Gel Systems Inc. v. Hyundai Engineering & Const. Co., Inc., 89-1579

• Decision Date: 06 October 1989
• Docket Number: No. 89-1579,89-1579
• Citation: 902 F.2d 1024
• Parties: GEL SYSTEMS INC., Plaintiff, Appellant, v. HYUNDAI ENGINEERING & CONSTRUCTION CO., INC., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1024

902 F.2d 1024

GEL SYSTEMS INC., Plaintiff, Appellant, v. HYUNDAI ENGINEERING & CONSTRUCTION CO., INC., Defendant, Appellee.

No. 89-1579.

United States Court of Appeals First Circuit.

Heard Oct. 6, 1989.

Decided May 8, 1990.

Denzil D. McKenzie with whom McKenzie & Company, P.C., Cambridge, Mass., was on brief for appellant.

David J. Paliotti with whom Stephen A. Greenbaumm and Greenbaum, Oshana, Nagel, Fisher & Hamelburg, Boston, Mass., were on brief for appellee.

Before CAMPBELL, Chief Judge, TIMBERS, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

LEVIN H. CAMPBELL, Circuit Judge.

Gel Systems, Incorporated ("Gel") sued Hyundai Engineering & Construction Company ("Hyundai") for breach of contract in the United States District Court for the District of Massachusetts. After a bench trial, the district court held that the parties never entered into a binding contract. Judgment was entered for Hyundai. Gel argues on appeal that a letter of intent executed by the parties at Gel's request after several months of negotiations required the court to hold that there was a binding contract. We affirm.

Facts

In September 1984, Hyundai, through its agent, D.S. Sim, solicited a quotation from Gel for ten language laboratories to fulfill its commitments on a contract with its client in Saudi Arabia. On September 12, 1984, Gel's Vice President, Anthony Longo, submitted a proposal with alternative specifications and prices. After a few days of negotiations with Hyundai, Gel sent a revised proposal guaranteeing a stated price until December 31, 1984.

In November 1984, as negotiations between Sim and Longo continued, Hyundai sought an extension on the December 31 deadline and Gel sought a firm commitment from Hyundai. On November 29, 1984, Gel telexed Hyundai offering to guarantee the price until January 15, 1985 if Hyundai would: 1) issue a letter of intent on or before December 31, 1984, stating an intent to purchase specified language laboratories from Gel and 2) place a confirming purchase order with Gel on or before January 15, 1985. On December 18, 1984, Gel sent Hyundai a letter containing a detailed proposal, including such terms as price, delivery, installment, and payment. The letter indicated that the total price of the equipment installed would be $933,926.00. The letter stated, "We suggest that your forthcoming letter of intent incorporate this letter by reference as the basis for the contract. Minor adjustments can be made, if necessary, when the final contract/purchase order is prepared in January." Negotiations continued through December and no letter of intent arrived.

On January 3, 1985, Gel telexed Hyundai and threatened to withdraw its offer unless Hyundai sent Gel a letter of intent "dated" on or before December 31, 1984, containing Hyundai's "statement to have a form of contract prepared for Gel's agent to sign no later than January 15, 1985." On January 7, 1985, Gel received a letter of intent from Hyundai, dated December 27, 1984. The letter of intent made reference to Gel's proposal of December 18, and stated Hyundai's "intention of purchasing GEL's equipment subject to our job site client's approval on your system proposed." The letter further stated,

formal contract will be made between Hyundai Saudi and Yarthrip [Gel's Saudi agent] as per your proposal [of December 18] except followings: 1. In any events, CIF job site total price installed/commisioned shall not exceed USD933, 926.00. 2. Ocean freight from U.S. port to Riyard (at job site), insurence premium from factory to Riyard (at job site) and forwarding agent fee at U.S.A. and Saudi shall be settled at cost between Hyundai-Saudi and Yarthrip but shall not exceed USD44,376.00. 3. Terms and conditions in detail will be further discussed when formal contract is made. [all sic].

The letter was signed by a Director of Hyundai, O.S. Suh, and lines were provided for a signature from Gel. Upon receiving the letter, Gel's Vice President, Anthony Longo, signed it.

No further documents were executed and Hyundai never issued a purchase order. Sometime thereafter Hyundai informed Gel that it had decided to purchase its equipment from another company.

On June 3, 1986, Gel sued Hyundai in the United States District Court for the District of Massachusetts. At the trial, Gel argued that the letter of intent gave rise to a binding contract based on the terms of its December 18 proposal. Hyundai argued that the letter of intent did not create a binding contract and that the parties' intent was not to be bound in the absence of approval by Hyundai's job site client and the signing of a formal contract. The evidence consisted of communications between the parties (including the proposal and the letter of intent) and the testimony of Anthony Longo, Gel's Vice President, and I.K. Kim, a Purchasing Manager of Hyundai.

The district court found that the communications between the parties did not give rise to a binding contract. On May 4, 1989, the district court ordered judgment for Hyundai on the basis of its previous memorandum opinion of December 29, 1988. ¹ This appeal followed.

Discussion

Hyundai contends that the district court's conclusion that the parties did not enter into a binding contract amounts to a finding of fact that the parties did not intend to be bound by the letter of intent. Hyundai insists that under Federal Rule 52(a), the district court's determination can be reversed only if clearly erroneous. ²

Gel responds that the district court's conclusion that the letter of intent did not give rise to a binding contract is a conclusion of law subject to de novo review. Gel relies on United Truck & Bus Service Co. v. Piggott, 543 F.2d 949 (1st Cir.1976), in which this court stated, "If the district court had only construed the written contract itself, its conclusions would be freely reviewable. But in the present case the court clearly relied in part on 'extrinsic evidence of the parties' intent' and therefore the clearly erroneous standard of Fed.R.Civ.P. 52(a) applies." Id. at 950 (citations omitted).

The above quotation from Piggott requires some expansion, however. First, of course, a finding that is "predicated on or induced by, a misapprehension of law" may always be reviewed. See RCI Northeast Services Division v. Boston Edison Co., 822 F.2d 199, 203 (1st Cir.1987); see also United States v. Singer Manufacturing Co., 374 U.S. 174, 194 n. 9, 83 S.Ct. 1773, 1784 n. 9, 10 L.Ed.2d 823 (1963). Second, even where based solely on written documents, a finding as to the meaning of a writing will be reviewed under the clearly erroneous standard if, applying the relevant legal principles, the writing is subject to more than one reasonable interpretation. See RCI Northeast Services Division, 822 F.2d at 202 ("findings of fact do not forfeit 'clearly erroneous' deference merely because they stem from a paper record", and "where the plain meaning of a...