Revisiting the Skunks—Constructive Conditions of Exchange and Consolidated Service Group, LLC

In a prior post, we have concluded the contract in Consolidated Service Group, LLC v. Maxey, No. S.D. 33061 (Mo. Ct. App., S.D.) did not limit the homeowner’s ability to have efforts in mitigation obtained by a third party. We move to the second issue:

Did the homeowner’s actions discharge the contractor’s duty to perform, under principles of constructive conditions of exchange?

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Student Commentary

A few MU law students are preparing their own commentary on briefed cases. At least this year, we do not have enough student posts to populate a separate site. Those comments students wish to have me post, and make available to a wider audience, will be posted under a separate page here:

http://missouri-k.com/?page_id=786

I expect the first student post to be available some time later this month.

Consolidated Service Group, LLC—“The shingles looked like skunks ….”

The so-called right to cure can arise in a few contexts. It’s better not to conflate them. But that seems on the agenda in Consolidated Service Group, LLC v. Maxey, No. S.D. 33061 (Mo. Ct. App., S.D.). The below blog post analyzes the briefs. The case was the subject of a subsequent decision, 2015 WL 268866.

The basics of the case are as follows:

A contractor, engaged to replace a roof, received defective shingles. The defects were patent.

One may summarize circumstances as presented in the client’s brief (2014 WL 4659565):

“The shingles looked like skunks, in that they were dark shingles with a white stripe running horizontally the length of the shingle.” After the first day, one Benz, agent for the contractor, instructed the workmen not to install defective shingles during the second day of the work. This instruction the workmen failed to follow.

Benz first offered to replace defective shingles individually. That, evidently, would compromise the other shingles, not resulting in the contemplated 30-year roof. The homeowner’s brief reports Benz, in a deposition, admitted that type of repair would damage the surrounding shingles. Some months later, Benz offered to replace the whole roof.

On Benz’s request, the manufacturer sent vouchers to the homeowners’ agent (a relative), in an amount for enough shingles to replace the entire roof and pay up to $4,100 toward labor to install the replacement roof. Benz’s offer to replace the roof was conditioned payment of the initial contract price plus relinquishment to CSG of the vouchers.

The homeowners, evidently having had enough of Benz and CSG, declined to allow Benz to remedy the defect. They ultimately had another firm replace the roof, incurring expenses of almost $3,000 that were not covered by the vouchers.

The trial court was faced with the following question: Is the contractor entitled to recover for a stinky job? It granted summary judgment to the contractor on a breach of contract action.

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Why Do We Still Encounter Issues of Promoter Liability? Menard, Inc. v. Dial-Columbus, LLC

The normal treatment where a promoter purports to enter into a contract on behalf of a corporation that has not yet been formed is that the promoter is personally liable. Here is a summary of the normal treatment:

  • The promoter is personally liable for pre-incorporation contracts.
  • The corporation becomes liable not merely upon formation but upon adoption. This is sometimes referenced as “ratification”. A somewhat tedious observation is that one formally cannot ratify a contract where the person purporting to ratify the contract was not in existence as of the time of the contract. Hence, avoiding tedious distraction is facilitated by referencing this as an “adoption”.
  • Acceptance of benefits constitutes adoption.
  • The promoter is not discharged upon corporation becoming bound, unless creditor assents to substitution (novation).
  • A novation exists where the newly-formed entity accept benefits “if performance is made with the understanding that a complete novation is proposed”.

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