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Does a Construction Contract Mean “Do Whatever”?

Briefs are sometimes difficult to follow without review of the full terms of the underlying contract, or previously filed briefs in the same case. I see the following in the respondent’s brief in Cope Marine Tablerock, Inc v. Hensley d/b/a/ Construction Processing Co., No. SD32670, 2014 WL 2573096 (Mo. Ct. App. S.D.) (May 27, 2014):

Appellants argue at page 16 of their Brief that there is no cause of action in Missouri for breach of applied [sic] warranty for commercial construction. This is not correct.

I regret that the appellant’s brief is not in Westlaw, because I really want to see it. The above language in respondent’s brief seems to say that appellant’s view is that a construction contract does not impose a duty to perform the specified construction in a reasonable workmanlike manner. I would be interested in the authority for that proposition.

Of course, it is a separate matter if one is asked to perform commercial construction pursuant to stated specifications and the specifications will not produce construction meeting the desired objectives.

Respondent’s brief goes on to note:

Baerveldt & Honig Construction Company v. Szombathy, 289 S.W.2d 116 (Mo. 1956) was a suit on a contract to build an office building to be leased to the United States as a Post Office. The court stated at page 4, “Defendants correctly assert that in every contract to perform work there is an implied agreement that the work will be done in a skillful and workmanlike manner.”

That seems eminently sensible.

Pre-Existing Duty Rule and Agent’s Obligations–PDI Group, Inc. v. The Desco Group, Inc.

In PDI Group, Inc. v. The Desco Group, Inc., 2014 WL 2718852 (Mo. Ct. App., E.D.), we have an issue of the pre-existing duty rule and the scope of an alleged agent’s duties.  The appellant’s brief reports the following:

The case involves a construction contract requiring the contractor to do work involving installation of a plumbing system for particular premises. The contractor allegedly in part used existing ABS pipe in lieu of installing scheduled PVC pipe, with bad results following. The  defendant, allegedly in the capacity of the agent of the property owner, had discussions with the contractor, following which some additional plumbing work was done.

The pertinent questions include, among others: whether no enforceable contract could have been formed, because the contractor was under a pre-existing duty to a third party (relationship not adequately clarified in the brief)  to have done that work and  whether the defendant could be liable, because it alleges it purported to act as agent for the property owner.

 As a third party only reviewing the brief, it is, frankly, somewhat awkward to ascertain the pertinent relationships between the referenced entities. In particular, the precise relationship between the obligee under the first contract and the putative principal of the defendant could be better explained. And one would think that relationship requires some detailed discussion. Here’s why:

The case involves an alleged pre-existing duty owed by contract to a third party. The benefit of the pre-existing duty rule is it affords a basis for a court to negate a determination there is an enforceable amendment to a contract in certain contexts where it would appear there was not voluntary assent. Of course, the principle is couched in terms of consideration, but its real benefit is it allows revisiting of the ordinary principles of what is assent (and what is not duress) in a context where factors indicate there was not voluntary assent.

That the duty is owed to a third party raises additional complexities. It may well be that, where the duty is owed to a third party, the arrangement was, in fact, voluntary–that the concerns underlying the principle are not present. See generally Restatement (Second) of Contracts § 73, cmt. d.

Calamari & Perillo § 4.9(d) (5th ed. 2003) indicates “the weight of the modern authority” would allow the arrangement to be enforceable–that a pre-existing contractual duty to a third party does not eliminate consideration.

Of course, the fact that a majority of jurisdictions reaches a particular result does not mean that’s the intelligent answer. I am something of a fan of the pre-existing duty rule, at least relative to what I gather to be the typical modern approach. But, were I seeking to support the defendant’s position in this regard, I would want to see a greater development of the pertinent facts, and the relationship with the first contract, for purposes of being persuaded that the circumstances are such that the consent appears to have been not fully voluntary.

As to the agency issue, it’s very difficult to comment. Of course, in the normal case, an agent is not liable for a contract entered into on behalf of a disclosed principal. The alleged agent’s brief does not go into detail as to why the ordinary principle may not apply, so one cannot really comment thoughtfully on that.

The brief also discusses claims the alleged contract was not sufficiently definite. That is, of course, an important factor. The context does not capture my fancy at the moment, so I’ll pass on addressing that.

“Hereunder” is Hereinafter Banned Herein–Naeger v. Farmers Insurance Co.

One of the practice pointers I received while practicing on Wall Street is that one should review with skepticism use in contracts of “herein” and like expressions.  Though it’s often clear what’s “here”–sometimes it’s not (whether an entire agreement or a section or something else.  So, for the past decade or so, in teaching either Contracts or the law of Corporate Finance (generally involving construction of corporate financing instruments), I’ve shared concern with that phrasing with students.

I’m not always sure they’ve been convinced.  Behold–a brief quoting a dictionary to define “hereunder”.  Naeger v. Farmers Insurance Co., Inc., 2014 WL 462945 (Mo. Ct. App., W.D.).

