## Facts

- Nathan Jacobson, acting as a developer/promoter, asked architect Martin Stern, Jr. in January 1969 to prepare plans for a Lake Tahoe hotel/casino project known as “Kings Castle.”
- Stern began work immediately and dealt directly with Jacobson, who referred to the project as “my hotel” and instructed Stern to proceed.
- After negotiations, the parties agreed to a $250,000 architectural fee; by early May 1969, a substantial portion of the services (about 60%) had been completed.
- Although Jacobson later acknowledged a contract formed in April 1969, no written contract was introduced at trial.
- While plans were underway, Jacobson formed and used related business entities, including acquiring A.L.W., Inc. and establishing additional ownership/management structures for the project.
- Stern billed Jacobson but received partial payment via four checks totaling $150,000 drawn on A.L.W.’s account; most checks were not signed by Jacobson.
- A.L.W. later filed for bankruptcy; Stern did not pursue a bankruptcy claim and instead sued Jacobson personally for the unpaid balance.
- After a bench trial, the district court entered judgment for Stern for $132,590.37 plus interest; Jacobson appealed.

## Issues

1. Whether Jacobson remained personally liable on the architectural fee agreement as a promoter who contracted before or apart from any corporate entity’s involvement.
2. Whether corporate payment and alleged adoption of the agreement constituted a novation that substituted A.L.W. (or other entities) as the sole obligor and discharged Jacobson.

## Decision

- The Nevada Supreme Court affirmed the judgment for Stern.
- The court held the agreement was a personal contract between Stern and Jacobson in Jacobson’s individual/promoter capacity.
- The court determined that even if A.L.W. adopted the contract and became liable, that adoption did not release Jacobson absent a novation.
- The court found no novation because Stern did not assent—expressly or by clearly inferable conduct—to substituting A.L.W. (or any entity) for Jacobson as the obligor.
- Applying substantial-evidence review to the bench-trial findings, the court declined to disturb the trial court’s determinations on personal contracting, adoption, and lack of novation.

## Legal Principles

- A contract made with a promoter is not automatically a corporate contract; a later-formed corporation may become bound only through express or implied ratification/adoption.
- A promoter remains personally liable on a preincorporation contract unless there is a novation or an agreement that the corporation alone will be bound.
- Corporate adoption of a promoter’s contract—even with corporate part performance or payment—adds potential corporate liability but does not, by itself, discharge the promoter.
- Novation requires the creditor’s assent to substitute a new obligor; assent may be inferred from acceptance of performance only when the performance is tendered with the understanding that a complete substitution is proposed.

## Conclusion

Because Stern contracted with Jacobson personally and never agreed to substitute a corporate entity as the sole debtor, no novation occurred; Jacobson remained personally liable for the unpaid architectural fees, and the judgment for Stern was affirmed.


Jacobson v. Stern, 96 Nev. 56, 605 P.2d 198 (Nev. 1980)