60 Of 174 documents

Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

Supp. To CHAPTER 2 OFFERS: CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts Supp. to § 2.9

Supp. to § 2.9 Formal Document Contemplated by the Parties

[Go To Main]

(A) The following cases cite this section:

(1) Venture Assocs. Corp. v. Zenith Data Systems Corp., 96 F.3d 275 (7th Cir. 1996) (applying Illinois law) (noted in § 2.8(b)).

(2) Jack Baker, Inc. v. Office Space Development Corp., 664 A.2d 1236 (D.C. App. 1995) (noted in § 2.8(a)).

(3) Seal Products v. Mansfield, 705 So. 2d 973 (Fla. App. 3d Dist. 1998) . Amid pending litigation a debtor and creditor through their attorneys agreed in principle on a settlement amount subject to approval by the debtor's accountant in exchange for the creditor dropping a treble damages claim and expressly contemplating entering into a stipulation agreement. A month later, debtor's attorney wrote a letter to creditor's attorney enclosing an initial payment and setting forth monthly payment amounts. The next month's payment was made but no more; the creditor had withdrawn its treble damages claim. The creditor thereafter sued on this agreement and the debtor moved for summary judgment on the grounds that no contract had been formed and the court granted that motion.

This court reverses, citing this section of Corbin: assuming the parties initially contemplated a formal document, they subsequently reached agreement on all material terms (as evidenced by the letter) and began performance. A contract was thus formed and the parties by their conduct waived the requirement of an executed settlement stipulation. This seems so easy and correct, it is hard to discern how the lower court could have granted the debtor summary judgment.

(4) B. Lewis Productions, Inc. v. Angelou, 2001 U.S. Dist. LEXIS 8639 (S.D.N.Y. June 26, 2001) . In this contract dispute case, The defendant, Maya Angelou, sought declaratory judgment in North Carolina state court, seeking a declaration that the parties had never entered into a contract and that if they had, Angelou had terminated it. The plaintiffs removed the case to federal court and then sought an order enjoining the declaratory judgment action from proceeding in North Carolina. The court granted the motion, enjoining the declaratory suit from proceeding in the state court. Citing this section of Corbin, the court considered the subsequent conduct and interpretation of the parties themselves in determining whether the parties intended to be bound by their preliminary agreement.

(5) Virtual Dev. & Defense, Int'l, Inc. v. Republic of Moldova, 133 F. Supp. 2d 9 (D.D.C. 2001) (applying D.C. law). The court refused to enforce an oral contract between the parties, reasoning that a ''letter of authorization'' between the parties was insufficient to constitute a binding contract. Citing this section of Corbin, the court reflected that oral contracts are enforceable as long as they contain the dual requirements of intent and completeness and as long as the parties agree to all material terms. Here, there was no evidence of agreement on the material terms, and the court therefore found there to be no enforceable contract.

(6) Hunneman Real Estate Corp. v. Norwood Realty, Inc., 54 Mass. App. Ct. 416, 765 N.E.2d 800 (App. Ct. 2002) . Hunneman and Norwood signed a letter of intent for the purchase of Norwood's real estate brokerage assets for $500,000. Norwood later sold its assets to a member of the Carlson group for $675,000. Hunneman alleged a breach of contract because the letter of intent stated that it was a ''binding agreement'' and a ''binding letter of intent,'' leaving only immaterial matters to be further agreed upon.

After reviewing the language and surrounding circumstances, the court held that ''the intent of the parties to be bound by the letter of intent is not left to inference from the terms of their agreement but is twice expressly stated in prominent parts of the letter.'' The court stated that any missing terms not material could be filled by gap fillers. Norwood argued that a major unresolved and material provision of the letter was the provision obliging Norwood to deliver ''its assets free and clear of all encumbrances'' and reserving the right to negotiate the settlement of an FDIC debt. The court found that the settlement was not a condition to the formation of the agreement or the signing of the contemplated purchase and sale agreement. Rather, it was in the nature of a condition subsequent attached to a binding agreement that excuses a party from its contractual obligations thereunder. Citing Corbin, the court stated, ''If the matter to which the obligation is subject is some event or some act of a third person, the parties may now be bound irrevocably, though their obligation may be a conditional one.'' Thus, if a settlement was reached, the contract would not come into existence but would continue to be binding.

