Actions Speak Louder Than Words: Hanham v. Access Management Group L.p. Reestablishes Validity for Course of Conduct Parol Contracts in Georgia
| Publication year | 2020 |
Actions Speak Louder Than Words: Hanham v. Access Management Group L.P. Reestablishes Validity for Course of Conduct Parol Contracts in Georgia
Elizabeth C. Selph
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Many laypeople recognize and revere the value of a written contract as an instrument legally binding, but they also believe such work to be solidified in its construction, unamendable without a rewriting of the agreement. Georgia courts, however, for over a century have allowed for contracts not governed by the statute of frauds1 to be amended through oral agreements or course of conduct.2 This principle was reaffirmed in Hanham v. Access Management Group L.P.,3 a 2019 Georgia Supreme Court case where the court recognized that written contracts can be amended by course of conduct in the state of Georgia.4 Prior to 2019, several Georgia Court of Appeals cases, using a slightly altered definition for a breach of contract from a 2013 Georgia Court of Appeals
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case,5 excluded all evidence that attempted to show any agreement which modified or amended any text in the written contract.6 The only action considered by the courts under this new definition for a breach of contract claim were actions that were "specified in the contract."7
Although this revised definition used for a breach of contract was only slightly altered from the original definition used previously in Georgia courts8 and was seemingly only a simple and innocent rewording, the definition had profound effects on contract law in Georgia. The new definition quickly became established precedent in several Georgia cases, and courts in Georgia refuted or did not consider arguments in cases where parties attempted to argue for behavior or interactions forming a new agreement. The courts stated that any basis of action had to accrue from matters "as specified in the contract."9 In 2018, the Georgia Court of Appeals used the revised definition for a breach of contract to hold that an contract could not be amended in the absence of a written modification,10 ignoring the rulings of Georgia courts since 1884.11
Hanham v. Access Management Group L.P. showed how a simple and innocent rewording of a rule had a profound effect on contract law despite established and well-recorded precedent.12 The cases preceding Hanham v. Access Management Group L.P. also highlight how quickly an incorrect rule can be repeated by courts and harm people's rights in
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a common law system.13 With this 2019 decision, the Georgia Supreme Court discarded the 2013 definition of a breach of contract and once again allowed courts to consider and question the validity of a contract based on interactions which take place outside of the written agreement.14
Under its Declaration of Covenants, the St. Mario Homeowner's Association delegated the management of the St. Mario neighborhood to Access Management, a third party.15 Access Management, as part of the agreement, was to "[o]perate and maintain the Development according to the highest standards achievable consistent with the overall plan" but could only work within the neighborhood's common areas.16 Over time, Access Management, without the consent of the St. Mario Homeowner's Association, expanded their purview to "managing the homeowner application process for landscaping modifications," which included the residence of Marie Berthe-Narchet.17
Berthe-Narchet presented to Access Management an application to modify her backyard.18 Despite the application's lack of compliance with the architectural standards manual of the St. Mario Homeowner's Association, Access Management approved the modification, and Berthe-Narchet hired a landscaper to complete the project.19 Once the project was underway, as a result of the lack of compliance, the alterations caused the property of Mary and James Hanham, neighbors of Berthe-Narchet, to be flooded.20
Mary and James Hanham brought, among several claims, a claim of breach of contract against Access Management for alleged "breach of its contractual duties under the management agreement."21 The Forsyth County Superior Court found for the Hanhams on the breach of contract claim, denying Access Management's motion for directed verdict, under
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the argument that Mary and James Hanham were third-party beneficiaries of the contract between the St. Mario Homeowner's Association and Access Management.22
At the Georgia Court of Appeals, Access Management stated that the superior court mistakenly denied Access Management's motion for directed verdict on the breach of contract claim, and the court agreed, reversing.23 The Georgia Court of Appeals held that the Hanhams did not present the requisite evidence to demonstrate that Access Management breached its agreement with St. Mario Homeowner's Association, stating that "[no] breach of contract claim can be founded upon responsibilities not specified in the contract,"24 relying upon five other Georgia Court of Appeals' cases.25 The Georgia Supreme Court ultimately reversed the Georgia Court of Appeals' rulings, holding that a contract, at least between private parties,26 can be altered or modified by later course of conduct.27
