Tag Archives: apparent authority

Writing Requirement in Contracting With Counties, Etc.

Mo. Rev. Stat. 432.070 requires a writing for any of the following to contract: counties, cities, towns, villages, school townships, school districts and other municipal corporations.  Gill Construction, Inc. v. 18th & Vine Authority, 157 S.W.3d 699, 708 (Mo. App. W.D. 2004) notes, “A contract made in violation of the statute is ‘void rather than voidable.’”  Somewhat interestingly, Mays-Maune & Associates, Inc. v. Werner Bros., Inc., 139 S.W.3d 201 (Mo. App. E.D. 2004), holds a claim in restitution cannot be made against a school district, by virtue of this statue of frauds provision.

An appellate brief in Drury Co. v. Jackson R-2 School District, 2013 WL 6169464 (Mo. Ct. App. E.D.) discusses a related question:  Whether this writing requirement bars enforcement of a written agreement within the statute by a third-party beneficiary.  The basic circumstances are a subcontractor alleges it has been harmed by the school district’s alleged failure to obtain insurance the district’s contract with the prime contract obligated the district to obtain.

The brief reports the claim was dismissed:

On November 18, 2010, the Circuit Court entered a “Judgment on Motions to Dismiss,” stating summarily: “The motion of Defendant, Jackson R-2 School District to dismiss Count I of Plaintiff’s Petition is SUSTAINED. Count I of Plaintiff’s petition is dismissed without prejudice. Gill Construction, Inc. v. 18th & Vine Authority, 157 S.W.3d 699 (Mo. App. W.D., 2005).”

The cryptic reference to Gill is evidently to that court’s determination that municipal ordinances did not satisfy the writing reqirement (though it could perhaps be to the court’s deference to the trial court’s determination as to a claim the municipality was not liable as a principal).

Gill states, “The purpose of Section 432.070 is to protect municipalities.”  “Protect” presumably does not mean allow to chisel–I mean avoid liability for failure to perform properly authorized obligations.  Gill references City of Kansas City v. Southwest Tracor Inc., 71 S.W.3d 211 (Mo. App. W.D. 2002).   Southwest Tracor, at 215-16, explains the purposes in greater detail (citations omitted):

The statute recognizes that municipal corporations represent the public and should be protected from the unauthorized actions of their agents. The purpose of the statute is to provide protection for municipalities; not parties who seek to impose obligations upon government entities. To that end, “ ‘[a] court should unhesitatingly enforce compliance with all mandatory legal provisions designed to protect a municipal corporation and its inhabitants.’ ” City of Washington, 533 S.W.2d at 558.

… A party contracting with a municipality is charged with the knowledge of the requirements set out in the statute. As a result, “any contract entered into by a municipality beyond the scope of its power is void and not merely voidable.” [Software A.G. of N. Am., Inc. v. City of Columbia, 903 S.W.2d 641, 643 (Mo.App. W.D.1995)]  “ ‘[I]t is … ultra vires for a Missouri municipality to incur a liability in the nature of a contractual obligation … not within the scope of its corporate powers or one not expressly authorized by law.’ ” Duckett Creek Sewer Dist. of St. Charles County v. Golden Triangle Dev. Corp., 32 S.W.3d 178, 183 (Mo.App. E.D.2000) (quoting Donovan v. Kansas City, 352 Mo. 430, 175 S.W.2d 874, 882 (banc 1943)).

Allowing recovery by an intended beneficiary under a properly authorized contract, memorialized in writing, does not implicate the referenced purposes. This does, however, seem to be the type of circumstance where a court may extract some snippet from a prior case, repeat it as mantra, and find the absence of a writing between the sub and the governmental entity a basis to avoid liability.

A finding for the district, of course, will result in increased transaction costs, as each subcontractor would evidently need to get a separate agreement signed by the governmental entity.  One supposes that each such separate agreement would be required to be properly authorized.  And one would expect the increased costs of contractors in assuring compliance, and the risk of noncompliance, will ultimately increase amounts charged on covered contracts.

At best a Pyrrhic victory in the offing for governmental units.