(7) Electronic Bankcard Sys., Inc. v. Retriever Indus., Inc., 2003 Tex. App. LEXIS 1007 (Tex. App. Jan. 30, 2003) . The plaintiff had entered into a finders agreement pursuant to which he was to find employees to work for one of the defendant companies. The term of the agreement was one year but could be terminated in the event of uncured default or for cause. The parties continued to operate under the same or similar terms for two years after the agreement expired in January 1993. In February 1995, the defendants advised the owner by letter that the agreement was terminated for cause, an allegation the owner disputed. The following month, the parties signed a letter entitled ''Letter of Intent,'' which discussed the defendants' purchase of various of the plaintiffs' assets. The plaintiffs' breach of contract claim was based upon the defendants' failure to pay residual fees to which the owner was entitled unless the finders agreement had been terminated for uncured default or cause. The appellate court reversed the trial court's grant of summary judgment in favor of the defendants on this claim. The defendants argued that the letter of intent proved their prior agreement had been terminated for cause since the letter stated the parties' agreement was terminated in accordance with the February letter, which in turn stated the agreement was terminated for cause. In considering whether the parties intended the letter of intent to be a binding contract, the court cited Corbin for the rule that the court can decide the issue of intent as a matter of law where the contract is unambiguous. If, however, a question remained as to whether the parties intended to be bound only by future agreements, the issue was one for the trier of fact. The language of the letter referred to a ''letter of intent'' and stated that the defendants were ''willing to proceed with an offer'' and a request that the plaintiffs have their lawyer ''draft an agreement covering these points.'' The letter also stated, however, that the plaintiff, by signing, was indicating his ''unconditional acceptance and agreement with the terms and conditions.'' An issue of fact remained as to whether the letter was intended to be binding as a whole, and also as to the effect of the reference to the February 1995 letter. The court rejected the defendants' argument that the owner was estopped from denying the binding effect of the letter of intent since he had accepted benefits thereunder in the form of payments. A factual dispute remained as to the reason for the payments.

(8) Hughes v. Misar, 189 Or. App. 258, 76 P.3d 111 (Ct. App. 2003) . Several homeowners reached an oral settlement agreement of their dispute regarding their rights and obligations in connection with maintenance of a private road that serviced their subdivision. The parties contemplated that the agreement would be memorialized in a writing but were unable to agree on the terms of a final document. One of the homeowners filed a claim to enforce the settlement. Citing Corbin, the court held that since the parties agreed on essential terms, the oral settlement was binding even though the parties contemplated executing a future writing as a more formal memorialization of their agreement. Moreover, the court held that the parties implicitly agreed that they would bargain in good faith to produce the extensive documentation necessary to implement their agreement. Quoting Corbin, the court noted that it was within its province to fill in any ''gaps'' in contracting where the parties' intent was not completely clear through ''courageous commonsense and reasonable implications of fact.'' This case is also discussed at § 1174.

(9) O'Neil v. Bunge Corp., 365 F.3d 820 (9th Cir. 2004) . The court recognized the general principle that the parties may intend to execute a signed agreement simply as a memorial of their already consummated oral contract and that the failure to execute the writing does not make the contract invalid. The court held, however, that the Longshoremen and Harbor Workers' Compensation Act (LHWC, 33 U.S.C. § 908(i)) superimposes a statutory and regulatory regime on contract law principles. A settlement agreement between the decedent and his former employer was negotiated under which the decedent would receive a lump sum payment in lieu of biweekly payments. The LHWC requires a signed agreement to be submitted for approval. The agreement was evidenced by a writing containing all of its terms and there was evidence that the decedent had orally agreed to these terms but had died before signing the document. The court held that, while it may seem unfortunate to refuse to enforce the agreement simply because it was unsigned, such enforcement would undermine the administrative efficiency that the LHWC regulations were designed to insure by introducing uncertainty about the claimant's actual acceptance of a proposed settlement. The regulations contain a ''bright line'' requirement that settlement applications must be ''self sufficient'' and ''evaluated without further reference to the administrative file'' (20 C.F.R. § 702.242(a)). Notwithstanding the attestation by the decedent's attorney that the decedent had assented to the settlement, the court held that the bright line requirement was not met and the agreement was unenforceable. This case is also noted in the supplement to § 2.34.

(10) Rosenbluth v. Prudential Securities, Inc., 134 Fed. Appx. 124 (9th Cir. 2005) . The plaintiff claimed that the defendant breached an oral contract concerning a venture capital fund. After the meeting at which the alleged oral contract was made, the plaintiff arranged for an attorney to draft a document evidencing the contract. The document was never executed, but it contained a merger clause which the court found to be persuasive evidence that the parties did not intend to be bound until such a document was executed by the parties. More important, the document revealed a number of missing material terms. The plaintiff had sent an e-mail referring to a number of missing terms that had to be included and one material term that was still under negotiation. Finally, the court quoted Corbin's guide that the greater the complexity and importance of the transaction, the more likely it is that informal communications were intended to be only preliminary. The instant court, therefore, agreed with the trial court's determination that a writing would be expected in $200 million ''mega-deals'' of this sort.

(11) County of Jackson v. Nichols, 623 S.E. 2d 277, 2005 N.C. App. LEXIS 2749 (2005) . Kimberly and James Nichols entered into a separation and property settlement agreement that later was incorporated into a decree of divorce in 2001. The separation agreement provided that a certain 4.81 acre parcel of land the couple acquired during marriage would be divided by conveying .87 acres to Kimberly with a remainder to James. The court found that the separation agreement provided that for a period of ten years following the execution of this separation agreement, neither party could accept an offer to purchase their parcel without first notifying the other party and providing an opportunity to purchase the property on identical terms as the offer they had received. The separation agreement further provided that if either party sold their land in violation of the separation agreement, the seller would be liable to the other party for the purchase price. The separation agreement stated that an express and distinct right of first refusal agreement was to be executed on the same date as the separation agreement. A separate agreement was never executed. Subsequently, James sold his share of the parcel to the County without first notifying his former wife. Kimberly filed a claim seeking enforcement of the separation agreement. James filed a motion for summary judgment, which the trial court granted. The court of appeals affirmed, holding that a contract leaving material portions open for future agreement is nugatory and void for indefiniteness. Where parties manifest an intent not to become bound until the execution of a more formal agreement or document, that intent must be effected. The court recognized Corbin's teaching in the predecessor section that the question of whether an agreement is complete or partial is left to inference or further proof and subsequent conduct of the parties themselves may be decisive. In March, 2003, Kimberly conveyed her .87 acre tract to James for $100,000. That deed stated that the property was free and clear of all encumbrances. The court recognized that a right of first refusal constitutes an encumbrance and creates a liability attached to the property. The court found that the deed, therefore, manifested the intention of the parties not to be bound by the provisions in the separation agreement absent the execution of a more formal and final right of first refusal which was never executed. Accordingly, James was entitled to summary judgment.

