Jack Baker, Inc. v. Office Space Dev.

• Decision Date: 25 September 1995
• Docket Number: No. 93-CV-188.,93-CV-188.
• Citation: 664 A.2d 1236
• Parties: JACK BAKER, INC., Appellant, v. OFFICE SPACE DEVELOPMENT CORPORATION, Appellee.
• Court: D.C. Court of Appeals

664 A.2d 1236

JACK BAKER, INC., Appellant, v. OFFICE SPACE DEVELOPMENT CORPORATION, Appellee.

No. 93-CV-188.

District of Columbia Court of Appeals.

Argued January 31, 1995.

Decided September 25, 1995.

Lawrence C. Melton, Washington, DC, for appellant.

Louis P. Robbins, Washington, DC, for appellee.

Before FERREN, TERRY and STEADMAN, Associate Judges.

STEADMAN, Associate Judge:

Jack Baker, Inc. ("JBI") appeals from a grant of summary judgment in favor of Office Space Development Corporation ("OSDC") in a breach of contract action brought by JBI in connection with a building project for the new Philippine Embassy. JBI principally argues that the trial court erred when it concluded that the oral negotiations between JBI and OSDC could not be found to have resulted in an enforceable oral contract. We affirm.

I.

This controversy arises out of the construction of a new Philippine Embassy building in the District of Columbia. OSDC had been hired by the Embassy to oversee the construction of the new building.¹ In a letter dated December 20, 1990, which OSDC sent to various potential subcontractors including JBI, OSDC announced that "the Philippine Embassy is in the process of selecting subcontractors for the construction of the New Philippine Embassy Building." The letter stated that OSDC was working "in collaboration with the Chairman of the Embassy Building Committee and the project architect." The letter also outlined a highly formal three-phase selection process and provided that "the final selection of any subcontractor will be subject to the approval of the Philippine Department of Foreign Affairs (DFA)." Bids were submitted by JBI, the John Driggs Company ("Driggs"), and Abernathy Excavation, Inc. ("Abernathy"), for excavation work on the building site.

On June 19, 1991, Jesus Almario (the president of OSDC) and representatives from JBI met to discuss JBI's bid.² The parties are in disagreement as to the significance of this meeting. The Chief Estimator for JBI, Christopher Ertz, stated in his deposition that after JBI agreed to lower its price, "Mr. Baker shook hands with Mr. Almario and we considered that we had a firm contract to perform the work." However, Ertz admitted that the subcontract was still subject to the approval of the Embassy. According to Almario's version of the meeting, Almario told JBI's representatives that if they lowered its price (as they did), he would recommend JBI to the Embassy for approval.

On June 21, 1991, Almario sent a letter to the Embassy's building committee, requesting its "approval of the above recommendation to negotiate the sitework and excavation portion of the Project first with Jack Baker, Inc." This letter is dated June 21, 1991, and has signatures from the committee members dating from June 26 to July 16.³ In his affidavit, Almario indicated that this authorization meant that negotiations were to take place with JBI and that "in the event agreement could not be reached with Jack Baker, Inc.," negotiations were to take place with Abernathy. However, in his deposition, Almario acknowledged that in this letter he was "requesting permission from the Embassy Committee to go ahead and make the award to JBI." He acknowledged that once the letter had been signed by a majority of the members, the letter "authorized him to go forward."⁴

On July 5, 1991, OSDC sent a letter to Driggs and Abernathy, informing them that "the decision was made to award the excavation phase of the Project to JBI." Almario sent an elaborate ten-page form contract to JBI on July 9, 1991. On July 24, 1991, almost three weeks later, JBI faxed to OSDC a copy of the form contract which reflected several changes.⁵ These changes included scope of work exclusions,⁶ which JBI indicated—in an added contract term—were "an integral part of this agreement."

On August 6, 1991, one of JBI's employees noticed that Abernathy was performing excavation work at the Embassy. Shortly thereafter, JBI received a letter from OSDC dated August 5, 1991, indicating that the job had been awarded to the second lowest contractor, Abernathy.

JBI then instituted the present suit in the Superior Court, alleging breach of contract, promissory estoppel, and fraud. OSDC moved for summary judgment, principally on the basis that no written contract had ever been agreed to. JBI now appeals from the trial court's grant of that motion.

II.

Since JBI's alleged breach of contract rights must depend upon its proof of an enforceable oral agreement, we first turn to an examination of the relevant law on that issue. Under D.C. law, as is generally true, "for an enforceable contract to exist, there must be both (1) agreement as to all material terms; and (2) intention of the parties to be bound." Georgetown Entertainment Corp. v. District of Columbia, 496 A.2d 587, 590 (D.C. 1985). Absent any contrary requirement under a statute of frauds, parties may enter into enforceable oral contracts, as long as they agree to all material terms and intend to be bound by their oral agreement. See, e.g., Edmund J. Flynn Co. v. LaVay, 431 A.2d 543, 547 (D.C.1981).

