Arnold Palmer Golf Co. v. Fuqua Industries, Inc.

Brief Fact Summary.

Arnold Palmer Golf Co. (Arnold Palmer) (plaintiff) entered into a business relationship with Fuqua Industries, Inc. (Fuqua) (defendant) for the purpose of acquiring third party manufacturing companies.The Memorandum of Intent also stated that the agreement between Palmer and Fuqua was conditioned on fulfillment of two conditions: the preparation of a definitive agreement for the proposed combination of the two businesses that was satisfactory to both party, and approval of such agreement by Fuqua’s Board of Directors. Before the definitive agreement was prepared, Fuqua terminated negotiations with Arnold Palmer.

Synopsis of Rule of Law.

A valid acceptance must be definite and unequivocal and must not impose additional conditions or limitations on the offer, unless the conditional language is independent of the actual acceptance.

Facts.

Arnold Palmer Golf Co. (Arnold Palmer) (plaintiff) entered into a business relationship with Fuqua Industries, Inc. (Fuqua) (defendant) for the purpose of acquiring third party manufacturing companies. Arnold Palmer and Fuqua acquired Fernquest and Johnson (Fernquest), a manufacturer of golf clubs. The Memorandum of Intent contained detailed statements about how the new company would be run and funded, as well as a statement that counsels for Arnold Palmer and Fuqua would “proceed as promptly as possible to prepare an agreement acceptable to Palmer and Fuqua for the proposed Combination of businesses.” The Memorandum of Intent also stated that the agreement between Palmer and Fuqua was conditioned on fulfillment of two conditions: the preparation of a definitive agreement for the proposed combination of the two businesses that was satisfactory to both party, and approval of such agreement by Fuqua’s Board of Directors. Before the definitive agreement was prepared, Fuqua terminated negotiations with Arnold Palmer. Arnold Palmer brought suit in federal district court against Fuqua seeking to enforce the alleged contract. The district court held that since the conditions in the Memorandum of Intent were not fulfilled, the Memorandum of Intent did not represent sufficient intent by Arnold Palmer and Fuqua to be bound by contract. The district court granted Fuqua’s motion for summary judgment, and Arnold Palmer appealed.

Issue.

Whetherboth parties must have a clear understanding of the terms of an agreement and an intent to be bound by its terms to have a valid contract.

Held.

The Memorandum of Intent signed by Arnold Palmer and Fuqua contains all essential terms of a contract. It describes the combination to be formed by the two businesses, the location of their future offices, and the rights and obligations of each party. Additionally, the Memorandum of Intent contains unqualified language in describing the planned actions of each party. For example, the Memorandum of Intent states that Fuqua “will” transfer all of its stock in Fernquest to Arnold Palmer upon formation of a new company; that the office of the new combination business “will” be located in Atlanta, Georgia; that Fuqua “will” loan Arnold Palmer money to finance the transaction; and that counsels for Arnold Palmer and Fuqua “shall” prepare an agreement that is acceptable to all parties. This unqualified language may be interpreted as evidencing intent by Arnold Palmer and Fuqua to proceed with a contractual agreement. At a minimum, the issue of intent by Arnold Palmer and Fuqua to be bound in contract should be submitted to a trier of fact. A genuine issue of material fact exists regarding whether the Memorandum of Intent reflects sufficient intent by Arnold Palmer and Fuqua to be bound in contract. The district court’s grant of Fuqua’s motion for summary judgment on this issue is reversed and remanded.

Discussion.

A genuine issue of material fact exists regarding whether the Memorandum of Intent reflects sufficient intent by Arnold Palmer and Fuqua to be bound in contract. To create an enforceable contract, both parties must have a clear understanding of the terms of an agreement and intent to be bound by its terms. When determining whether a writing reflects a genuine intent by the parties to be bound, the entire document and relevant circumstances surrounding its adoption must be considered. Extrinsic evidence may be introduced to support the existence of intent to be bound by the parties.