand so the breach would have occurred when the demand occurred and no payment ensued.

So, what's the story here? How much does the customer owe and what discussions have there been regarding payment?

By the way, the debt is owed to your father's estate. The estate will have to hire an attorney to represent it in any lawsuit. Even if you are the court authorized executor or representative of the estate you would still have to hire an attorney to sue the customer because it would be illegal to engage in the unauthorized practice of law.

I suggest you go hire that attorney you talked to and let him handle it before you make a costly mistake.
 

Not IC

Junior Member
Common mistake. A statute of limitations is a deadline for filing a lawsuit, not for collecting a debt. Did you look up the statute and read it before you posted here?

It's addressed by the Guam Code - Title 7 Civil Procedure and Judiciary Chapter 11: Time for Commencing Actions.

11303. Within Four Years --.
(a) An action upon any contract, obligation or liability founded upon an instrument in writing.
(b) An action to recover
(1) upon a book account whether consisting of one (1) or more entries;
(2) upon an account stated based upon an account in writing, but the acknowledgment of the account stated need not be in writing;
(3) a balance due upon a mutual, open and current account; provided, however, that where an account stated is based upon an account of one (1) item, and where an account stated is based upon an account of more than one (1) item, the time shall begin to run from the date of the last item.
11304. Book Account Defined.
The term book account means a statement which constitutes the principal record of one (1) or more transactions between a debtor and a creditor arising out of a contract of some fiduciary relation, and which shows the debits and credits in connection therewith, and against whom and in favor of whom the entries are made, is entered in the regular course of business as conducted by the creditor or fiduciary, and is kept in a reasonably permanent form and manner and is
(1) in a bound book, or
(2) on a sheet or sheets fastened in a book or to a backing but detachable therefrom, or
(3) on a card or cards of a permanent character or is kept in any reasonably permanent form and manner.


I have no way of knowing whether your opinion is correct that this was a book account because I can't read the contract from here and I have no idea what provision were made for payment, hence no clue as to when the breach occurred.

Wild guess for the two cents that it's worth. If the $5800 was paid regularly and the other party had permission to defer payment of the additional amounts until some future date then there is no breach until that date arrives and no payment is made. On the other hand if no date was specified I hope the contract called for payment on demand so the breach would have occurred when the demand occurred and no payment ensued.

So, what's the story here? How much does the customer owe and what discussions have there been regarding payment?

By the way, the debt is owed to your father's estate. The estate will have to hire an attorney to represent it in any lawsuit. Even if you are the court authorized executor or representative of the estate you would still have to hire an attorney to sue the customer because it would be illegal to engage in the unauthorized practice of law.

I suggest you go hire that attorney you talked to and let him handle it before you make a costly mistake.
They defined his contract as a not to exceed year to year contract. I read it is also known as a open account contract common in construction. The contract allowed for additional expenses. My father contacted the other party and their lawyer two years into the contract notifying them that they need to raise his payment of $5,800 a month to reflect the actual amount of work they were requiring. Since my father passed its unclear what their response was if there even was a response because all we have to go off is his emails. I think it was one of two things: 1) they denied his request even though the contract allows for it or 2) they never responded even though he was awaiting their response. I think maybe they told him he was wrong, even though he knew he was right. He continued in good faith providing the services required by the contract even though the hours worked exceeded the monthly threshold.

To be honest he had taxes. Its not worth us pursuing the lawsuit unless all his time worked spanning 12-14 years is included. The attorney I'm interested in going with said we can only collect 4 years back. There are a few things I think in the contract that would allow for us to collect all the way back 12-14 years.

1.) The contract is an automatic renewal service contract with no minimum only a maximum cap on billable hours. It renewed every year until after his death and possibly after (probably not), because there is a clause preventing them from using waiver and estoppel to object against previous and future performance. That part is unlikely, but if the same contract was automatically renewing every year wouldn't the balance also follow?

2.) When he contacted them about the issue with the contract it may have brought up equitable tolling. They either told him he was wrong (which he wasn't) or they never answered him after he contacted their attorneys and he continued on in good faith. He followed the contract completely they didn't.

For example, when pursuing one of several legal remedies, the statute of limitations on the remedies not being pursued will be equitably tolled if the plaintiff can show:
  • Timely notice to the adverse party is given within applicable statute of limitations of filing first claim
  • Lack of prejudice to the defendant
  • Reasonable good faith conduct on part of the plaintiff.
It has been held that equitable tolling applies principally if the plaintiff is actively misled by the defendant about the cause of action or is prevented in some extraordinary way from asserting his or her rights. Importantly, it has also been held that the equitable tolling doctrine does not require wrongful conduct on the part of the defendant, such as fraud or misrepresentation.[5]

3.) The continuing violation doctrine tolled the statute of limitations. Each monthly payment was a separate offense all the way to my father death and maybe past?

4.) Some for of estoppel like promissory or equitable estoppel can be used against a statute of limitations defense



I know we will have to do probate and an attorney is needed. I have seen two different attorneys and I like the latest on will probably use him. Im trying to see if there is anyway to collect all that is owed to my father. Maybe some form of equity if nothing else works out?
 

adjusterjack

Senior Member
You didn't answer my question.

How much does the customer owe and what discussions have there been regarding payment?
And by that I meant recent discussions and with what result?

I know we will have to do probate
If you haven't opened probate you go nowhere with this because you are not authorized by the court to represent the estate.

Its not worth us pursuing the lawsuit unless all his time worked spanning 12-14 years is included. The attorney I'm interested in going with said we can only collect 4 years back. There are a few things I think in the contract that would allow for us to collect all the way back 12-14 years.
Well, I'm not going to second guess the lawyer, though you may be inclined to.

