## Facts

- Baskin Robbins decided to close its Vernon, California ice-cream manufacturing plant, and Kevin A. Copeland sought to acquire the manufacturing assets and sublease the facility.
- Copeland conditioned the transaction on Baskin Robbins also entering a multi-year “co-packing” arrangement under which Copeland would manufacture ice cream for Baskin Robbins.
- In May 1999, Baskin Robbins sent a letter stating it detailed terms approved for the sublease, asset sale, and a product supply arrangement, including a $1.3 million equipment purchase price.
- The letter stated Baskin Robbins “would agree,” subject to a separate co-packing agreement and negotiated pricing, to a three-year co-packing commitment with specified volume targets.
- Copeland signed the letter and paid a “non-refundable” $3,000 as requested; the parties then negotiated unresolved co-packing terms, including price, product specifications, quality standards, and intellectual property rights.
- In July 1999, Baskin Robbins terminated negotiations and returned the $3,000, citing a change in corporate strategy.
- Copeland sued for breach, seeking expectation damages including anticipated profits and related consequential losses.
- The trial court granted summary judgment for Baskin Robbins, reasoning that the letter did not create an enforceable co-packing contract because material terms were left open.

## Issues

1. Whether the parties formed a binding co-packing contract, or instead formed an enforceable contract to negotiate a co-packing agreement in good faith.
2. If a contract to negotiate existed and was breached, whether recoverable damages include expectation damages (lost profits) or are limited to reliance damages.

## Decision

- The Court of Appeal affirmed summary judgment for Baskin Robbins.
- The court held that California law recognizes a contract to negotiate an agreement in good faith as enforceable and distinct from an unenforceable “agreement to agree.”
- The court held that damages for breach of a contract to negotiate are limited to reliance damages, not expectation damages tied to the unmade final deal.
- Because Copeland sought only expectation damages and disclaimed reliance damages, he could not recover as a matter of law, even assuming a breach of a duty to negotiate.

## Legal Principles

- A preliminary agreement can be enforceable as a contract to negotiate in good faith even though essential terms of the contemplated final contract remain to be negotiated.
- A contract to negotiate requires good-faith participation in the bargaining process; it does not require assent to any particular terms or guarantee that a final agreement will be reached.
- Breach turns on failure to negotiate in good faith (such as abandoning negotiations without good-faith effort), not merely on the fact that the parties did not reach a final agreement.
- For breach of a contract to negotiate, recoverable damages are limited to reliance damages (costs and losses incurred because of the negotiations), not expectation damages based on profits from the unrealized agreement.
- Expectation damages are unavailable where they depend on hypothetical terms never agreed upon and would effectively convert a process obligation into a promise of a completed deal.

## Conclusion

The court recognized that parties may bind themselves to negotiate a contemplated agreement in good faith, but limited remedies for breach of that obligation to reliance damages; because the plaintiff pursued only expectation damages from a co-packing agreement that was never finalized, summary judgment for the defendant was affirmed.


Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251 (Cal. Ct. App. 2002)