A. Adoption of Parol Agreements and Course of Conduct Modifications for Written Contracts in Georgia
Cooley v. Moss,28 a 1905 Georgia Supreme Court case, was the first Georgia court case to outline the elements for a breach of contract in a similar manner as is written today.29 Previous court cases dealt with breaches of contracts, such as Smith v. Georgia Loan, Savings & Banking Co.30 in 1901, but courts discussed the breach only as it related to the fact pattern of the case.31 In Cooley, the court's definition of breach of contract bodes strong similarities to the Georgia courts of today's definition; Cooley set the foundation for future breach of contract claims in Georgia.32
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One of the earliest cases in Georgia ruling that a written contract can be modified by subsequent agreements was Rogers v. Atkinson,33 an 1846 Georgia Supreme Court case. The court in Rogers stated that the court may admit "evidence of conversations [and circumstances] subsequent to the time of making the agreement . . . to show that the parties agreed afterwards to vary the contract."34 While the Rogers decision did not state a source in its reasoning (perhaps English law), Georgia courts have since adopted the same rationale of Rogers, and the same rationale has been used in almost every breach of contract dispute involving a subsequent agreement in Georgia since.
Subsequent oral modifications to written contracts has been codified in Georgia since The Code of the State of Georgia,35 the first legislative code for the state, which was published in 1861.36 Such a revision is called a parol agreement or a parol contract, which is defined in Black's Law Dictionary as "a contract or modification of a contract that is not in writing."37 In The Code of the State of Georgia, parol evidence is allowed "to prove a new and distinct subsequent agreement."38
Since Eaves & Collins v. Cherokee Iron Co.39 in 1884, parties have been able to modify a written contract through subsequent course of conduct.40 In this decision, the Georgia Supreme Court ruled that,
When a contract is in writing, each party has a right to expect the other to do precisely what he promises; but if, in the course of the execution of its terms—the carrying them into practical execution in a continuous business—some of those terms are departed from and
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money is paid and received on that departure for some time . . . the departure is a sort of new agreement.41
This decision was later codified in the 1895 The Code of the State of Georgia.42
B. Allowance of Parol Agreements and Course of Conduct Modifications Prior To Hanham v. Access Management Group L.P.
Parol agreements and course of conduct modifications have a long history in Georgia case law prior to 2019. Since 1846 with Rogers v. Atkinson,43 courts have repeatedly allowed parol agreements in a myriad of cases. The same can be stated with Eaves & Collins v. Cherokee Iron Co., which in 1884 established the existence of course of conduct modifications into case law.44 Except when a written contract disallows any course of conduct modifications,45 parties are usually bound by their proven conduct as well as a written contract.
Parker v. Brown House Co.46 is a 1903 Georgia Supreme Court case that considered both parol agreements and course of conduct modifications to a written contract.47 In Parker, both parties agreed in a leasing contract that any desired repairs to be made to the leased building had to be submitted as a notice detailing the type of repair desired and an estimate of the cost of repair. This notice then had to be approved by both parties before repairs could begin. The parties would also pay equally for any costs of repair.48
The defendant began to ask the plaintiff to repair the leased building but did not require the plaintiff to submit a notice and never approved the repairs in writing. The plaintiff continued to do repairs at the request of the defendant, but never received the requisite notice or approval. Near the end of the lease after all the repairs were finished, the plaintiff submitted to the defendant the cost of the repairs so the defendant could pay half the cost; the defendant refused to pay because he had not received the requisite notice and approval as stipulated in the contract.49
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The Georgia Supreme Court stated that "no law of this [s]tate require[d] such a stipulation to be in writing," and parties have the ability to waive certain limitations in a contract and modify an agreement by course of conduct.50 The court found that while there was no...
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