A new decision from the Illinois Appellate Court reminds both attorneys and clients alike that attention to all aspects of business contract drafting should be a priority.
In the case of Nord v. Residential Alternatives of Illinois, Inc., 2023 IL App (4th) 220669, published on November 3, 2023, the Court was presented with a case asserting negligent nursing home care against Manor Court of Freeport Illinois. Naomi, a former resident of the nursing home passed away, and her Executor sought damages for the nursing home’s alleged treatment that the Executor insisted was the cause of or a contributing factor in Naomi’s death.
Manor Court moved to dismiss the case, directing the Judge’s attention to an arbitration agreement in the Manor Court contract materials. Businesses with potentially significant exposure to lawsuits will frequently include arbitration clauses in their contracts. These clauses require that claims be brought by disgruntled clients in an arbitration setting that is often less public and sometimes more favorable than state or federal court. There is a significant body of law outlining when and how those arbitration clauses can be enforced.
Considering Manor Court’s motion, the trial court held that the arbitration clause was unfair and unconscionable because it was buried in some 27 pages of documents included with the Manor Court resident admission materials. Also, reviewing the agreement to arbitrate, the court found that its terms essentially shifted all of the costs (potentially thousands of dollars) of the arbitration expenses to the resident. The trial court denied Manor Court’s motion to dismiss.
When the nursing home appealed, the Illinois Appellate Court considered another important aspect of the Resident Admission Agreement: Naomi’s Executor argued that all of the language of the resident contract should be read together, and here the agreement stated that the “term” of the contract terminates on the day that the resident is discharged from the facility. As a result, the resident contract, including the arbitration provision, terminated on the date of the resident’s death. The arbitration clause, Naomi’s Executor urged, was no longer enforceable. The Appellate Court agreed and the Court permitted the claim by Naomi’s Estate to continue in the Illinois court.
What should attorneys and business owners take away from the Court’s decision?
Choose the language of your contracts carefully. The Appellate Court pointed to the fact that the arbitration clause did not state that it applied to claims filed after the termination of the resident contract. The Manor Court nursing home and its attorneys could have clarified the concept of termination, the definition of the “term” of the contract, and what provisions were intended by the parties to survive the conclusion of the contract — all important considerations that could have significant impact upon the enforcement of the contract. Eyes on the contract language can support the client’s enforcement of the contract later, both in and out of court.If you are concerned about the enforceability of your contracts, or are preparing for new or revised agreements for your business, Marc D. Sherman & Colleagues P.C. can help.