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Verification letters support estoppel argument

November 27, 2013

A series of verification letters from a subcontractor to a contractor provided the grounds for the doctrine of promissory estoppel from being applied to commercial transactions.

Sterling Commercial Credit – Michigan LLC, Hammert’s Iron Works Inc., and National Steel Erectors Inc. entered into a maze of contractor and subcontractor agreements to do construction work at the Veteran’s Administration Outpatient Clinic in Evansville.

As part of those agreements, Sterling purchased invoices from NSE and Hammert’s verified the validity of the invoices. Hammert’s tried to impose payment conditions on the second invoice and did not pay the third invoice.

On appeal, Sterling argued that since Hammert’s had sent verification letters, it was estopped from denying payment on the third invoice and placing payment restrictions on the second invoice.

In Sterling Commercial Credit – Michigan, LLC v. Hammert’s Iron Works, Inc., 49A02-1306-PL-513, the Indiana Court of Appeals agreed. It found that Hammert’s did make promises that it would not assert claims to reduce the value of the invoices. Also, there was detrimental reliance when Sterling believed Hammert’s verification that NSE had done the work.
 

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