Law for Business 10th Edition by James Barnes,Terry Dworkin,Eric Richards

Exercise 6

In 1857, the Central America, which was loaded with gold from California, sank off Cuba. Thompson organized the Columbus-American Discovery Group, an organization that won the race to locate the sunken ship. In 1983, Thompson, Standefer, and Doering entered a contract contemplating the salvage of the ship. It stated, "It is agreed that a corporation... will be formed between [us]. The object of forming [it] is to carry out the duties of the... Group under the joint venture with Mr. John." The agreement further provided that if the joint venture discontinued operations for any reason, the corporation or individuals therein would still receive a share of any salvage from the ship. John was to finance the search and salvage procedures. John, however, never signed the contract or the joint venture agreement, and a corporation was never chartered. After the failure of the joint venture, Standefer had virtually no active participation in the location of the ship or the salvage operation. Nonetheless, Standefer sought to assert rights under the contract and share in the treasure that was salvaged by Thompson. Thompson alleged that the creation of the joint venture was a condition precedent to the contract's effectiveness. Is he correct? Explain.