(12) Perles v. Kagy, 473 F.3d 1244 (D. C. Cir. 2007) . Kagy was a junior attorney assisting Perles, an experienced lawyer, in litigation that resulted in millions of dollars in contingent fees for Perles. Kagy claimed that Perles had orally agreed to pay her one-third of such fees. Perles denied this assertion. Kagy had produced a writing evidencing Perles alleged promise to pay one-third of fees collected in this litigation that Perles had repeatedly refused to sign. In her action to enforce the alleged oral contract, the district court found that there was an express oral contract on one of the two cases in this litigation that would result in Kagy receiving over $1.3 million as one-third of the contingent fee recovery. The court of appeals, however, reversed this decision. Beyond the fact that there was no agreement as to the duration of the alleged agreement or the extent of the work to be performed by Kagy, the court quoted Corbin's proposition that where parties contemplate the execution of a document to evidence their agreement, this is some evidence, albeit not conclusive, that they did not intend to be bound until the document was executed. The court quoted § 27, comment b, of the Restatement (Second) of Contracts in noting that where one party knows or has reason to know that the other party regards the agreement as incomplete and intends that no obligation shall exist until it has been reduced to writing, an otherwise valid oral agreement does not evidence a contract. The court also noted that another factor to be considered is the magnitude of the project, quoting Corbin's view that, the greater the importance of the transaction, the more likely it is that the informal communications were intended to be only preliminary.

(13) Steven R. Perles, P.C., et al. v. Kagy, 2007 U.S. App. LEXIS 847 (D. D.C. 2007) . From 1994 to 1999, recent law school graduate Ann-Marie Kagy worked as an attorney for sole practitioner Steven Perles. As part of her work, Kagy assisted Perles with, a wrongful death action brought by Perles' client against the government of Iran resulted in a verdict of more than $200 million. Congress used frozen Iranian assets to compensate the victims of these types of cases for the compensatory portions of the damages awards, which was more than $20 million in Perles' case. As a result, Perles received millions of dollars in contingency fees. Perles and Kagy had no written contract on how Kagy would be paid for her work on the case, but Kagy claimed that they had an oral contract entitling her to a one third share of Perles' fee. After Kagy commenced working on the case, she drafted a fee agreement for the case which Perles refused to sign. Thereafter, Kagy claimed that she and Perles had a telephone conversation in which Perles agreed to pay the one third fee. Perles denied this claim. Perles filed suit against Kagy seeking a declaratory judgment that he should pay Kagy on an hourly basis for her work. Kagy filed a counterclaim, asserting that she was entitled to one third of Perles' fees. The court concluded that Kagy had not met her burden of proof in showing that she and Perles intended to create an oral contract in their telephone conversation since the parties clearly contemplated a written agreement and did not intend to be bound by an oral agreement alone. As Corbin suggests, the fact that the parties contemplated the execution of a document is some evidence, not in itself conclusive, that they intend not to be bound until it is executed. The court also found that the potentially large amount of money at issue in the alleged oral agreement warred against finding an enforceable contract absent a writing: ''It strains credulity to suggest that Perles and Kagy, both of whom are attorneys, intended a single, undocumented telephone conversation to give rise to a mutually binding agreement giving a junior attorney the potential right to millions of dollars in compensation for her work.'' Again citing Corbin, the court explained that ''The greater the importance of the transaction, the more likely it is that the informal communications are intended to be preliminary only.''

(14) Cochran v. Norkunas, 398 Md. 1, 919 A.2d 700 (Md. 2007) . In determining whether a letter of intent was enforceable, the appellate court cited Corbin in explaining that letters of intent have led to much misunderstanding, litigation and commercial chaos. Preliminary agreements, oral or in writing, cannot be easily generalized, as they range from firm binding commitments to agreements that presuppose no binding obligations on the parties. Relying on Corbin, the court explained that courts have identified four main categories of preliminary agreements: a fully binding preliminary agreement is found where the parties reached complete agreement including the agreement to be bound on all issues perceived to require negotiation. A more elaborate formalization of the agreement is not necessary because the agreement is preliminary only in form and is thus enforceable as it stands. The second type of binding preliminary commitment exists when the parties accept a mutual commitment to negotiate together in good faith regarding any remaining open terms. If negotiations fail, no final contract exists because this type of preliminary agreement does not commit the parties to the ultimate contractual objective. The types of preliminary agreements that are generally not binding include the agreement with open terms, where the parties agree to be bound by some terms but leave others open for the court to fill. The fourth type that is not an enforceable contract is an agreement to agree. The court found that the letter of intent in this case did not evidence a binding preliminary agreement. This case is also discussed at §§ 1.16 and 3.21.

