How and associates, Inc. v. Boss AUTHOR: Magsino, Patricia Marie C.

[222 F. Supp. 93, 1963] NOTES:

TOPIC: Personal liability of promoter on pre-incorporation Boss defendant
contracts How plaintiff
PONENTE: Hanson, District Judge
Boss is the promoter who contracted How for his services,
Boss then abandoned project and didnt pay How he
should be liable as promoter
FACTS:

Plaintiff Stanley How and Defendant Edwin Boss entered into a contract for the performance of architectural
services by How for the establishment of a motor hotel and restaurant to be called Boss Hotels (which will form
the corporation Boss Hotels Co. Inc.)
How performed the contract and prepared detailed plans and specifications for a motor hotel and restaurant at the
66th and France Streets, Edina, Minnesota (estimated cost = $850,000)
How secured blank copies of the standard form of agreement between owners and architects, the contract stated
that it was between Boss Hotels Co., and Stanley J. How & Associates, Inc. Boss signed as the owner/president
After completing the signing of the contract Boss erased the words Boss Hotels Co., Inc. from the place for
signature and below the line typed the words By: Edwin A. Boss, Agent for a Minnesota Corporation to be
formed, who will be the Obligor this was done with Hows consent
Boss eventually abandoned the project, and left the sum of $23, 750 unpaid to How
How is now seeking the amount left unpaid by Boss, holding him liable as the corporations promoter
ISSUE(S):

Can Edwin A. Boss be held liable as a promoter of Boss Hotels Company, Inc.?

HELD: YES.
Edwin A. Boss should be held liable as the corporations promoter.
Court ordered Boss to pay How the unpaid balance of $23, 750

RATIO:

The Court held that Boss was the principal promoter acting for himself personally and as President of Boss Hotels,
Inc.,
Because he abandoned the purpose of forming a corporation he is liable to the contract he executed with How
A promoter will not be held liable if;
o (1) the plaintiff agreed to look solely to the new corporation for the payment
o (2) he did not have any duty to the plaintiff to form the corporation and give the corporation the
opportunity to assume and pay the liability
In deciding in favor of How, the court discussed the three possible understandings that parties may have when the
agreement is made on behalf of a corporation that is to be formed by one of the parties;
o (1) an offer or option to the corporation to be formed; which will result in a contract that if it is accepted
when the corporation is formed. The promoter undertakes the responsibility of organizing the corporation
and giving it the opportunity to pay its debts
o (2) parties agree to a present contract by which the promoter is bound, but with an agreement that his
liability terminates if the corporation is formed and manifests its willingness to become a party. This is an
agreement for a future novation
o (3) parties have agreed to a present contract upon which, even though the corporation later becomes
a party, the promoter remains liable either primarily or as surety for the performance of the
 corporations obligation
The court based their decision on the wordings of the contract specifically; By: Edwin A. Boss, Agent for a
Minnesota Corporation to be formed, who will be the Obligor the court seeing that there is ambiguity in the
phrasing held that the construction should be in favor of How, especially since it was Boss who wrote those words
According to Hows testimony and his business record Exhibit K (THIS WAS NOT SHOWN IN THE CASE,
ONLY MENTIONED) he did not intend for the new corporation (Boss Hotels) to be the sole obligor in the
contract (basically he believed that they are liable but not solely)
The phrasing of the words intended that there be a present and a future obligor, the present being Edwin A. Boss
and the future was the then unformed corporation Boss Hotels
Court ordered Boss to pay How the unpaid balance of $23, 750
CASE LAW/ DOCTRINE:

DISSENTING/CONCURRING OPINION(S):