Reference no: EM131379304
Through Langham Engineering, Michael Langham marketed his invention, the cross-slope monitor (CSM), as an accessory to John Deere equipment. He had a plan to expand his business to include the CSM as an accessory to Caterpillar Tractor (CAT) equipment.
To do this, Langham and Clark Balderson of Balderson , Inc., entered a preincorporation agreement (PIA), in which Langham agreed to contribute his technical abilities, and Balderson agreed to contribute his leadership capabilities to manufacture and market the CSM to CAT. No release clause was included in the PIA. The resulting corporation was named Illinois Controls, Inc. Balderson was designated the president and chairman of the board, and Langham was named vice president.
Over the next two years, Balderson failed to train and motivate the sales staff about the proper techniques for selling the CSM to CAT dealers. Balderson also neglected to arrange demonstrations and consignment sales, failed to employ properly trained personnel, and disregarded the need to develop, print, and distribute installation manuals for the CSM.
Finally, Balderson set up another corporation named the Dymax Corporation, which dealt with CAT's competitors, thereby undermining Illinois Control's relationship with CAT. As a result, Illinois Controls was forced to shut down operations. Langham sued Balderson personally for the losses that he incurred as a result of Balderson's failure to meet his obligations as outlined in the PIA.
Balderson argued that the PIA was a promoter's contract and that the corporation had adopted it. Therefore, Illinois Controls should be held liable. Was Balderson correct? Explain.
Illinois Controls, Inc., v. Langham, 639 N.E.2d 771 (OH).
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