Background
LG bought live-chat and visitor-monitoring software services from Velaro under a long-running commercial agreement. A 2022 amendment created a two-year term but retained provisions allowing termination for convenience and imposing late-payment charges. LG terminated about seven months into the term.
Velaro contended that LG remained responsible for payments associated with the balance of the term and related late charges. The Madison Circuit Court treated the termination language as ambiguous and entered rulings favoring Velaro, including a later award of attorney fees and expenses. Two appeal numbers reached the Supreme Court in one combined opinion.
The Court’s Holding
The Supreme Court held that the contract was unambiguous when read as a whole. LG's termination-for-convenience right limited its obligation to money still owed for services Velaro rendered through July 15, 2022, the effective termination date. The agreement did not accelerate payment for services never to be furnished.
Because Velaro's merits recovery could not stand, its dependent fee and expense award also failed. The Court reversed both judgments and remanded. It emphasized ordinary contextual meaning and declined to use interpretive machinery to manufacture ambiguity from language with one reasonable reading.
The opinion’s analysis provides additional detail: “bligated to pay the full 24-month contract term. In other words, Velaro and LG could enter into the contract, Velaro could immediately provide notice of termination for convenience, and LG (1) would be required to pay for the entire 24-month term despite receiving virtually no software services from Velaro and (2) would be required to make such payment immediately rather than over the 24-month period. This is an and unreasonable reading of the payment provision. Velaro concedes that its proposed interpretation would require additional changes to the text. For instance, in its brief on appeal, Velaro explains that "[t]he better reading of [this] language is to exclude Velaro's ability to terminate for convenience … altogether, or require LG to pay for the remainder of the contract term only if LG terminates for its convenience …." Velaro's brief at 49 (bold typeface in original). However, it then admits that "[its] readings admittedly would ignore some language in Section 9(a)." Id. (emphasis added). Velaro's admission is fatal to its proposed interpretation. This Court cannot and will not adopt a reading that admittedly ignores express contractual language and effectively rewrites the parties' contract. As we have explained, this Court will not " ' rewri te [the parties'] contract under the guise of construing it.' " Boyd v. Mills, 337 So. 3d 1196, 1198 (Ala. 2021) (quoting Ex parte Dan Tucker Auto Sales, Inc., 718 So. 2d 33, 36 (Ala. 1998)). If Section 9.a. requires a rewrite to make Velaro's interpretation reasonable, then Velaro's interpretation cannot be deemed reasonable. Second, Velaro's reading makes the termination-for-convenience and clause useless. LG would never have an economic reason to exercise its contractual right to terminate for convenience before the end of the contract term. Under Velaro's interpretation of the payment provision, an early termination by LG would accelerate its payment obligation, requiring LG to pay the entire amount for the remaining contract term within 30 days while simultaneously losing the software services for which it was paying. By contrast, if LG did not terminate early, it could spread its payments over the full 24-month term while continuing to receive the services for which it was paying. In other words, considering the present value of funds, it would”
Key Takeaways
- A fixed contract term does not nullify an express termination-for-convenience clause.
- Courts read payment and termination provisions together and avoid implied acceleration obligations.
- A fee award dependent on a reversed merits judgment ordinarily falls with that judgment.
Why It Matters
The case gives Alabama commercial counsel a useful drafting checklist: state the termination effective date, identify accrued charges, address prepaid or committed costs, and say expressly whether remaining-term fees accelerate. Silence on acceleration may be decisive where the contract separately grants termination without penalty.
Litigators should present the contract's practical operation as a whole. Competing semantic possibilities do not necessarily create ambiguity if only one reading fits the agreement's structure and commercial context.