## Facts

- Seaman’s Direct Buying Service, Inc., a ship chandler and marine fuel supplier in Eureka, California, sought to expand into a redeveloped marina after the city planned to condemn and modernize the waterfront.
- To make the expansion feasible, Seaman’s needed a long-term marine fuel supply arrangement with a major oil company.
- Standard Oil Company of California provided a signed “letter agreement” outlining key terms of a proposed marine dealer relationship, including a 10-year term and supply-related provisions, while also stating that more formal contracts were contemplated.
- Relying on Standard’s commitment, Seaman’s entered into a 40-year lease with the City of Eureka for marina space and incurred planning costs and other expenditures to develop the new facility.
- Market conditions shifted, and Standard decided not to add new marine dealer accounts.
- When Seaman’s attempted to finalize documentation and begin performance, Standard refused to supply fuel and denied that any binding contract existed.
- Seaman’s claimed Standard’s denial made the planned facility economically unworkable and caused substantial business losses.

## Issues

1. Whether the letter agreement and related circumstances satisfied the statute of frauds and supported a finding of a binding long-term supply contract.
2. Whether intent is an element of the tort of intentional interference with contractual relations, and what mental state is required.
3. Whether tort damages may be recovered for breach of the implied covenant of good faith and fair dealing in a noninsurance commercial contract, and if so under what limits.

## Decision

- The court held the letter agreement, together with the surrounding conduct, was sufficient to satisfy the statute of frauds and support the jury’s finding that a binding contract was formed and breached.
- The court confirmed that intent is an essential element of intentional interference with contractual relations; liability requires a purpose to interfere or knowledge that interference is substantially certain.
- The court rejected a broad extension of insurance-style “bad faith” tort remedies to ordinary commercial contracts.
- The court recognized a limited tort theory: a party may incur tort liability when it denies the existence of a contract in bad faith and without probable cause to avoid contractual obligations.
- The judgment was affirmed in part and modified or reversed in part consistent with these standards, with further proceedings as needed.

## Legal Principles

- A writing may satisfy the statute of frauds if it identifies the subject matter, indicates a contract has been made, and states essential terms with reasonable certainty; the anticipation of later formal documents does not necessarily negate present intent to be bound.
- Intentional interference with contract requires intentional conduct aimed at disrupting the contract or undertaken with knowledge that disruption is substantially certain; negligent or incidental interference is insufficient.
- In noninsurance commercial contracts, breach of the implied covenant of good faith and fair dealing generally sounds in contract, not tort.
- A narrow exception permits tort remedies when a contracting party, in bad faith and without probable cause, denies the existence of the contract itself as a tactic to escape obligations; this is distinct from ordinary disputes over performance or interpretation.

## Conclusion

The court upheld enforcement of a letter agreement as a binding contract despite contemplated formal documentation, reaffirmed that intentional interference requires a specific intent standard, and recognized only a narrowly confined tort remedy for bad-faith, baseless denial that a contract exists in a commercial setting.


Seaman’s Direct Buying Serv., Inc. v. Standard Oil Co. of Cal., 36 Cal. 3d 752, 686 P.2d 1158 (Cal. 1984)