Cases: The writing is not the contract

A recent decision in a dispute over Wisconsin cheese raises some intricate issues of contract law, including whether a signed writing with a forum-selection clause was, in fact, the parties’ agreement.  Affirming a jury verdict, the U.S. Court of Appeals for the Seventh Circuit held that while there was certainly a contract between the parties, it was appropriate for the jury to conclude that it was not embodied in the writing.

The dispute started when Olé Mexican Foods began negotiating a three-year contract with Latino Food Marketers, in which Olé would buy cheese from Latino.  Latino demanded an exclusive contract with Olé, but Olé refused.  Olé faxed over a draft contract.  Latino hand-wrote in an exclusivity clause, signed it, faxed it back, and requested a signed copy from Olé.  Here’s where it gets complicated:  Olé says it sent back a signed copy by Fed Ex; Latino says it never got it.  Olé later came up with what it claimed was a signed copy, but not until after litigation was under way.

Regardless, both parties continued performance for about 18 months, although each continued to complain about the other.  Latino sent cheese, some of which turned out to be contaminated; Olé withheld payment.  Latino finally sued in Wisconsin; Olé then filed suit in Georgia, relying on the forum-selection clause in its contract.  The Georgia court dismissed the case based on the first-to-file rule, and Olé moved to dismiss the Wisconsin proceeding based on the forum-selection clause.  The trial judge denied the motion and it went to trial, where the jury awarded Latino some $1.1 million in damages.

Olé lost on two arguments, the court holding (i) that given the factual dispute the jury could conclude that the parties had never signed the writing; and (ii) that the jury could reasonably believe that the parties did not intend to be bound to the terms of that agreement until signed.  Therefore, the jury could conclude that a contract was made by conduct of the parties, which did not include the forum-selection clause.

Latino Food Marketers, LLC  v. Olé Mexican Foods, Inc., 2005 U.S. App. LEXIS 8464 (7th Cir. May 12, 2005).  The slip opinion is here.