Centex v. Dalton

Centex Corporation ("Centex") is a company specializing in construction & finance of homes.

In 1988, the U.S. government directed all savings and loan associations (S&L), or thrift institutions to join larger banks.

In November 1988, Centex contacted Mr. Dalton to see his assistance. Namely, Centex wanted to acquire some thrift institutions to expand its business.

Dalton notified Centex about 4 potential small banks for acquisition by Centex. In December 1988, Centex agreed to pay Dalton $750,000 over the course of a 3-year period. The board of Centex rejected the finder's fee for Dalton.

As a result, Centex refused to remunerate Dalton. Within a few month, the board of Centex was dissolved. Moreover, a federal law made it mandatory for the smaller banks to join Centex anyway.

Dalton sued Centex in a Texas trial court for the breach of his original contract with Centex which the Centex board had later repudiated.

Dalton won in a summary judgment. This decision was affirmed by the Texas appellate court.

Can a law prohibiting 1 party's performance under a contract invalidate the contract & discharge that party's obligations thereunder?

What if it becomes impossible to remit payment for something that we've received?

Can a supervening law invalidate a contract &, thereby, excuse non-performance?

Yes. A change in the law may result in a supervening impossibility.

A contract may be rendered un-enforceable if a law is passed that prohibits 1 party from performing its contractual obligations.

Reversed.

Justice Gammage: If a party's obligation to perform under a contract is rendered impracticable, or impossible due to illegality, then that party's duty to perform is discharged.

Quantum Meruit may allow a party to receive equitable relief in some cases, though. So, unjust enrichment may be avoided in the absence of legal recourse.

Nevertheless, Dalton was not granted Quantum Meruit in this case.

As of 2023, Centex is part of PulteGroup which is residential construction company.