## Facts

- Itek Corporation and Chicago Aerial Industries, Inc. (CAI), both Delaware corporations producing photographic equipment, discussed a transaction that would generate cash for CAI’s controlling stockholders.
- In late 1964, negotiations produced a proposed structure under which Itek would purchase all CAI assets at a price tied to CAI shares and a fraction of an Itek share, intended to yield cash to CAI stockholders.
- On January 4, 1965, CAI communicated acceptance of Itek’s offer subject to conditions, including Itek obtaining financing, execution of an informal letter of intent, working out remaining details, and preparation of formal documents satisfactory to the parties.
- After Itek obtained financing, the parties executed a January 15, 1965 letter of intent describing the contemplated asset purchase and assumed liabilities and stating the parties had agreed “to work towards” a combination, subject to board approval, CAI’s adoption of a plan of liquidation, and CAI stockholder approval of the sale.
- As definitive transaction documents were drafted, disagreements arose and the parties failed to reach agreement on all details.
- On March 2, 1965, CAI terminated the transaction, citing unforeseen circumstances and the parties’ failure to reach agreement.
- Itek sued CAI and certain individuals involved in negotiations for breach of contract, asserting the letter of intent and related communications created a binding asset sale agreement.
- The Superior Court granted summary judgment for defendants, concluding there was no enforceable contract, only an agreement to agree; Itek appealed.

## Issues

1. Whether the January 15, 1965 letter of intent and related negotiations formed an enforceable contract for the sale of CAI’s assets.
2. Whether the writings instead reflected only a preliminary understanding conditioned on later agreement and execution of formal documents, permitting either party to withdraw.
3. Whether summary judgment was proper where contract formation depended on the intent expressed in the parties’ written communications.

## Decision

- The Delaware Supreme Court affirmed summary judgment for defendants.
- The court held the January 4 conditional acceptance and the January 15 letter of intent did not create a binding asset purchase contract.
- The documents showed the parties intended to be bound only upon execution of later formal documents satisfactory to both sides and after required corporate actions and approvals.
- Because the documentary record resolved the formation question as a matter of law, no genuine issue of material fact existed and summary judgment was appropriate.

## Legal Principles

- A preliminary writing, including a detailed letter of intent, is not enforceable as a final contract when it indicates the parties are only working toward a transaction and contemplates a later formal agreement as the definitive expression of obligations.
- Language making the deal “subject to” later preparation of formal documents “to the satisfaction of the parties,” and subject to required corporate approvals, supports a finding that no present contractual commitment was intended.
- Courts determine whether parties intended immediate contractual obligation or obligation only upon execution of a later writing by examining the instrument’s language and the surrounding circumstances.
- Where the parties’ intent is evident from unambiguous written communications, contract formation may be decided as a matter of law on summary judgment.

## Conclusion

The court concluded that the parties’ letter of intent and conditional acceptance reflected a commitment to continue negotiations toward a possible transaction, not a completed contract for the sale of assets; therefore, termination of the negotiations was not a breach of contract, and summary judgment for defendants was properly affirmed.


Itek Corp. v. Chicago Aerial Indus., Inc., 248 A.2d 625 (Del. 1968)