## Facts

- Arcadian Corp. owned a phosphate fertilizer facility in Geismar, Louisiana and negotiated in 1986 to sell it to a purchaser joint venture organized through Arcadian Phosphates, Inc. (API).
- In June 1986, the parties executed a memorandum of understanding (MOU) outlining major deal points (assets, price, and Arcadian’s potential equity participation), while contemplating board approval and API financing.
- In November 1986, the parties signed a shorter memorandum incorporating the June MOU and adding terms such as purchase price mechanics and a target closing date.
- The November memorandum left material items open or contingent, including partial payment by a note “secured to Arcadian’s satisfaction” and participation by additional joint-venture members subject to “mutual agreement.”
- The memoranda contemplated later execution of a definitive “binding sales agreement” and addressed the possibility that negotiations could fail.
- After the November memorandum, API made a cash deposit and took steps toward closing, but no final agreement was executed.
- As market conditions improved, Arcadian demanded majority ownership in the venture (at least 50%), which API rejected; negotiations ended and Arcadian did not proceed.
- API and individual participants sued for breach of contract (asserting the memoranda were binding) and promissory estoppel (asserting a clear promise and detrimental reliance).

## Issues

1. Whether, under New York law, the June and November memoranda formed an enforceable contract for sale of the facility or were a nonbinding agreement to negotiate pending further documentation and approvals.
2. Whether summary judgment was proper on promissory estoppel, including whether Arcadian made a clear and unambiguous promise, whether plaintiffs reasonably relied, and whether reliance caused injury.

## Decision

- The Second Circuit affirmed summary judgment for Arcadian on breach of contract because the memoranda did not reflect intent to be bound without a later definitive agreement.
- The court held the memoranda’ language, open terms, and contingencies (including board approval and financing) showed ongoing negotiations rather than a final contract.
- The Second Circuit reversed summary judgment on promissory estoppel and remanded because material factual disputes remained regarding the existence and scope of a promise, reasonable reliance, and resulting injury.

## Legal Principles

- Under New York law, enforceability of preliminary writings turns on objective manifestations of intent to be bound; explicit contemplation of a later definitive agreement and provisions anticipating failed negotiations indicate nonbinding intent.
- Open or subjective conditions (e.g., security “to [a party’s] satisfaction” and future “mutual agreement” on essential participants) can be inconsistent with a completed contract, especially in a major asset sale where formal documentation is expected.
- Even when no contract is formed, promissory estoppel may proceed if evidence could support (1) a clear and unambiguous promise (including a promise to negotiate in good faith), (2) reasonable and foreseeable reliance, and (3) injury caused by that reliance.
- On summary judgment, courts may not resolve genuine disputes over promise, reliance, and causation; such questions are commonly for the factfinder.

## Conclusion

The Second Circuit treated the parties’ memoranda as nonbinding preliminary writings and upheld dismissal of the contract claim, but it permitted the promissory estoppel claim to go forward because the record raised triable disputes about whether Arcadian made a definite promise that induced reasonable, detrimental reliance.


Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69 (2d Cir. 1989)