In 1980, Kenneth McMillan and his associate in a dental practice obtained life insurance policies that designated each the beneficiary of the other. They set up automatic withdrawals from their bank accounts to pay the premiums. Later, Laurence Hibbard joined the practice, which was renamed Bentley, McMillan and Hibbard, P.C. (professional corporation), or BMH. When the three terminated their business relationship in 2003, McMillan sold his BMH stock to Hibbard. But Hibbard did not pay, and McMillan obtained a judgment against him for $52,972.74. When Hibbard still did not pay, McMillan offered him a choice. In lieu of paying the judgment, Hibbard could take over the premiums on Bentley’s insurance policy or “cash” it in. Either way the policy’s proceeds would be used to pay off loans against the policy—which McMillan had arranged—and Hibbard would accept responsibility for any unpaid amount. Hibbard signed the agreement but did not make a choice between the two options. McMillan filed a suit in a Georgia state court against Hibbard, seeking reimbursement for the premiums paid since their agreement.
(a) McMillan asked the court to award him attorneys’ fees because Hibbard had been “stubbornly litigious,” forcing McMillan to litigate to enforce their agreement. Should the court grant this request? Are there any circumstances in which Hibbard’s failure to choose between McMillan’s options would be justified? Explain.
(b) Generally, parties are entitled to contract on their own terms without the courts’ intervention. Under the principles discussed in this chapter, what are some of the limits to this freedom? Do any of these limits apply to the agreement between McMillan and Hibbard? Why or why not?