N.C. Business Court Dismisses Two Contract Claims on Summary Judgment for Lack of Mutuality
In separate cases, the North Carolina Business Court answers the question: When exactly is a contract formed? The Court reminds business leaders that parties do not form an enforceable agreement until their minds meet on all the material terms.
In Denver Property Partners, LLC v. Sisson, 2019 NCBC 22 (N.C. Super. Ct. Apr. 1, 2019), Judge Robinson granted the Defendants’ motion for partial summary judgment on the Plaintiffs’ breach of contract claim. See Order and Opinion.
In Hocutt v. Hocutt, 2019 NCBC 24 (N.C. Super. Ct. Apr. 4, 2019), Judge McGuire denied a Defendant’s motion to enforce a settlement agreement allegedly formed prior to the action’s filing. See Order and Opinion.
Denver Property Partners, LLC v. Sisson
In Denver Property Partners, the Plaintiffs claimed the Defendants breached an agreement to purchase an indoor shooting range and firearms retail store. The Defendants argued the parties never formed an accord. The Court agreed.
The facts in the light most favorable to the Plaintiffs showed the following: The Plaintiffs and Defendant Mr. Sisson entered into an agreement whereby Mr. Sisson would manage the range and store and would undertake due diligence to determine whether to purchase them. Thereafter, the parties began negotiations for the purchase:
- Mr. Sisson emailed the Plaintiffs’ agent, attaching a signed purchase agreement that he called a “draft.” He invited the Plaintiffs to sign it.
- The Plaintiffs’ agent responded, telling Mr. Sisson to add the effective date of the agreement and to add two related parties as sellers.
- Mr. Sisson replied, telling the Plaintiffs’ agent to modify the purchase agreement as needed.
The parties engaged in no further negotiations.
Two months later, Mr. Sisson informed the Plaintiffs he wanted out. He would neither purchase the businesses, nor manage them. Litigation ensued.
In granting Mr. Sisson’s motion for partial summary judgment, Judge Robinson cited Normile v. Miller, 313 N.C. 98, 103 (1985), for the general rule that new terms added by acceptance operate as a counteroffer and a rejection of the original offer. He determined that the first Sisson email was an offer. The agent’s response was a counteroffer (and a rejection). Sisson’s reply was an invitation to the Plaintiffs to make an additional offer.
Neither party ever accepted the other’s terms. There was no contract.
Hocutt v. Hocutt
In Hocutt v. Hocutt, Judge McGuire denied a Defendant’s motion to enforce a settlement agreement allegedly formed prior to the action’s filing. He treated the motion as one for summary judgment.
This case arose from “a long-simmering dispute” over control of three closely-held corporations among Plaintiff Joey Hocutt; his father, Defendant Mike Hocutt; and his brother, Defendant Jay Hocutt. In an attempt to resolve their conflict, the family engaged counsel, who met without their clients to discuss a framework for settlement. Counsel circulated unsigned draft agreements to their respective clients to work toward resolution. Defendants Mike and Jay accepted the terms of a final draft, but Joey did not. Joey offered additional terms, which the Defendants rejected. Joey filed this action.
Defendant Mike filed a motion to enforce the settlement agreement. He argued that an agreement existed because Joey’s attorney circulated it, and each Defendant signed it. Yet, he provided no evidence that the final draft was a formal offer. To the contrary, Defendant Mike admitted that Joey refused to sign the final draft and that Joey’s attorney communicated Joey’s rejection of it.
Judge McGuire denied the motion to enforce. He cited Chappell v. Roth, 353 N.C. 690, 692 (2001), for the rule that a valid contract requires a meeting of the minds as to all material terms. “If any portion of the proposed terms is not settled, or no mode agreed on by which they may be settled, there is no agreement.” Chappell, 353 N.C. at 692.
Going even further, the Court cautioned the motion was “close to frivolous, and that undisputed facts arguably would entitle Plaintiff to judgment as a matter of law” rather than Defendant Mike.