Art and Beth have been operating a seasonal landscaping business under the name AB Landscaping (“ABL”) as partners without a written partnership agreement. Art lives in Florida in the winter from November to March, when ABL does not operate. In December 2007, one of ABL’s customers, Carl, asked Beth if she knew anyone who could construct a new home on vacant land owned by Carl. Without contacting Art, Beth responded that ABL could act as general contractor and hire subcontractors for the job. ABL had never previously acted as a general contractor.
One week later, Beth, on behalf of ABL, and Carl signed a building contract to construct a new home at the price of $300,000 with a down payment of $100,000, a payment of $125,000 on February 1, 2008 and the balance of $75,000 on completion and issuance of a certificate of occupancy (“C/O”).
In March 2008, after Carl made payments of $225,000 to ABL, Beth discovered that, due to increases in the cost of materials, ABL was losing money on the job. She advised Carl that ABL would not complete construction unless. Carl agreed to pay an additional $25,000 for the increase in the cost of materials. Therefore, Carl gave Beth a signed note which read: “I agree to pay ABL an additional $25,000 upon the issuance of a C/O.” Although the building contract specified the installation of Wonder Windows, Beth, on behalf of ABL, mistakenly ordered windows from Clear Windows. In April 2008, after ABL obtained a C/O, Carl inspected the new home and discovered that Clear Windows were installed instead of Wonder Windows.
Clear Windows are identical in appearance, quality and price to Wonder Windows. In May 2008, Art first learned about the building contract between Carl and ABL and that, even if it received payment of the additional $25,000 and the $75,000 final installment, ABL would lose money on the job. Art asserts that Beth lacked the authority to enter into the contract. Despite a demand from ABL, Carl refused to pay (a) the additional $25,000 and (b) because the wrong windows were installed, the $75,000 final installment due under the building contract. ABL did not pay the invoice from Clear Windows for its windows.
(1) What are the remedies, if any, available to Art against Beth to
recover the loss on the building contract?
(2) What are the issues raised by, and likely outcome of, an action by
ABL against Carl to recover (a) the additional $25,000 that Carl
agreed to pay and (b) the $75,000 final installment due under the
building contract?
(3) What are the issues raised by, and likely outcome of, an action by
Clear Windows to recover on its invoice (a) against ABL and (b)
against Beth individually?
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