In a significant ruling, the Fifth Circuit Court of Appeals has affirmed a lower court's decision against Ztar Mobile Incorporated and its CEO, Kevin Haddad, for breach of contract. The court's decision, issued on October 9, 2026, highlights the importance of thoroughly reviewing contract documents before signing. The case, documented under docket number 25-11330, underscores how reliance on verbal assurances can lead to costly mistakes in business agreements.
The ruling affects Haddad and Ztar Mobile, a company that resells cellular prepaid SIM cards, as they now face a judgment requiring them to pay over $7 million to Bank of America (BANA). This case serves as a warning to business owners about the risks of not reading loan documents and relying on oral statements during negotiations.
Background
The dispute arose from a loan agreement between Bank of America and Ztar Mobile. For years, Haddad and Ztar had a stable banking relationship with BANA, which included revolving lines of credit totaling around $2 million, personally guaranteed by Haddad. In 2018, BANA proposed a new line of credit that would replace the existing one, assuring Haddad that it would not require a personal guaranty.
Despite these assurances, when the final loan documents were presented in March 2019, Haddad signed them without reading or having his in-house counsel review them. The documents included a personal guaranty, which Haddad had previously been led to believe would not be part of the agreement. This misunderstanding led to a legal battle after BANA sought to enforce the guaranty when Ztar defaulted on the loan.
The Ruling
The Fifth Circuit reviewed the case after the district court granted summary judgment in favor of Bank of America, ruling that Haddad's claims of fraudulent inducement were not valid. The court stated, "Haddad’s reliance on Walker’s prior representation was not justifiable." The judges emphasized that Haddad had the opportunity to read the loan documents and was responsible for understanding the terms before signing.
The court further noted that under Texas law, a party cannot justifiably rely on oral misrepresentations when they contradict the clear terms of a written contract. The judges pointed out that Haddad's failure to read the agreement before signing it was a critical factor in their decision. The ruling confirmed that Haddad's claims of being misled by BANA were not sufficient to overturn the contract's terms.
Impact
This ruling reinforces the principle that business owners must carefully review contracts and not rely solely on verbal assurances. The court's decision serves as a reminder that written agreements hold significant weight in legal disputes. The outcome may influence how businesses approach contract negotiations in the future, particularly regarding the importance of due diligence.
Moreover, the ruling sets a precedent regarding the enforceability of contracts in the face of claims of fraudulent inducement. It illustrates that parties cannot simply rely on prior negotiations or discussions if they do not align with the signed contract's terms. This case may lead to increased scrutiny of oral representations made during contract negotiations.
What's Next
While the Fifth Circuit has affirmed the lower court's ruling, Haddad and Ztar Mobile may still explore options for appeal. However, the court's clear stance on the importance of contract terms and the responsibility of parties to understand agreements makes the likelihood of a successful appeal uncertain. There are no related cases pending that could impact this ruling.