The plaintiff/victim was evidently a passenger in a vehicle that was struck by a car being allegedly operated negligently by another.  The victim’s brief recites receipt of $190,000 from underinsured motorist insurance obtained by the operator of the car she had been in, and $50,000 from the insurer of the other driver.  The victim’s brief recites the victim’s policy identifies relevant policy limits of $250,000 for the following coverage  (emphasis removed):

We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an UNDERinsured motor vehicle because of bodily injury sustained by an insured person. The bodily injury must be caused by an accident, and arise out of the ownership, maintenance or use of the UNDERinsured motor vehicle.

According to the brief, there are a variety of limits on this coverage, one of which, as reported by the brief, is this:

 We will not provide insurance for a vehicle other than your insured car or your insured motorcycle, unless the owner of that vehicle has no other insurance applicable hereunder.

So here we have one of those cryptic usages of “herein”, “hereunder”, etc.  Who knows what the sentence means.

Another exclusion recited by the brief is:

This coverage does not apply to bodily injury sustained by a person:
***
3. If the injured person was occupying a vehicle you do not own which is insured for this coverage under another policy.

The victim’s counsel, relying on some out-of-State authority, makes a thoughtful argument–it surely would be an awkward state of affairs if coverage by other insurers aggregating less than the policy limit under the plaintiff’s own underinsured motorist coverage would operate to eliminate coverage under the plaintiff’s own underinsured motorist coverage.  Victim’s counsel seems to categorize the victim’s insurer as taking that position.  Perhaps the insurer/defendant will clarify–there is a cryptic reference in the brief to the $190,000 having been “settled”, although not in reference to policy limits, unlike the $50,000 from the other driver’s insurer.

 

An Unfortunate Analysis: Wallace v. St. Francis Medical Center, 2013 WL 5469137 (Mo. App. E.D. Oct. 1, 2013)

So, in Wallace, discussed previously when the case was pending, we now have in the decided opinion the following concerning compensation–and this is important–allegedly for services actually rendered before at-will employment was terminated:

Even accepting Wallace’s premise that the verbal offer and acceptance in 1983 plus the 2004 on-call posting created a contract, to satisfy the statute of frauds, an employment contract must contain all essential terms, including duration of the employment relationship. McCoy v. Spelman Mem’l Hosp., 845 S.W.2d 727, 730 (Mo.App.1993). No such term existed here. Absent a valid contract, Wallace’s breach of contract claim must fail.

This is, of course, unsound.  Although at formation there may be some indefiniteness in the terms of the bargain (such as when it will end), the parties’ performance can fill-in the missing component–the term.  The employee is entitled to bargained-for compensation for services the employee provides–the performance of the contract determines the term.

Is the authority cited by the Wallace court, McCoy, about recovery of bargained-for compensation for work previously provided under an at-will contract?  No.  It’s about seeking compensation for having been terminated before an alleged five-year term claimed to have been provided orally.

Is there Missouri authority allowing recovery of compensation of services actually rendered under a bargained-for under an at-will arrangement, when the employer sought to get away with paying less. Sure:

For the services which the plaintiff has performed, he himself admits he has been paid, with the exception of the $12.75, which have been deducted for his board bill, as he claims without authority.

We are of opinion that there is substantial evidence showing that the plaintiff is entitled to this amount with interest, and that to that extent, but no further, the verdict of the jury is supported by substantial evidence. As the cause has been repeatedly tried, and no other result can be accomplished by a re-trial, we will not remand it, but enter judgment here.

Evans v. St. Louis, I.M. & S. Ry. Co., 24 Mo.App. 114, 1887 WL 1749, at *3 (Mo. App. 1887).

Thus, for example, one will see that an at-will employee who has earned some performance bonus before the employer elects to terminate him is entitled to the bonus.  E.g., Wright v. Cofield, 730 S.E.2d 421 (Ga. App. 2012).

Wallace illustrates what happens when a court takes bromide out-of-context.  One hopes that this erroneous observation in Wallace gets a second look, in one forum or another.

The Wheels Come Off This Attempt to Defend an MMPA Claim—Jackson v. Hazelrigg Automotive Service, Inc., 2013 WL 3191829 (Mo. Ct. App. S.D.)

At some time, Missouri courts will clarify whether the following words, split infinitive and all, mean what they say:

“(1) It is an unfair practice … to unilaterally breach unambiguous provisions of consumer contracts….”

15 CSR 60-8.070.  One hopes they do.

If one thinks businesses’ performance of consumer contracts is characterized by an overabundance of diligence—and that the law should encourage more inadequate and defective performance—one would seek to construe non-literally the words of this rule.  Taking-up the standard is a car repair facility in Jackson v. Hazelrigg Automotive Service, Inc., 2013 WL 3191829 (Mo. Ct. App. S.D.).