Illinois Controls, Inc. v. Langham

Michael Langham (defendant) invented a useful device for highway construction, which Langham initially marketed on a small scale through his unincorporated business, Langham Engineering. Clark Balderson and BI (plaintiffs) entered into an agreement with Langham and Langham Engineering to market the device to a larger market on behalf of a corporation to be formed for that purpose, Illinois Controls, Inc. (plaintiff). The agreement terms gave Illinois Controls exclusive use of the device’s patent, the manufacturing capabilities of Langham Engineering’s facility, Langham’s expertise, and the titles to two motor vehicles. In exchange, Illinois Controls agreed to assume Langham Engineering’s debts and certain debts assumed by Langham. The beginning of the agreement also stated Balderson and BI’s marketing obligations following a phrase introducing the agreement covenants “as follows.” The agreement did not state that the parties intended for Illinois Controls to be exclusively liable for any breach of the agreement. Illinois Controls was subsequently formed. Although Illinois Controls received many benefits from the agreement, it neither assumed the debts that it promised nor formally adopted the agreement. Following litigation, the trial court awarded substantial damages to Langham against Illinois Controls, which it allocated against Balderson and BI as promoters. The appellate court found that the language setting forth Balderson and BI’s marketing obligations was merely introductory and reversed the award against them. Thereafter, the Ohio Supreme Court was tasked with determining the obligations under the agreement, whether said obligations were breached, and which parties were liable for any breach.