(B) The following case cites this section and its predecessor:

(1) Pueblo Chemical, Inc. v. III Enterprises Inc. V, 169 B.R. 551 (E.D. Pa. 1994) . Pueblo and Enterprises were negotiating a loan agreement. On July 30 they executed a two-page Loan Term Sheet, including several provisions that appear to be complete and acceptable as segments of an agreement. The Loan Term Sheet was accompanied by a cover sheet referring to the term sheet as ''incorporating the final revisions to which we agreed this morning.'' On August 5, five days before the agreed upon closing date of the loan, the negotiations hit a snag on other provisions. Seven days after the closing date, Pueblo sought an injunction to prevent Enterprise's parent from refusing to close the contemplated loan. Enterprise filed a voluntary chapter 11 petition. Pueblo alleged that Enterprise filed its petition solely to avoid honoring its loan agreement. The Bankruptcy Judge held there was no agreement to avoid. The district court affirmed.

Under Delaware law, a contract comes into existence if a reasonable person would conclude, based on objective manifestations of intent and surrounding circumstances, that the parties intended to be bound to their agreement. The Loan Term Sheet was lacking, or unclear concerning, some essential terms. Also, the document was ambiguous about the specific terms of a stock option the borrower was to grant the lender. Hence, the totality of the circumstances strongly suggests that the parties were not intending to be bound by the Loan Term Sheet. The mere fact that it was in writing does not prove that the parties intended to be bound by the writing.

(2) Philips Credit Corp. v. Regent Health Group, Inc., 953 F. Supp. 482 (S.D.N.Y. 1997) . The court also cites the Consarc case, noted below in note 29 of this section of the supplement, and thoroughly applies its multi-factor analysis to determine whether a lender and borrowers intended to be bound to a loan transaction prior to the execution of a written document. They didn't.

(3) Tiburzi v. Dep't of Justice, 269 F.3d 1346 (Fed. Cir. 2001) . Where a DEA agent, represented by counsel and appearing before an administrative judge agreed to an oral settlement with the agency after repeated confirmations to the judge that all parties agreed, the agent refused to execute a written agreement containing the essential terms of the oral settlement. The court cited Corbin at § 30 for the proposition that where the evidence is convincing that the parties intend to reduce their consummated oral contract to writing as a mere ''memorial'', the oral contract is valid though no memorial is executed.

(4) United States v. Shah, 193 F. Supp. 2d 1091 (E.D. Wis. 2002) . The defendant, who was indicted for five counts of fraud and two counts of money laundering, was released on the condition that he execute a bond secured by the promissory note of his friend, Tessman. At a hearing, Tessman agreed under oath to sign a promissory note for the release of the defendant which he would be obligated to pay if the defendant violated a condition of his bond. The terms of the defendant's bail were continued after the defendant was found guilty on the fraud counts. For unknown reasons, the defendant never executed the bond. Thus, Tessman never executed a promissory note. Prior to sentencing, the defendant apparently left the country. The government moved for forfeiture of the bail bond. The bail statutes, however, assumed the existence of a bond to declare a forfeiture, and contract principles precluded forfeiture since the execution of a bond and a violation of a bond condition are conditions precedent to the surety's obligation to pay.

While the court recognized the possibility that an oral suretyship promise like the promise by Tessman may be enforceable under other circumstances, here there was no bond obligation. The promise to pay the debt of another cannot be enforced when the debt of the other does not exist. The court also cited Corbin in holding that, where parties understand that an agreement will be embodied in a formal writing, neither is bound until that document is executed.

(5) Richie Co., LLP v. Lyndon Ins. Group, Inc., 316 F.3d 758 (8th Cir. 2003) . Richie received a fee for each service contract he arranged for a company providing extended service warranties. Richie and Lyndon pursued plans under which Lyndon would acquire such a company. They signed a ''letter of agreement'' (letter) under which Richie sought compensation for providing the acquisition opportunity to Lyndon as well as future compensation on a fee-per-contract basis ''substantially identical'' to the fees Richie had been earning. The letter set forth the general terms of the compensation and stated that the defendant ''has agreed that it will enter into a Service Contract Agreement'' with the plaintiff. Such a contract was never formed and the plaintiff claimed a breach by the defendant for failing to form the contract. The district court concluded the letter was an unenforceable ''agreement to agree'' and on appeal, the appellate court agreed. The language, which spoke of future actions and contemplated agreements, created a mere agreement to negotiate in good faith, which is unenforceable under Minnesota law. Citing Corbin, the court also noted that ''where two parties consider the details of a proposed agreement, perhaps settling them one by one, with the understanding during this process that the agreement is to be embodied in a formal, written document and that neither party is to be bound until he executes the document,'' no contract exists.

(6) Gurley, et al. v. King, et al., 2005 Tenn. App. LEXIS 504 (2005) . This case is fully described forth at § 1774. The Court cited for the proposition that the ''subsequent conduct and interpretation of the parties themselves may be decisive of the question as to whether a contract has been made, even though a document was contemplated and has never been executed.'' It is also cited for the proposition that the fact that the parties intended to create a formal document does not prevent their informal document from taking effect prior to that. This case also cites §§ 2.8, 4.1 and 4.7.

