Facts
- Dwight Davis negotiated to buy a mobile-home park from owners Gayle Satrom and D.C. Blair, working through real estate agent David Wisdom.
- On July 24, 1984, Davis sent Wisdom a written “letter of intent” setting out proposed terms and conditions for the sale.
- The letter of intent stated that if the proposal was acceptable and signed by the owners and returned, Davis would deposit $10,000 into a trust account and would prepare a formal agreement of purchase and sale.
- Blair changed some terms in the letter of intent and returned it, and the parties continued negotiations.
- Davis later submitted an unsigned “commercial purchase agreement and deposit receipt” that contained additional terms not included in the letter of intent.
- Blair signed the commercial purchase agreement only after adding handwritten conditions, including that the agreement was “subject to the approval of the sellers’ attorney.”
- The sellers’ attorney did not approve the agreement, citing concerns that included unfavorable tax consequences.
- By letter dated September 7, 1984, Blair informed Wisdom that the sellers would “pass” on Davis’s offer and terms; Wisdom relayed this to Davis and later told Davis the sellers were unwilling to negotiate further or close.
- On September 25, 1984, Davis wrote directly to Satrom stating he was ready to perform under the purchase agreement as signed and enclosed a $10,000 check; Satrom returned the check uncashed.
- Davis sued Satrom and Blair seeking specific performance of the alleged contract or, alternatively, damages for breach; the district court granted summary judgment for Satrom and Blair and dismissed the complaint.
Issues
- Whether the documents exchanged during negotiations (the letter of intent and the later commercial purchase agreement with handwritten additions) resulted in an enforceable contract for the sale of the mobile-home park.
- Whether the clause making the agreement “subject to the approval of the sellers’ attorney” prevented contract formation when the attorney did not approve.
- Whether summary judgment for the sellers was proper because no genuine issue of material fact existed and the sellers were entitled to judgment as a matter of law.
Decision
- The Supreme Court of North Dakota affirmed the district court’s summary judgment dismissing Davis’s complaint.
- The court held that no enforceable contract was formed because there was no unqualified acceptance of a single set of terms; changes and added conditions operated as counteroffers in ongoing negotiations.
- The “subject to the approval of the sellers’ attorney” language was treated as a condition that had to occur before the sellers could be bound; because approval was not given, the asserted agreement never became binding.
- Davis’s later statement of readiness to perform and tender of the $10,000 deposit did not create a contract where the parties had not reached mutual assent and the attorney-approval condition was not satisfied.
- Summary judgment was appropriate because the material facts about the writings, the added attorney-approval condition, and the absence of approval were not genuinely disputed and the dispute turned on contract formation as a matter of law.
Legal Principles
- A response that changes or adds material terms to an offer is a counteroffer, not an acceptance, and does not create a contract unless there is a later unqualified acceptance of the counteroffer.
- A letter of intent that anticipates preparation of a later purchase-and-sale agreement may show that the parties have not yet assented to a final contract.
- A term stating that an agreement is “subject to” a third party’s approval, including approval by a party’s attorney, can function as a condition that must be satisfied before a binding obligation arises.
- Summary judgment is proper under Rule 56 when the record shows no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law; contract formation may be resolved on summary judgment when the controlling facts are established by undisputed documents and communications.
- A party opposing summary judgment may seek additional time for discovery under Rule 56 procedures; failure to pursue available procedural steps can weigh against claims that more facts are needed to defeat summary judgment.
Conclusion
Because the parties’ exchanges reflected continuing negotiation with repeated changes in terms rather than an unqualified acceptance, and because the sellers’ obligation was expressly conditioned on their attorney’s approval—which was never given—the North Dakota Supreme Court agreed that no enforceable contract existed; the sellers were therefore entitled to summary judgment, and Davis could not obtain specific performance or damages.