## Facts

- A/S Apothekernes Laboratorium for Specialpraeparater (a Norwegian company) negotiated with I.M.C. Chemical Group, Inc. to purchase certain assets of IMC’s Biochemical Division, including facilities at IMC’s Terre Haute plant.
- On December 9, 1977, the parties signed a letter of intent stating it set forth terms on which they “intend to negotiate and consummate” an agreement of sale.
- The letter of intent stated that all terms were “subject to” concluding a sale agreement “acceptable to the Boards of Directors of our respective corporations,” and that board discretion “shall in no way be limited” by the letter.
- The letter included a 60-day period to execute the final sale agreement and a provision restricting IMC from negotiating with third parties about the same assets during negotiations.
- By February 24, 1978, the negotiating principals agreed on all terms, but no formal agreement of sale was drafted or executed.
- IMC’s CEO presented the proposed transaction to the parent company’s president, who rejected it; IMC’s board then refused to approve the sale, and IMC informed Apothekernes it would not proceed.
- Apothekernes sued seeking damages and specific performance, asserting breach of contract, fraud, and estoppel based on the negotiations and alleged final agreement on terms.

## Issues

1. Whether the letter of intent and subsequent agreement on terms created an enforceable contract to sell IMC’s Biochemical Division assets.
2. Whether the express board-approval condition prevented contract formation absent actual board approval and an executed definitive sale agreement.
3. Whether IMC or its CEO committed actionable fraud by misrepresenting authority or the likelihood/inevitability of approval.
4. Whether IMC’s conduct supported equitable estoppel or a claim based on lack of good faith in negotiations despite the board-approval condition.

## Decision

- The Seventh Circuit affirmed judgment for IMC on all claims.
- The court held no enforceable contract existed because the parties expressly conditioned any sale on a definitive agreement approved by both corporations’ boards, and approval never occurred.
- The court upheld the rejection of fraud claims after bench trial, finding no actionable misrepresentation about authority or the conditional nature of the transaction.
- The court upheld dismissal of estoppel-based theories because reliance on negotiations could not be reasonable in light of the explicit reservation of unrestricted board discretion.

## Legal Principles

- A preliminary writing and negotiations are not enforceable as a final contract when the parties manifest intent not to be bound until execution of a definitive agreement and satisfaction of specified conditions.
- An express condition requiring board approval, coupled with language reserving unrestricted board discretion, prevents contract formation absent actual approval.
- Agreement on deal terms by negotiators does not create a binding sale contract when the parties have made board approval and a definitive written agreement prerequisites to obligation.
- Fraud and estoppel claims fail where the allegedly deceived party cannot reasonably rely on assurances inconsistent with clear written terms reserving approval authority and conditioning any deal on that approval.

## Conclusion

The court enforced the parties’ expressed allocation of decision authority: the letter of intent and later agreement on terms did not bind IMC because the contemplated sale required an executed agreement approved by both boards, and the record supported findings that IMC made no actionable misrepresentations and engaged in no conduct warranting estoppel.


A/S Apothekernes Lab. for Specialpraeparater v. I.M.C. Chem. Grp., Inc., 873 F.2d 155 (7th Cir. 1989)