(C) The following cases are also noteworthy:

(1) Scaife v. Associated Air Center, Inc., 100 F.3d 406 (5th Cir. 1996) (applying Texas law). Scaife sought renovation services for an aircraft and solicited a proposal from Associated. Associated submitted a proposal, revised it twice to reflect Scaife's comments, but never sent Scaife the final version. The draft proposal was never signed by either party and Associated never did any work on the aircraft. Scaife argued that the unsigned proposal and surrounding discussions constituted a binding contract. The court disagreed, finding that the parties had not intended to enter into a binding contract and that signatures to the writing were intended as a ''condition precedent to the formation of a contract.''

(2) Wolvos v. Meyer, 668 N.E.2d 671 (Ind. 1996) . This case distinguishing between an agreement to agree and an option contract which contemplates execution of subsequent formal document is noted in §§ 2.8 and 11.1. In Friedman v. Donenfeld, 2004 Conn. Super. LEXIS 907 (Apr. 2, 2004) , the plaintiffs sought specific performance of an alleged contract to purchase the defendant's property. The parties' agreement (binder) was recorded on a napkin-sized piece of notepaper stating that the defendant had received $500 from the plaintiffs ''as a binder toward an option'' to buy the property ''within six months from the contract signing,'' at which time a balance of $24,500 would be paid for the option. The option would entitle the buyers to purchase the property for $1,225,000.00. The property was under lease at the time this agreement was signed. The defendant told the plaintiffs that he would see to it that the lease was terminated. He did not, however, reveal that the tenant had a right of first refusal to purchase the property by meeting the terms of any third party offer until three days after the binder was signed. At that time, the defendant presented a proposed contract to the plaintiffs, conditioned upon the tenant's surrender of his right of first refusal. The plaintiffs refused to sign the agreement with that condition and brought this suit for specific performance on the footing that the binder agreement was sufficient evidence of a contract to sell the property. The defendant introduced evidence of similar proposed contracts he had provided to other interested parties, none of which were completed. The court held that the binder agreement was not, itself, a binding contract for the sale of the property. The evidence demonstrated that the execution of a formal contract was a condition precedent to the completion of the sale of the property. The court further held that the defendant had not repudiated the binder agreement since the defendant had presented the same type of agreement he had previously presented to other potential buyers. The court entered judgment for the defendant.

(3) Geophysical Micro Computer Applications (Int'l) Ltd. v. Paradigm Geophysical Ltd., 2001 Tex. App. LEXIS 7125 (Tex. Ct. App. Oct. 24, 2001) . Whether a contemplated formal document is a condition precedent to formation of a contract or merely a memorial of an already enforceable contract is determined by the intention of the parties and is a fact issue properly left to the jury's determination.

(4) Oldcastle Materials, Inc. v. Rohlin, 343 F. Supp. 2d 762 (N.D. Iowa 2004) . The Rohlins, majority stockholders in a construction company, desired to sell their shares. On March 22, 2004, the Bruenings made an ''offer to purchase'' the shares in a document that stated, ''The buyer wishes to commence negotiating a definitive written agreement for the purchase of all of the ... shares of the Company owned by Rohlin. ... Buyer wishes to provide an offer to Rohlin predicated upon a cursory review of the books and records of the company and an interview with Rohlin.'' The document stated a purchase price of $9,273,600 ''subject to'' due diligence and verification as well as conditions including free and clear title to all shares without liens, good title to the company assets and no known areas of potential liability. The Rohlins signed this document, signifying their acceptance. Pursuant to an original buy-sell agreement among the original shareholders of the company, the Rohlins were required to and did notify the minority shareholders, the Zieglers, of the third-party offer from the Bruenings to allow the Zieglers to decide whether to exercise their right of first refusal. The Zieglers decided to exercise that right and did so within the notice provisions of the buy-sell agreement. When the Bruenings learned of the Ziegler's exercise of that right, they notified the Rohlins that they would pay $12,500,000 for the company. The Zieglers had assigned their rights to the Oldcastle Company to purchase 100 percent of the stock in the company for $12 million. Oldcastle had agreed to finance the Ziegler's exercise of their right of first refusal. The issue before the court was whether the Bruening's original March 22 ''offer to purchase'' for $9,273,600 was an offer or a mere letter of intent or ''agreement to agree.'' The Bruenings claimed that the Zieglers' exercise of their right of first purchase under the buy sell agreement was premature since the March 22 document was not an offer that would activate that right. The Bruenings argued that the price contained in the document was not final since it was subject to due diligence and other conditions. The court found that the March 22 document was sufficiently definite to constitute an offer. The due diligence and other conditions were contemplated as conditions, i.e., facts and events occurring after the formation of the contract. Relying upon the Restatement, Second, of Contracts, § 24, the court held that the document was a manifestation of willingness to enter into a bargain, so made as to justify the other party (Rohlins) in understanding that their assent was invited and would conclude the bargain. The Rohlins did, in fact, sign the document and signify their acceptance and, through their lawyer, returned the signed acceptance to the Bruenings. There was, therefore, a contract between the Rohlins and the Bruenings, subject to the exercise of the Ziegler's right of first refusal. The court held that the Zieglers were entitled to specific performance. It rejected the Bruenings' claim that specific performance should have been denied because the Zieglers failed to inform the Rohlins about their arrangement with Oldcastle. There was no obligation on the Zieglers to notify the Rohlins how the Zieglers intended to finance the exercise of their right.

