Contracts – Beware of signing a lease agreement on behalf of a company in your own name in Tennessee.

Posted on Sep 16 2013 9:02AM by Attorney, Jason A. Lee

Analysis: The recent Tennessee Court of Appeals decision of Reginald M. Mudd v. Rexford Goostree, Jr. and Liberty Cabinets and Millwork, Inc., 2013 WL 1402157 (Tenn. Ct. App. 2013) provided a good example of the great danger in signing a lease agreement in an individual’s own name when it is intended to be signed on behalf of a company.  In this case, the lease agreement listed the landlord as “Mudd Properties”. Mudd at 1.  The tenant was listed as “Liberty Cabinets & Millworks, Inc.” Mudd at 1. However, in the signature box at the end of the lease Rexford Goostree Jr., the owner of Liberty Cabinet & Millworks, Inc., signed the lease as follows:




By Rex Goostree, Jr.


(bold portions were handwritten) Mudd at 1.  He did not state that he was signing on behalf of the company as a representative.  The lease terms were breached by the Tenant and therefore the plaintiff sued Rex Goostree Jr. personally for breach of contract. Mudd at 1.  Rex Goostree Jr. asserted in response that he should not be held personally liable under the commercial lease because “Liberty Cabinets & Millworks, Inc.” was named as the tenant in the body of the lease agreement.  Further, there was no language in the agreement that identified Rex Goostree Jr. as a guarantor of the lease.


The Tennessee Court of Appeals also found that because Rex Goostree Jr. was handwritten as the “Tenant” and then the lease was signed by “Rex Goostree, Jr.”, this was a clear designation that Rex Goostree Jr. was a tenant.  As a result, the court noted that “only if a contract is ambiguous does a court look beyond the four corners of the document and consider evidence of the parties' intentions.”  Mudd at 2.  Therefore, Rex Goostree Jr. was personally obligated under the terms of the lease. Mudd at 3. 


I am actually somewhat surprised by this decision.  It is certainly arguable that there is an actual obvious ambiguity in the contract because it lists “Liberty Cabinets & Millworks, Inc.” as the Tenant at the beginning and then later lists an individual as the Tenant.  Nobody signed the document on behalf of the company.  This is a pretty significant ambiguity which I think should allow the Court to look beyond the “four corners” of the lease. 


Regardless, this case shows how important it is to properly sign lease agreements and other contracts.  Even if a “Tenant” or “Party” to a contract is specifically listed in the body of the contract as a corporation or other business, if an individual signs on the dotted line personally, that individual can be held personally responsible for the contract.  This is a significant mistake that can result in tremendous personal liability when none is intended. 


Follow me on Twitter at @jasonalee for updates from the Tennessee Defense Litigation blog.

TAGS: Breach of Contract, Corporation/LLC Law, Contracts
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Jason A. Lee is a Member of Burrow Lee, PLLC. He practices in all areas of defense litigation inside and outside of Tennessee.

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Tennessee Defense Litigation Blog
Jason A. Lee, Member of Burrow Lee, PLLC
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