Contract Validity – Personal Guaranty

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7^th Circuit Court of Appeals

Case Name: Emirat AG v. WS Packaging Group, Inc.

Case No.: 17-1893

Officials: EASTERBROOK, ROVNER, and HAMILTON, Circuit Judges.

Focus: Contract Validity – Personal Guaranty

Sabafon, a telephone company based in Yemen, wanted to buy cards that would provide its customers with prepaid minutes of phone use. To make these cards more attractive, Sabafon wanted to add a game of chance. Both the number that would supply phone time and the symbols representing prizes were to be covered by a scratch-off coating. (An opaque coating prevents the numbers and symbols from being discovered before the cards are sold, and it also prevents buyers from knowing in advance which parts of the card contain the winning boxes.) Emirat, a German firm in the risk-management business, promised to supply Sabafon with 25 million high-security scratch-off cards. Emirat contracted with High Point Printing LLC of Ohio to print the cards, and High Point in turn engaged WS Packaging of Wisconsin to do the work.

Emirat paid High Point about $700,000, and in this suit under Wisconsin law it demands that much in damages— not from High Point, which is defunct, but from WS Packaging. Emirat did not have a contract with WS Packaging, whose deal was with High Point. Still, Emirat contends that a settlement agreement it reached directly with WS Packaging after an initial run of cards was not shipped in numerical order, 500 pieces to a tray, subjects WS Packaging to all terms of the contract between Emirat and High Point. The district court thought otherwise and granted summary judgment to WS Packaging. 248 F. Supp. 3d 911 (E.D. Wis. 2017). To simplify this decision, we assume that WS Packaging is indeed obliged to perform up to the standards that High Point promised Emirat. But what are those standards?

Because this record does not contain evidence from which a reasonable jury could conclude that WS Packaging promised to supply cards more secure than the World Lottery Association’s norm, and because Emirat’s own expert witnesses conceded that these cards could not be candled in less than five minutes, the judgment of the district court is affirmed.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.