Cochran v. Norkunas

Brief Fact Summary.

Robert and Rebecca Cochran sued for breach of contract when Eileen Norkunas took residential property off of the real estate market after signing a letter of intent. 

Synopsis of Rule of Law.

A preliminary agreement is not binding when the parties intend to enter a final agreement prior to being bound.

Facts.

Robert and Hope Groves (Groves) alongside Robert and Rebecca Cochran (Cochrans) issued a letter of intent and $5,000 deposit to purchase real estate from Eileen Norkunas (Norkunas). The Groves and Cochrans then sent over a real estate contract to Norkunas, who did not return the signed documents to the Groves or Cochrans nor accepted the terms of their offer. Norkunas took the property off of the market and the Cochrans sued for breach of contract. The trial court granted summary judgment in favor of the Groves and the court of appeals reversed.

Issue.

Whether a preliminary agreement is binding when the parties intend to enter a final agreement prior to being bound?

Held.

No. The letter of intent is not binding because the letter of intent referenced fulfilling the Maryland Realtors Contract prior to being bound. The judgment of the court of appeals is affirmed. 

Discussion.

To form a binding contract, the parties must have intended to be bound. To determine the intent to be bound, five factors must be considered: (1) the language in the preliminary agreement, (2) whether or not the terms are open, (3) whether there was partial performance under the preliminary agreement, (4) the context of the negotiations, and (5) what is customary for similar negotiations.