Monthly Archives: June 2014

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.

Alleged Good Faith Obligations Concerning Credit Insurance–Vantage Credit Union v. Chisholm

So here we have a circumstance that requires some thought to put in order.  The brief reports summary judgment was granted for the lender. That seems difficult to support. Briefs are at Vantage Credit Union v. Chisholm, 2014 WL 1872072 (Mo. Ct. App., E.D.); and 2014 WL 1458186 (Mo. Ct. App., E.D.)

A lender, Vantage, offers debtors disability insurance. A debtor, Chisholm, makes the payments for the insurance, and then allegedly has a covered disability. The lender’s employee, one Berry, allegedly promises to assist in making a claim. The lender subsequently disclaims any obligation, as recited in the debtor’s brief.

More after the break …

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