## Facts

- Quest Engineering Solutions, Inc. (Quest) entered into a written agreement with Eric Wilbur before Wilbur formed Compliance Management Group Corporation (CMG).
- At the time of contracting, Wilbur intended to form CMG and had already selected that corporate name.
- Wilbur signed the agreement using only his personal name, not in a representative capacity and not “on behalf of” CMG.
- The agreement stated that it was anticipated Wilbur would “form a corporation to undertake his obligations,” but it otherwise did not identify CMG or substitute a corporate party.
- The agreement was described as an interim arrangement terminable by either party on short notice.
- Although CMG was later formed and performed work related to the agreement, the parties did not execute a replacement agreement reflecting CMG’s existence, adoption of the earlier contract, and assumption of obligations until more than two years later.
- Wilbur never obtained a written release from Quest stating that Quest would look only to CMG (and not Wilbur) for performance.
- At a bench trial, Quest’s president testified that Quest always looked to Wilbur personally to perform under the agreement, including after CMG was formed.
- The trial judge found Wilbur personally liable on the preincorporation contract and awarded Quest roughly $165,215 in damages for Wilbur’s breach of the agreement’s noncompetition provision by competing with Quest.
- Wilbur appealed, challenging personal liability and the damages award.

## Issues

1. Whether Wilbur, who signed a preincorporation agreement only in his own name while planning to form a corporation, remained personally liable after the corporation was formed and later performed under the arrangement.
2. Whether CMG’s later involvement and the parties’ later dealings constituted a novation that released Wilbur from liability.
3. Whether the trial court’s damages award for breach of the noncompetition provision was supported by the evidence.

## Decision

- The Appeals Court affirmed that Wilbur was personally liable on the preincorporation contract because he signed in his individual name and Quest did not agree to substitute CMG as the sole obligor.
- The court rejected Wilbur’s novation argument, concluding that later corporate formation and performance, without a clear agreement releasing Wilbur, did not discharge his obligations.
- The court left intact the finding that Wilbur breached the noncompetition provision by competing with Quest.
- The court vacated the approximately $165,215 damages judgment and directed entry of a reduced damages award consistent with the evidence.

## Legal Principles

- A person who enters into a contract for a not-yet-formed corporation and signs in an individual capacity may be personally liable on the contract.
- The later formation of the corporation, and the corporation’s later adoption or performance, does not by itself release the individual signer from liability.
- A novation requires a clear agreement that substitutes a new obligor and releases the original obligor; it is not established merely by later dealings with the corporation.
- Contract language anticipating future incorporation does not alone shift liability to the future entity when the signer does not sign as an agent for a disclosed principal.
- Damages for breach of a noncompetition covenant must be supported by proof tying the claimed loss to the breach; an appellate court may reduce an award that exceeds what the record supports.

## Conclusion

The Massachusetts Appeals Court held that Wilbur remained personally bound on the preincorporation agreement because he signed only in his own name and Quest never clearly released him in favor of CMG; while the liability finding and breach of the noncompete were upheld, the damages award was vacated and reduced for lack of adequate evidentiary support.


Quest Engineering Solutions, Inc. v. Wilbur, 2011 WL 2224953 (2011)