## Facts

- B & B Equipment Co. (BB) was a closely held corporation owned by three principals: Braymen, Jaecques, and Hughes.
- Braymen wanted to retire, so Jaecques and Hughes sought a replacement co-owner and reached an agreement with John A. Bowen.
- The parties valued Braymen’s 100 shares at $15,000, but Bowen lacked the funds to buy the shares outright.
- BB purchased Braymen’s 100 shares on Bowen’s behalf. Bowen paid $2,500 toward the purchase and gave BB a promissory note for the remaining $12,500.
- Under the agreement, Bowen was entitled to dividends attributable to the 100 shares, but he was to turn those dividends over to BB to be applied toward the note until it was paid.
- Bowen’s agreed responsibilities included taking over corporate recordkeeping and bookkeeping and generally doing what needed to be done to help run the business.
- After a period of time, Jaecques and Hughes became dissatisfied with Bowen’s performance of these duties and told him he was discharged.
- After the discharge, Bowen informed BB’s attorney that he would surrender his interest in the corporation for a stated sum.
- BB’s attorney responded that the agreement had been rescinded and tendered repayment of Bowen’s $2,500 and additional amounts Bowen had paid toward the stock purchase.
- The parties reached an impasse. BB filed an action for declaratory judgment seeking confirmation that it could rescind the agreement; Bowen counterclaimed seeking a declaration that the agreement remained in force.
- The trial court entered a declaratory judgment for BB, concluding BB had the right to rescind. Bowen appealed.

## Issues

1. Whether Bowen’s failure to perform the agreed bookkeeping, recordkeeping, and related services constituted a material breach that entitled BB to rescind the parties’ agreement.
2. Whether the stock-purchase terms and Bowen’s service obligations were part of a single bargain such that BB could rescind the whole agreement rather than leave Bowen with continuing stock rights.
3. Whether BB lost the right to rescind through waiver or estoppel by continuing the relationship and accepting performance and payments before discharging Bowen.

## Decision

- The Missouri Court of Appeals affirmed the declaratory judgment for BB.
- Bowen’s unsatisfactory performance of the duties that formed a central part of the exchange supported a finding of material breach and justified rescission.
- The court treated the arrangement as one contract in which the opportunity to acquire Braymen’s shares was tied to Bowen’s promised services; the stock provisions were not treated as independent and surviving obligations after termination.
- BB was permitted to rescind and restore the parties, as nearly as possible, to their pre-agreement positions by returning Bowen’s down payment and amounts paid toward the stock purchase.

## Legal Principles

- Rescission is available when a party’s breach is material—i.e., when it defeats the essential purpose of the agreement rather than involving a minor defect.
- Whether promises are severable depends on the parties’ intent and the nature of the exchange; when the performances are interdependent parts of one bargain, rescission may reach the entire agreement.
- A party seeking rescission must generally tender restitution of benefits received so the other side is not left worse off solely due to rescission.
- Continued dealings after performance problems do not automatically bar rescission; waiver and estoppel require facts showing an intentional relinquishment of the right to rescind or conduct that reasonably induced reliance inconsistent with rescission.

## Conclusion

The appellate court upheld the declaration that B & B Equipment Co. could rescind its agreement with Bowen because Bowen’s poor performance of the bookkeeping and business-management duties went to the heart of the arrangement under which he was to acquire Braymen’s shares, and rescission with repayment of Bowen’s contributions was the proper way to unwind the parties’ transaction.


B & B Equipment Co. v. Bowen, 581 S.W.2d 80 (1979)