Can “Trade Custom And Usage” Be Read Into A Business Contract?
When it comes to business contracts, the cardinal rule is that a court will not construe–or read anything into–an agreement that is “clear, complete, and unambiguous” on its face. Put another way, if you want to include a particular right or obligation into an agreement, it should be in the written text. Never assume the other side “knew what you meant” or that there is some “unwritten rule” that covers a particular scenario.
Florida Courts Reject Healthcare Provider’s Claim to Read “Implied” Payments Into Agreement with Defunct Insurer
A recent decision from the Florida First District Court of Appeal, Advanzeon Solutions Inc. v. State of Florida, provides a useful illustration of this point. In this case, an insurance company (the defendant) hired a healthcare provider network (the plaintiff) to render services for its plan members. Under the contract, the defendant paid the plaintiff a monthly administrative fee based on the number of “eligible members” for a given month. The contract also permitted termination with 90 days notice.
The defendant provided this notice 90 days before the contract’s scheduled end date. When the contract ended, there were no unpaid claims involving the plaintiff’s providers. Shortly thereafter, the defendant went into receivership and ultimately liquidation. During these proceedings, the plaintiff sued, alleging it was still owed $820,000 in unpaid administrative fees, which it described as “tail and extended fees” that were “customarily paid in the industry” after a contract ended. According to the plaintiff, such fees were necessary to cover the costs of processing claims that might arise after the contract’s termination.
The Florida courts rejected the plaintiff’s claims. The First District, affirming an earlier ruling from the circuit court, said there was nothing in the written contract authorizing any “tail payments.” Indeed, the plaintiff admitted as much, yet continued to press the idea that such claims were properly rooted in “trade custom and usage.” But as the appellate court explained, this was not a valid basis for reading an “implied term” into the contract.
First and foremost, the plaintiff failed to establish that “tail payments” were an actual trade custom in the health insurance industry. The only evidence presented came from the plaintiff’s own employees, and the trial judge was free to reject that testimony as lacking credibility. Second, even if such a custom did exist, it would not overrule the clear language of the contract. As the First District emphatically stated, “A court cannot apply generic, conceptual ‘custom’ to vary the express terms of a contract.”
Speak with a Florida Business Litigation Lawyer Today
Not all breach of contract claims are this cut and dry. There are situations where a contract does contain ambiguous or unclear terms that require judicial interpretation. That is why if you are involved in such a lawsuit it is important to work with an experienced Bradenton business litigation attorney who will zealously represent your position in court. Contact the offices of Moran, Sanchy & Associates today to schedule an appointment with a member of our business litigation team.