## Facts

- Jack Rose held an option to purchase from Northern Metal Company a deep-water port facility on the Pennsylvania side of the Delaware River.
- On March 29, 1973, Mitsubishi International Corporation (MIC) and Federal Steel Corporation executed a letter of intent addressed to Rose, and Rose approved it the same day.
- The letter of intent contemplated that MIC would contribute funds needed for Rose to exercise his option and that MIC and Federal would form a new corporation to participate with Rose in a joint venture involving the facility.
- Paragraph 6 of the letter made the defendants’ financing obligations conditional on issuance of title insurance: a reputable United States title insurer had to issue policies “indicating clear and marketable title” to the relevant real estate and interests and indicating the property could continue to be used in the future for its present purposes.
- The letter set May 15, 1973 as the deadline for completing the parties’ obligations; the parties later extended that deadline by mutual agreement to May 22, 1973.
- In connection with the contemplated purchase, a title report/commitment contained an exception (exception 14) stating the premises were subject to governmental authority over portions extending beyond the low-water mark, including regulation of commerce and navigation and governmental title and ownership beyond the original low-water mark of the Delaware River.
- Before the extended deadline, on May 21, 1973, MIC notified Rose that it would not proceed under the letter of intent because Rose was unable to provide a title policy indicating clear and marketable title.
- Rose sued MIC, an officer of Federal, and Federal’s parent corporation in federal court (diversity jurisdiction) for money damages for breach of the alleged contract; MIC moved for summary judgment under Rule 56.

## Issues

1. Whether MIC was entitled to summary judgment on the theory that the March 29, 1973 letter of intent was not, as a matter of law, an enforceable contract.
2. Whether MIC was entitled to summary judgment because Rose failed, as a matter of law, to satisfy paragraph 6’s express condition requiring title insurance indicating clear and marketable title to the real estate and interests involved.
3. Whether any asserted waiver or immateriality of the title exception could excuse nonfulfillment of paragraph 6’s condition.

## Decision

- The court denied summary judgment to the extent MIC argued the letter of intent could not be a binding contract as a matter of law; under Pennsylvania law, whether a particular writing reflects a binding agreement generally presents a fact question for the trier of fact.
- The court granted summary judgment in MIC’s favor based on the undisputed failure of paragraph 6’s condition precedent: the title report exception concerning governmental authority and governmental title/ownership beyond the low-water mark prevented issuance of a policy “indicating clear and marketable title” as required by the letter.
- Applying Pennsylvania law concerning riparian ownership and the Commonwealth’s rights in a navigable riverbed, the court concluded that, where portions of the facility extended beyond the original low-water mark, the Commonwealth’s ownership interests and public rights meant Rose could not deliver the contractually required title showing.
- The court rejected Rose’s arguments that the exception was insignificant, curable within the parties’ timeframe, or effectively waived; the requirement of a policy indicating clear and marketable title was a material, express condition, and treating it as waived would require clear mutual assent amounting to a new agreement.
- Because the condition precedent failed, MIC’s duty to provide financing under the letter of intent never arose, even assuming the letter could otherwise be found enforceable at trial.

## Legal Principles

- Under Pennsylvania law, whether a preliminary writing such as a letter of intent constitutes a binding contract often turns on the parties’ intent and is commonly a fact question not suited to resolution as a matter of law on summary judgment.
- When parties make performance expressly conditional on the occurrence of a stated event (such as issuance of specified title insurance), the condition precedent must be satisfied before any contractual duty to perform becomes due.
- “Marketable title” is evaluated in relation to the property interest being conveyed and the use contemplated; a title exception reflecting sovereign ownership or superior governmental rights over portions of the property can render title unmarketable for the transaction described.
- A material, expressly stated condition is not treated as waived based on informal conduct or unilateral expectations; a waiver that would shift a material risk allocation generally requires clear mutual assent.

## Conclusion

Rose v. Mitsubishi International Corp. holds that, although the enforceability of a letter of intent may present a fact question, MIC was entitled to summary judgment because the letter made financing contingent on obtaining title insurance indicating clear and marketable title, and the undisputed riverbed-related exception in the title report prevented satisfaction of that express condition precedent, excusing MIC from performance.


Rose v. Mitsubishi International Corp., 423 F. Supp. 1162 (1976)