(5) Ken Hood Constr. Co. v. Pacific Coast Constr., Inc., 120 P. 3d 6 (Ore. App. 2005) . A developer, Fong, purchased property on which it intended to erect a restaurant. Fong invited bids for the construction of the restaurant. Pacific Coast submitted a bid on a standard American Institute of Architects (AIA) form. Fong responded that ''your company has been chosen'' and ''It is my intention to sign a contract with you based on our verbal agreement that the price of the project is increased to $1,259,888.00 which reflects your obligation to provide a performance bond and payment bond on the project.'' The parties agreed that work should begin even before permits were obtained since time had been lost in the bidding process and winter weather would be upon them. In particular, the parties agreed that trees on the property and other material should be cleared. Pacific subcontracted the tree removal with the plaintiff, Ken Hood. Pacific notified Fong that the tree removal was scheduled and stated the need for a ''signed contract.'' At Pacific's direction, Hood proceeded with the tree removal and related activities. A contract between Fong and Hood was never signed. Pacific sued Fong for breach of contract. The trial court concluded that no contract had been formed between Fong and Pacific since the parties never signed a contract. The court noted that Pacific had said it would not proceed absent a signed contract but still proceeded with the work. On appeal, the instant court found that Pacific's bid was an offer and Fong's response awarding the project to Pacific accepted the offer, emphasizing Fong's language that it was his intention to sign a contract with Pacific ''based on our verbal agreement'' with the price noted. Quoting the Restatement (Second) of Contracts, § 27, the court noted that where manifestations of assent are in themselves sufficient to conclude a contract, it will not be prevented from being recognized as a contract by the fact that the parties also manifest an intention to prepare and adopt a written memorial of their agreement. Fong's lawyer argued that the parties had subsequent discussions concerning changes in the agreement. The court viewed any such changes as proposed modifications to the existing contract (Restatement (Second) of Contracts, § 27, comment d). The court reversed the trial court's holding that there was no contract between Fong and Pacific.

(6) Omega Engineering, Inc. v. Omega, S. A., 2005 U.S. App. LEXIS 28270 (2d Cir. 2005) . The plaintiff is an engineering company manufacturing industrial and scientific control and measurement devices which it markets under its registered trademark and symbol of ''Omega.'' The defendant is a Swiss manufacturer of watches, clocks and other timepieces which it markets under its registered trademark and symbol of ''Omega.'' The plaintiff filed a complaint alleging that the defendant's opposition to trademark applications involving the use of the Omega trademark breached a 1994 settlement agreement. The district court referred the complaint to a magistrate judge for settlement discussions. A settlement conference was held one day before trial was to begin. Both sides were represented by counsel and each had a representative with authority to settle the case. The conference resulted in a written settlement agreement stating that the case was settled and the agreement would be signed by an appropriate party in Switzerland. The Swiss officials, however, refused to sign the agreement contending that a particular paragraph was objectionable though that paragraph was copied from a proposal made by the defendant's representative. The case was referred back to the magistrate judge who concluded that the settlement agreement was effective absent any final signing by a Swiss official as the defendant's representative had the authority to bind the defendant. On appeal, the instant court recognized that a contract is not made so long as, in the contemplation of the parties, something remains to be done to establish the contractual relation. The parties' intention is determined by the language used, the surrounding circumstances including motivation and the purposes which the parties sought to accomplish. The court found that the defendant's motive in negotiating the settlement was to avoid a trial. If any agreement was contingent upon further review by Swiss officials, however, that motive would have been negated since, absent a settlement on the day before the trial, the trial would have begun. While the settlement agreement envisioned a signing, it did not establish that the obligations it imposed were contingent upon the signing. The parties represented to the judge that they had the authority to conclude a final settlement and that they had done so. There was evidence that the subsequent signing by a Swiss official was intended as only a ''ministerial'' act. The court viewed the evidence as suggesting that the later objection by the defendant was a thinly veiled attempt to rewrite the agreement because of their dissatisfaction with it since and they believed their representative who had the authority to settle made a mistake. Much of the language, however, had been proposed by the defendant's representative. The court restated the elementary principle of contract law that a party's subsequent change of heart will not unmake a bargain already made. Nothing remained to be done to the contractual relation between the parties. The judgment of the district court enforcing the agreement was affirmed.

(7) QFA Royalties LLC v. A & D Foods, Inc., 2007 U. S. Dist. LEXIS 38388 (D. Colo. 2007) . The attorneys for the parties exchanged a series of e-mails in pursuit of a settlement agreement leading to a final document that the defendant did not sign. Instead, the defendant joined a class action lawsuit against the plaintiff who claimed that the defendant was bound to the settlement agreement though a final document was never executed. To determine whether parties intend to be bound before the execution of a final document, the court relied on criteria set forth in City & County of Denver v. Adolph Coors Co., 813 F. Supp.1476, 1481 (D. Colo. 1993) : (1) Whether the parties stated an intention not to be bound until a final writing was executed; (2) whether one party has partially performed and the other party has accepted that performance; (3) whether there are no issues left to be negotiated thereby making the execution of the final writing merely ministerial; (4) whether the agreement concerns complex business matters that parties such that a final written agreement would be the norm rather than the exception. Applying these Coors factors to the instant case, the court concluded that the parties had, through their representatives, manifested a mutual intent to be bound by an enforceable agreement prior to the execution of a final writing.

