Brief Fact Summary. Plaintiff sued Defendant for specific performance based on a handwritten agreement.
Synopsis of Rule of Law. The fact that the parties contemplate the execution of a formal document is evidence that they intend to not be bound until the execution of the formal contract.
Where the intent of the parties is clear that they are negotiating with a definite understanding the terms of any contract are not fully agreed upon and a written formal agreement is contemplated, and no valid, enforceable contract is to exist until the execution of such an agreement, a binding contract does not come into existence in the absence of such execution.View Full Point of Law
Issue. Is the handwritten note a valid and enforceable contract for the sale of land?
Held. No. Judgment affirmed.
The intent of the parties is to be determined by the surrounding facts and circumstances of each case. 17 C.J.S. Contracts Section: 49 697. The mere intention to reduce an informal agreement to a formal writing is not of itself sufficient to show that the parties intended that until the formal writing was executed the informal agreement should be without binding force. However, the fact that the parties contemplated the execution of a formal document is evidence that they intend to not be bound until the execution of the formal contract.
Where the intent of the parties is clear that they are negotiating with an understanding that the terms of the contract are not fully agreed upon and a written formal agreement is contemplated, a binding contract does not come into existence in the absence of execution of the formal document.
The evidence showed that the parties did not have full agreement as to the terms at the time of the handwritten note. Also, the informal agreement was signed by only one of the three co-owners of the property. Even though Wenger signed for Ralston, there is no evidence of a written authorization required by law.
The Plaintiff never tendered the earnest money until it was discovered that the property had been sold to another, and the Plaintiff could not show that he took any steps in reliance upon the handwritten note. Thus, part performance would not be applicable.
Discussion. Note the insufficiencies in the handwritten note: the life tenant is not mentioned (though in the hospital), the lack of legal authority to bind Ralston, the lack of sufficient clarity as to the legal description. Therefore, the court would not conclude that the parties intended to be bound. This is not a case for part performance, because the Plaintiff did nothing until the property had been sold to someone else.