Here’s a Nice Case to Use to Review Contract Formation, Conditions Precedent, and Promissory Estoppel
As we reach the end of the semester, I keep trying to remind my students of what we learned at the beginning of the semester, which was only a few weeks ago but feels like several lifetimes ago. As we turn our attention to our last topic of third-party rights, I don’t want the students to forget the basics of contract formation. I want them to realize that contracts law builds on itself and is self-referential and so they can’t just forget about the stuff that came first.
Anyway, I say all of that to lead into this nice recent case out of the Eastern District of Pennsylvania, Killian v. Ricchetti, Civil Action No. 16-2874, that deals with issues of contract formation, and then turns to promissory estoppel. Exactly as I keep trying to remind my students to do! So I couldn’t resist writing this case up for the blog. It serves as a nice review of a lot of what we’ve learned and I think I may actually use it in class.
The alleged contract was a series of e-mails exchanged between two friends. The first e-mail set out a bunch of terms and ended with “there are more little details…it’s a start.” The response to the e-mail added a few additional terms. This, the court found, did not form a contract, because the response was not an acceptance but rather a counteroffer, due to the fact that it added terms. There was never any reply to that particular e-mail, so the counteroffer was never accepted.
After these initial e-mails, there were further e-mails between the two regarding the real estate transactions at the heart of the alleged agreement. Those e-mails were enough to form a contract as follows: The first e-mail read, “[W]hen the Pine [Street property] is clear title we form an LLC with an equal partnership of 50% . . . .” with some further details given. The reply to the e-mail was “OF COURSE,” which constituted an acceptance. However, there was a condition precedent to this contract: that the parties receive clear title on the Pine Street property in question. Due to no fault of the parties themselves, they never received this clear title, so the condition precedent never occurred, so no duties to perform under the contract ever arose.
The court then turns to the promissory estoppel question, though. The court found here there were genuine issues of material fact whether there was a promise made and whether the other party acted in reliance on that promise. Similar issues of material fact existed for the unjust enrichment and qunatium meruit claims. Therefore, although the court granted summary judgment on the breach of contract claims, it denied summary judgment on the remaining claims.