Even if the parties intend to subsequently enter into a written contract, as was indisputably the case here, it does not necessarily follow that they have not made any contract until the writing is completed and signed. The parties may be bound by their oral agreement if it meets the dual requirements of intent and completeness. See, e.g., Thompson v. Pike, 122 Idaho 690, 838 P.2d 293, 299 (1992); Juliano v. Angelini, 708 P.2d 1289, 1291 (Alaska 1985); see generally 1 ARTHUR L. CORBIN, CORBIN ON CONTRACTS §§ 2.8, 2.9 (1993).

However, the party asserting the existence of a contract has the burden of proof on that issue. See Allied Sheet Metal Works, Inc. v. Kerby Saunders, Inc., 206 A.D.2d 166, 619 N.Y.S.2d 260, 263 (N.Y.App. Div.1994) ("The party seeking to enforce a contract bears the burden to establish that a binding agreement was made and to prove the terms of the contract."); Thompson, supra, 838 P.2d at 299 ("The burden of proof is on the party asserting that the contract was binding before the written draft was signed."); see also CORBIN, supra § 2.9 at 159. Where the parties contemplate a subsequent written contract, this burden is particularly onerous. As we summarized the "well-settled" state of the law in D.C. Area Community Council v. Jackson, 385 A.2d 185 (D.C.1978) (per curiam):

Parties may make an enforceable contract binding them to prepare and execute a subsequent documentary agreement. In order that such may be the effect, it is necessary that agreement shall have been expressed on all essential terms that are to be incorporated in the document. That document is understood to be a mere memorial of the agreement already reached. If the document or contract that the parties agree to make is to contain any material term that is not already agreed on, no contract has yet been made; and the so-called "contract" to make a contract is not a contract at all.

Id. at 187 (quoting 1 A. CORBIN, CONTRACTS § 29 (1963)). Unless, then, a party claiming breach of an oral contract can show that the contemplated written document is to be "a mere memorial of the agreement already reached," it cannot prevail.

With respect to proof of intent, this court held in Edmund J. Flynn Co., supra, in determining whether the parties have entered a contract, the parties' intention to be bound must be "closely" examined:

In evaluating contract formation, we also look closely at the parties' intention to be bound. In order to form a binding agreement, both parties must have the distinct intention to be bound; without such intent, there can be no assent and therefore no contract.

431 A.2d at 547. The court further noted: "indeed, the subsequent negotiations about drafts of a written sales commission agreement reflect the parties' intention not to be bound until a formal writing was executed." Id. Accordingly, parties will not be bound to a preliminary agreement unless the evidence presented clearly indicates that they intended to be bound at that point. See Simplicio v. National Scientific Personnel Bureau, Inc., 180 A.2d 500, 502 (D.C.1962) ("the language of the letter, taken as a whole, clearly indicates that the appellant did not intend to be bound by the agreement until a written agreement had been signed by both sides"); see also Rosenthal v. National Produce Co., 573 A.2d 365, 369 n. 9 (D.C.1990) ("whether oral representations constitute a contract is a question of law").

But intent alone is not enough. Where the parties fail to agree to all material terms, no contract is formed, see Georgetown Entertainment, supra, 496 A.2d at 590 n. 2, even if the parties intended to be bound by their oral agreement prior to the execution of the written contract. See Opdyke Inv. Co. v. Norris Grain Co., 413 Mich. 354, 320 N.W.2d 836, 838 (1982) ("A contract to make a contract can fail for indefiniteness if the trier of fact finds that it does not include an essential term to be incorporated into the final contract."); see also D.C. Area Community Council, supra, 385 A.2d at 188.

This court has, in several cases, found agreements to be unenforceable because the parties failed to agree to all material terms. In Stansel v. American Sec. Bank, the court rejected a claim that an enforceable oral agreement concerning a loan existed, holding that the parties failed to "offer evidence of any specific terms of the alleged agreement, such as the exact amount of the loans, the interest rates, terms of payment, or manner of performance." 547 A.2d 990, 993 (D.C. 1988), cert. denied, 490 U.S. 1021, 109 S.Ct. 1746, 104 L.Ed.2d 183 (1989). Accordingly, the court held that the "claim of breach of contract fails for lack of certainty of the contract's terms." Id.; see also Owen v. Owen, 427 A.2d 933, 938 (D.C.1981) ("To be final, a contract must extend to all the terms the parties intend to introduce, and material...