(8) Tri-County Motors, Inc. v. American Suzuki Motor Corporation, 2007 U.S. Dist. LEXIS 48418 (E.D.N.Y. 2007) . Tri-County sought to purchase a Suzuki franchise. A formal franchise agreement was never executed by the parties, but Tri-County argued that Suzuki's conduct contractually bound Suzuki without execution of a formal agreement. The court noted that where all contract terms have been agreed upon, with nothing left for future settlement, and there was no understanding between the parties that an agreement should not be binding until reduced to writing and formally executed, an informal agreement can be binding despite the fact that the parties contemplated ultimately memorializing their contract in a formal document. The court cited Corbin in stating, ''The point of these rules is to give parties the power to contract as they please, so that they may, if they like, bind themselves orally or by informal letters, or that they may maintain 'complete immunity from all obligation' until a written agreement is executed.'' The court concluded the evidence supported Suzuki's contention that it did not intend to be bound by the mere submission of a dealership application and related documentation. Suzuki specifically advised the prospective dealer that the completion of the dealership application materials was necessary to ''evaluate'' his clients' expertise and reputation and that final approval or disapproval of the application ''will be at the sole discretion of'' Suzuki's executive management in Brea, California. Moreover, the language of the application itself stated that the receipt by Suzuki of the application ''does not obligate'' Suzuki in any way to enter into a franchise agreement; further, that no act other than the formal execution of a franchise agreement by an officer of Suzuki ''shall constitute approval of the application'' by Suzuki. The court concluded that Suzuki explicitly reserved its right not to be bound to, or even enter into, any form of agreement with Tri-County absent approval from executive management and the execution of a formal franchise agreement. Moreover, there were various open terms counseling against finding a contract prior to execution of a formal document, including a disagreement as to the location of the showroom. In addition, the agreement was the type that would normally be committed to a formal writing, also strongly supporting Suzuki's position that it had no intent to be bound by the prospective dealer's dealership application and accompanying documentation.

(9) West v. IDT Corp., 2007 U. S. App. LEXIS 17283 (3d Cir. 2007) (Unpublished). The plaintiff's meeting with the defendant's chief executive officer (CEO) who also served as chairman of the board resulted in the CEO's handwritten, two-page employment agreement which each party signed. The agreement stated the plaintiff's salary and a duration of five years as well as an advance annual payment of stock and cash. The agreement also stated that the parties ''will complete formal contracts as soon as possible but this is binding.'' The plaintiff began working for the defendant for a salary but the advance payment was not made and this action was brought. The district court examined factors suggested in Adjustrite Systems, Inc. v. GAB Business Services, Inc., 145 F. 3d 543, 547 (2d Cir. 1998) to determine whether the parties had entered into an enforceable agreement or a mere agreement to agree: (1) whether there had been an express reservation of the right not to be bound in the absence of a subsequent writing; (2) whether there was partial performance of the agreement; (3) whether all of the terms had been agreed upon, and (4) whether the agreement was of the type that is usually reduced to a more formal writing. Despite finding that ''many facts regarding what happened'' at the meeting resulting in the handwritten agreement were heavily disputed, the district court found that only the first two factors favored the plaintiff and ''qualitatively,'' the factors weighed against the plaintiff resulting in summary judgment for the defendant. On appeal, the instant court noted that, ''strictly speaking,'' it need not determine the analysis to be undertaken with respect to these factors which were an explication of New York law. Nonetheless, the court disagreed with the district court's analysis and application of the third and fourth factors. Regardless of the analysis, however, the instant court stated that the district court's conclusion as a matter of law that no binding contract existed was in error, especially in light of the express language in the agreement, ''this is binding.''

Supplement to Notes in Main Volume

5. Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736 (8th Cir. 2002) . The plaintiff sued for breach of an alleged contract to sell its rights to DirecTV television service in four Iowa counties to the defendant. The parties' negotiations were evidenced by three letters from the defendant, each of which stated that they were nonbinding manifestations of intention with respect to entering into an asset purchase agreement with the plaintiff. The trial court afforded such statements conclusive effect and granted summary judgment for the defendant. The appellate court relied heavily on the Restatement (Second) of Contracts, § 27, in affirming the grant of summary judgment. Recognizing that parties may intend to be bound by their oral agreement notwithstanding their intention to memorialize that agreement in writing, where one party knows that the other does not intend to be bound until such a final document is executed, the preliminary negotiations do not form a contract. Here, the plaintiff knew or had reason to know that the defendant did not intend to be bound until such a final document was completed. The negotiations also revealed numerous unresolved matters upon which the parties would have had to have reached agreement. The plaintiff produced no evidence sufficient to overcome the clear statements in the defendant's letters that it had no intention of being bound prior to the consummation of a final writing evidencing the complete agreement.

