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Contracts Keyed to Knapp
Marshall Durbin Food Corp v Baker
Facts
Mr. Durbin, the proprietor of Marshall Durbin Food Corp. (the “Company”), had entered into an agreement with Baker (P), one of his former employee, during the period the Company (D) going concern was threatened. The agreement stipulated that upon the occurrence of certain triggering events, one of which was the incapacity of Mr. Durbin, Baker (P) would be entitled to five years of his then current salary. Part of the agreement stipulated how payments to be made to Baker (P) would be derived, an “effective date”, and that the contract was entered into for consideration of $10 and other valuable consideration. Also, the contract also made it clear that the agreement was not purported to create a contract of employment which although remained at will. These clauses in the agreement were however approved by the Company’s (D) board.Mr. Durbin was diagnosed with malignant cancer about 18 months later and a month later, he was judicially declared incapacitated. After his diagnosis, Baker (P) took over as the Company’s (D) president and when Mr. Durbin was declared incapacitated by the court, Baker (P) informed the Company (D) that the triggering event captured by his agreement with the Company (D) has occurred and therefore he would now be working as a contractor and not an employee to the Company (D).The month after Mr. Durbin was declared incapacitated by the court, he died and the Company’s (D) board was dissolved to give rise to a new board, which repudiated the agreement the Company (D) had with Baker (P) after the plaintiff had sued for specific performance of the agreement. The Company (D) however defended its stand on the ground that the agreement was invalid because it lacked consideration. The trial court in its wisdom, ruled in favor of Baker (P) who had entered in an agreement with the Company (D) to retain management at a time the Company (D) was experiencing difficulties, and because Baker (P) did not seek for employment elsewhere because of the reliance he had placed on the agreement. The state intermediate appellate court however granted review.
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