Quake Construction, Inc. v. American Airlines, Inc.

Brief Fact Summary. The Defendants, American Airlines, Inc. (hereinafter Defendant) and Jones Brothers Construction Corporation (hereinafter Jones)

Synopsis of Rule of Law. Parol evidence of intent may be introduced to show intent when a writing is ambiguous.

Facts. The Defendant was expanding its facilities at O’Hare International Airport. Jones was hired by the Defendant to prepare bid specifications, accept bids, and award construction contracts. The Plaintiff submitted a bid to Jones. Jones notified the Plaintiff orally that the Plaintiff had been awarded the contract. The Plaintiff was informed that a written contract prepared by Jones would be received shortly. To aid the Plaintiff in securing subcontractors, Jones sent the Plaintiff a letter of intent. The letter of intent indicated that a written contract would be prepared and that Jones could cancel the letter of intent if the parties failed to agree on a fully executed subcontract agreement.
The Plaintiff and Jones discussed changes to the contract and Jones again told the Plaintiff that a written contract would be drawn up. At a meeting with the Plaintiff’s subcontractors and government officials, Jones announced that the Plaintiff would be the general contractor for the project. Immediately following the meeting, the Defendant told the Plaintiff that their involvement with the expansion was terminated.

Issue. Can the parties introduce parol evidence of intent

Held. Yes. Because the letter is ambiguous, parol evidence of intent may be introduced.
Letters of intent may be enforceable if the parties intend them to be binding.
If a writing is not ambiguous, the court may only look at the writing. However, if the writing is ambiguous, parol evidence may be introduced to show the intent of the parties.
To determine whether parties intended to reduce their agreement to writing the court considers: whether the type of agreement is one generally put in writing, the amount of details the agreement contains, the amount of money the agreement involves, whether a formal writing is required for full expression, and whether a formal written document was contemplated at the end of negotiations.
The Defendant argues that the letter did not contain all of the terms of a construction contract and indicated that some of the terms had yet to be negotiated. Alternatively, the Defendant argues that even if all of the terms necessary are present, the cancellation clause prevents an inference that the parties intended to be bound
The court viewed the fact that work was to begin just days after the letter of intent was sent, as an indication that parties intended to be bound. In addition, the court points out that the cancellation clause would be irrelevant if the letter was unenforceable. Also, the letter indicated that the contract had been awarded and that the Plaintiff was authorized to begin work.
The court held that the letter in the present case was ambiguous. Because the letter is ambiguous, the case is remanded so as to allow parol evidence of intent to be presented.
Concurrence. The concurring opinion agrees that dismissal was unwarranted, but is less optimistic about the Plaintiff’s chances of recovery. Unlike the majority, the concurrence does not think the cancellation clause is evidence of intent to be bound.

Discussion. In the present case, because the court found the letter of intent to be ambiguous, the court remands the case so parol evidence of intent may be considered.