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.

If You Write “Flounder” on the Contract’s Signature Line, Are You Scrod?

For the uninformed, I note defines scrod as “a young fish (as a cod or haddock)”.

We voyage to the Southern District of New York for this yarn. An employee having an employment agreement is pressured to amend the agreement. He is found to have written “flounder” on the amended terms and and returned them. Does this manifest assent?

I cannot have made this up. It’s from Random Ventures, Inc. v. Advanced Armament Corp., No. 12 Civ. 6792(KBF), 2014 WL 113745 (S.D.N.Y. Jan. 13, 2014). Here’s what one Judge Forrest, formerly a partner at the Cravath firm, writes about the matter:

Brittingham consistently refused to execute his amended EA—which, based on the factual record and as explained in more detail below, was closer to an $8 million hold-up than a mutually agreed upon deal.44 While a copy of the amended EA was eventually faxed by Thompson to Cofield, Brittingham had never signed it; instead, it had the word “flounder” scribbled on the last page in the signature block. (PX 126.) At trial, Brittingham denied having written the word “flounder,” but the Court found this testimony lacking credibility. (Tr. 460–61.) The Court did find credible, however, his testimony that he intentionally did not sign his name to the amended EA and that, in his view, he never entered into the agreement. (Tr. 462–64.) As a sophisticated counter-party, Remington could not reasonably have been duped into believing Brittingham had adequately executed the proposed amended EA based on the scribbling on the last page.

As one might expect, the opinion goes on to address whether there had been assent by conduct. The opinion is quite long–too long to summarize here.

There is a difficult line to be drawn between the so-called “duty to read” and actions that are constructively fraudulent. Illustrative of the latter camp is Hand v. Dayton-Hudson, 775 F.2d 757 (6th Cir. 1985).  There the court reformed a release signed by an employee in connection with receipt of a severance payment.  The employee re-typed a form the employer provided, to appear superficially identical to the form the employer proffered, but in a few words limiting the scope of the form release.  The appellate court affirmed the trial courts reforming the release described by the appellate court as having been fraudulently altered.

I must say that I am not particularly a fan of much of the authority applying the “duty to read”. It’s often applied in contexts where one is seeking to obtain assent in contexts where it is not knowing and voluntary. So, here we have a case going the other way. The employer is “hooked” by the principle employers often use themselves. Or is it “foul” hooked?

Long-Term Lease Restricting Improvements–Mayer v. Lindenwood Female College

A long-term lease provides this:

The Lessee shall at all times during the term of this lease, subject to the terms and provisions of this lease, have the sole and exclusive right to erect, build, rebuild, repair, change, alter, or otherwise construct such buildings, appurtenances, or other improvements for commercial use as the Lessee in its sole discretion may determine, so long as same are in no instances used for an unlawful purpose, and so long as the value of such improvements shall not be diminished to less than One hundred Thousand Dollars ($100,000.00) as the result of such work.

The brief is at: Mayer v. Lindenwood Female College, No. ED100587, 2014 WL 2116410 (Mo. Ct. App., E.D.). The question: Does this language allow the tenant to replace a building, as long as the improvement value continued to meet the dollar amount? I would think so. The lessor disagrees. Let’s see the brief.

More after the break …

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Additional Thoughts on Pre-Existing Duty Rule and Third Parties

Our last post, concerning PDI Group, Inc. v. The Desco Group, Inc., involved the application of the pre-existing duty rule to a circumstance where the pre-existing duty was under a contract with a third party. In that post it was noted that additional detail of the context would be helpful. Let us expand by illustration.

As previously noted, the function performed by the pre-existing duty rule is to make unenforceable a promise made in circumstances indicating the promise was not voluntary, without the need for separately proving the generally applicable elements of duress. When the pre-existing duty is owed to a third party, the circumstance may not suggest the same level of lack of volition. We can, however, provide an illustration of a context where a lack of volition may be present:

With three parties, the language can be confusing. So let’s say:

Current Contract: Promisor P promises to render performance to O, with putative consideration being performance C. It is alleged that O was already obligated under an old contract (“Old Contract”) between O and TP to render performance C.

An argument that P’s promise to render performance to O was not really voluntary (and was not supported by consideration) is supported by a conclusion P was an intended beneficiary of O’s duties under the Old Contract. So, one may want to consider that issue.


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.