11. 1- 800 Contacts, Inc. v. Weigner, 2005 Utah App. LEXIS 537 . The plaintiff claimed that since the parties had agreed on the property to be sold, the purchase price and the manner of payment, there was an enforceable contract. The defendant's e-mail to the plaintiff, however, stated that the agreement ''is not to considered legally binding until a physically executed contract between the two companies is completed. Until the time said contract is executed, I may, at my sole discretion, rescind or modify this offer in any way I see fit.'' The court held that this manifestation of intention was unambiguous and no contract was formed.

22. In Greystone Partnerships Group v. Koninklijke Luchtvaart Maatschappij, 815 F. Supp. 745 (S.D.N.Y. 1993) , the court faced and rejected the ''novel argument'' that where one party intends no contract to exist until a final writing is signed but the other party's intent is unclear, the former party may bind the second party to a unilateral contract.

28. Ry-Tan Constr., Inc. v. Washington Elementary Sch. Dist. No. 6, 93 P.3d 1095 (Ariz. Ct. App. 2004) . After the defendant school district board had voted to award a construction contract to the plaintiff and authorized the signing of the formal contract the next day, the defendant refused to sign the final document. In the plaintiff's action for breach of contract, the trial court ruled that the execution of the formal document was not a condition precedent to the formation of the contract. On appeal, the instant court reviewed cases from other jurisdictions, including a number of states where statutory language or the bid documents require the execution of a formal document before the owner is bound as well as jurisdictions holding that a contract is created when the award is made and communicated to the successful bidder. The court relied heavily on the Restatement (Second) of Contracts, § 27, previously adopted in Arizona, for the principle that manifestations of assent sufficient to conclude a contract will not be prevented from so operating by the mere fact that the parties also intend a written memorial thereof, unless the parties intend the manifestations to be preliminary negotiations. Where the parties agree upon all of the terms including a commitment that they will execute a final writing, they have concluded the contract (Restatement (Second) of Contracts, § 27, comment a). Here, the terms of the contract had been fully negotiated. The bid announcement stated that the bid would be awarded to the lowest bidder meeting all requirements of the bid specifications. The plaintiff was the lowest bidder and it met the specifications. The minutes of the meeting recorded the award, and the plaintiff began moving machinery onto the defendant's property before the time for the execution of the formal document. The court held, therefore, that the parties clearly manifested an intent to form a contract when the award was communicated to the plaintiff. However, in Ry-Tan Constr., Inc. v. Washington Elementary Sch. Dist., 111 P.3d 1019 (2005) , while recognizing that the Restatement (Second) of Contracts, § 27, captures a well-established rule of contract law, the Arizona Supreme Court noted that this rule was not unknown to the Arizona courts in 1951 when this court held that a public agency is not bound by a contract until a formal contract is executed. Covington v. Basich Bros. Constr. Co., 72 Ariz. 280, 233 P.2d 837 (1951) . Indeed, the First Restatement of Contracts included a virtually identical concept in Section 26. Absent compelling reasons, the court was unwilling to overturn precedent and detected no change in public policy that would lead it to set aside Covington's ''bright-line'' rule. The court reversed the decision below.

28. In Power v. Tyco Int'l, (US) Inc., 2007 U. S. Dist. LEXIS 96188 (S.D.N.Y. 2007) , there was no question that the defendant failed to make severance payments. The only question was whether an oral agreement existed in the first place. The court noted that, under New York law, parties are free to contract orally. It is the intent of the parties that determines whether and when an oral contract was formed. In determining whether parties had such an intent, the court considers whether there was an express reservation not to be bound absent a writing, whether the alleged contract has been partially performed, whether all of the terms have been agreed upon and whether it is the type of agreement usually committed to writing. As suggested in § 27, comment c, of the Restatement (Second) of Contracts, these circumstances may be shown by oral testimony as well as incomplete writings. No single factor is conclusive, but each may provide significant guidance. While the question is necessarily factual, application of the guidelines to the facts provides significant assistance in that determination. In this case, there was no evidence of any intention not to be bound absent a writing. There was clearly partial performance. While the agreement was incomplete in certain respects, the court found that no material terms were missing. Finally, the court recognized that while a severance agreement of the type under consideration is usually reduced to writing, this single factor weighing against enforcement of the oral agreement was not conclusive where the other factors clearly pointed to an enforceable contract.

29. This section is cited in Consarc Corp. v. Marine Midland Bank, 996 F.2d 568 (2d Cir. 1993) , in which the Second Circuit stated that to determine whether the parties intended to be bound absent a writing no single factor may be decisive, but where applicable each of nearly twenty factors may provide guidance. See also GSGSB, Inc. v. New York Yankees, 862 F. Supp. 1160 (S.D.N.Y. 1994) (four factors); Krauth v. Executive Telecard, Ltd. 890 F. Supp. 269 (S.D.N.Y. 1995) .

N.Y.- Durable, Inc. v. Twin County Grocers Corp., 839 F. Supp. 257 (S.D.N.Y. 1993) (''Where a writing sent by the party to be bound to the other specifically indicates that an additional agreed-upon writing is contemplated prior to entry into a binding contract, this indication of intent should be honored.'').

34. The approach of classifying binding preliminary agreements according to two types was also adopted in In re Atlantic Computer Systems, Inc., 154 B.R. 166 (S.D.N.Y. 1993) .