Wilson Floors is a flooring subcontractor working with Merck Construction in a p

Question

Wilson Floors is a flooring subcontractor working with Merck Construction in a project to build a commercial aircraft testing facility owned by Budcraft, Inc. When Merck Construction, the general contractor, fell behind in payments to Wilson Floors, Wilson stopped work on the project. A representative of the bank that was financing the development orally assured a representative of Wilson Floors that if Wilson would return to work, the bank would pay the company for the work if the general contractor failed to do so. After the project was finished and Wilson submitted its final bill, neither the general contractor nor the bank paid Wilson. Wilson then sued the bank to recover compensation for its work. The bank argued that its promise to Wilson was not enforceable because such promises must be in writing. How will the trial court judge hearing this case analyze the following questions?

a. Did the bank incur a primary or secondary obligation to Wilson Floors when it promised to pay Wilson if the general contractor failed to do so?

b. In the situation of either a primary or secondary obligation, must this contract be in writing to be enforceable against the bank? Why or why not?

Explanation / Answer

1)

In current case, the bank holds a secondary obligation because the bank is not a party in the contract.

2)

As a general rule in a contract in if a party assumes a primary obligation (parties involved in contract), promise does not need to be in writing to be enforceable.

In contrast, a contract in which a party assumes a secondary obligation does have to be in writing to be enforceable.

Since, the bank assumes the secondary obligations a written contract is must to make it enforceable.

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