Again, it's not a matter of collecting, it's a matter of filing the lawsuit. If you file the lawsuit today it will have to be for a breach that occurred within the last 4 years.
 

Not IC

Junior Member
H
You didn't answer my question.



And by that I meant recent discussions and with what result?



If you haven't opened probate you go nowhere with this because you are not authorized by the court to represent the estate.



Well, I'm not going to second guess the lawyer, though you may be inclined to.

Again, it's not a matter of collecting, it's a matter of filing the lawsuit. If you file the lawsuit today it will have to be for a breach that occurred within the last 4 years.
The customer owes $1.5 million over the 12-14 year period. Not sure what’s collectible. There has been no effort to directly collect the amount owed after my fathers death. I represent my mother and we live in a community property state/territory. Opening probate is unnecessary if we can’t collect more than he owed. I understand what your saying and I agree. I’m only trying to figure out if we can collect all the money maybe through some form of equity law or if that statute of limitations could have been tolled or extended. Or possibly if since it’s a open account contract the balance continued to the last item of account.
 

adjusterjack

Senior Member
Opening probate is unnecessary if we can’t collect more than he owed.
Even if a third or a fourth of that money is an actionable debt to the estate, only the estate through its representative can pursue it. And it would certainly be worth even a thousand or two for an attorney to review the contract and the accounts and provide you with options.
 

Not IC

Junior Member
Even if a third or a fourth of that money is an actionable debt to the estate, only the estate through its representative can pursue it. And it would certainly be worth even a thousand or two for an attorney to review the contract and the accounts and provide you with options.
I agree with you. The problem is however that he owed a few hundred thousand in taxes. We are mostly interested in collecting if an excess is possible. I did read that my mother could qualify for family allowance before the taxes comes out like a year or two worth. We don’t have a lot of money so even that would help. Thank you for your help so far.
 

Not IC

Junior Member
If there is an unpaid balance on a contract and it automatically renews does the balance move forward restarting the statute of limitations?

The contract is a not to exceed year to year with automatic renewal clause open book construction contract that was used for 10-14 years until my father passed away. If it is a open book contract and payments were made every month until his death could the entire remaining amount be due after his death when his last check was received?
 
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Not IC

Junior Member
Is an open book contract the same as open book account or does it create a open book account? This is a construction contract with a fixed price and allowable increases.
 

adjusterjack

Senior Member
The problem is however that he owed a few hundred thousand in taxes. We are mostly interested in collecting if an excess is possible.
I'm not sure it makes any difference. I don't know anything about Guam tax law but I expect that the estate would still owe the taxes regardless of any other money coming into the estate.

If it is a open book contract and payments were made every month until his death could the entire remaining amount be due after his death when his last check was received?

Is an open book contract the same as open book account or does it create a open book account? This is a construction contract with a fixed price and allowable increases.
I provided the statutory definition of "book account." I have no idea if your father's contract with the customer conforms to that definition and, apparently, neither do you. You are going to have to take the contract and the business records to a lawyer to review your options.

Otherwise, I think you are wasting your time on the internet trying to figure this out.
 

Not IC

Junior Member
I'm not sure it makes any difference. I don't know anything about Guam tax law but I expect that the estate would still owe the taxes regardless of any other money coming into the estate.



I provided the statutory definition of "book account." I have no idea if your father's contract with the customer conforms to that definition and, apparently, neither do you. You are going to have to take the contract and the business records to a lawyer to review your options.

Otherwise, I think you are wasting your time on the internet trying to figure this out.
I read the description you posted and he did keep copies of his invoices which showed payments to him. The invoices showed the payment versus the total amount of hours worked. His contract is defined as a open account contract.

Guam tax law mirrors federal tax law. Little to no estate tax when you die only creditors and back taxes can touch the estate.

§ 2727. Expenses, Charges and Debts; Order of Payment.
The debts of the decedent, the expenses of administration and the charges against the estate shall be paid in the following order:
1. Expenses of administration; 2. Funeral expenses;
3. Expenses of last illness;
4. Family allowance;
5. Debts to the Government of Guam;
6. Wages, to the extent of nine hundred dollars ($900.00), of each employee of the decedent, for work done or personal services rendered within ninety (90) calendar days prior to the death of the employer. If there is not sufficient money with which to pay all such labor claims in full, then money available must be distributed among the claimants in accordance with the amount of their respective claims;
7. Mortgages, judgments that are liens, and other liens, in order of their priority, so far as they are paid out of the proceeds of the encum- bered property. If such proceeds are insufficient for that purpose, the part of the debt remaining unsatisfied shall be classed with the general demands against the estate;
8. Judgments that are not liens rendered against the decedent in his lifetime and all other demands against the estate, without preference or priority one over another.

But then there's this law:


§ 3021. Distribution in General: Payment of Taxes.
Before any decree of distribution is made, all taxes due from the distributee and all personal property taxes due and payable by the estate must be paid.
 

Not IC

Junior Member
If there is an unpaid balance on a contract and it automatically renews does the balance move forward restarting the statute of limitations?
I'm not sure it makes any difference. I don't know anything about Guam tax law but I expect that the estate would still owe the taxes regardless of any other money coming into the estate.



I provided the statutory definition of "book account." I have no idea if your father's contract with the customer conforms to that definition and, apparently, neither do you. You are going to have to take the contract and the business records to a lawyer to review your options.

Otherwise, I think you are wasting your time on the internet trying to figure this out.
If there is an unpaid balance on a contract and it automatically renews does the balance move forward restarting the statute of limitations?
 

adjusterjack

Senior Member
Sorry, I don't have an answer for you and I doubt that anybody else will have one, except for a lawyer who can review the contract and the accounts and advise you.
 

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