Walker v Keith and Quake Construction, Inc. v. American Airlines, Inc

Walker v. Keith & Quake Construction, Inc. v. American Airlines Walker v. Keith Kentucky Court of Appeals (1964) Walker- Δ and Appellant Lessor Keith- Π and Respondent Lessee Facts- Π Leased a small lot from Δ for a ten years. The lease provided the option to renew for another ten years. The option kept all terms the same except for the rental price. The new rental price would be agreed upon by both parties and should represent a fixed rate that is comparable to “rental values as of the date of renewal with rental values at this time reflected by the comparative business conditions of the two periods. Procedural History- Π won in trial court. Rent was set $125.00 Δ appealed and won in the court of appeals Issue- Does Keith the plaintiff have the right to enforce an option contract to renew the lease? Where the terms of the renewal so indefinite that the parties could not be held to have agreed upon an essential portion of the lease. Holding- The option contract is unenforceable. Courts Reasoning- Courts are reluctant to complete an incomplete agreement made by the parties. This is based on the concept that substantial certainty with regard to the material terms is required for a meeting of the parties’ minds to occur. The traditional approach requires that an option to renew a lease set the amount of rent or provide a clear method for determining the rent. The Court determines that the provision in the lease renewal option does not clearly establish a method for determining the amount of rent; therefore, the provision is too vague to enforce. The Court does not hold that an option to renew must provide a dollar amount for rent to be enforceable. A definite objective standard would be sufficient for the court. For example, if the parties had agreed on a specific method, computation, formula, or even arbitration to determine the rent, the court would have enforced the option. The Court characterizes the provision as an unenforceable agreement to agree. Because the parties have failed to agree as to a rent amount for the renewal, the court is unwilling to enforce a “nonagreement.” The Court goes on to criticize courts that are willing to insert such terms as “paternalistic.” Quake Construction, Inc. v. American Airlines Supreme Court of Illinois (1990) Quake Construction, Inc.American Airlines, Inc.- Π and Appellee Δ and Appellant Facts- American Airlines was expanding its space at O’hare. Jones bros construction was hired by American to prepare bid specs, accept bids and award construction contracts. Quake submitted a bid to Jones. Jones orally told Quake they had won the contract for the work and told that a written contract would be sent to them soon. Jones sent Quake a letter of intent to allow them to secure subcontractors. The letter of intent said 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. Quake and Jones discussed the changes to the contract and jones said again that a contract would be drafted. At a meeting with Quake’s subcontractors and government officials, Jones announced that the plaintiff would be the general contractor for the project. Immediately after the meeting, American said that Quakes involvement in the project had been terminated. Procedural History- Circuit court dismissed Quakes complaint. Appellate court disagreed and the Supreme Court affirmed the appellant’s decision. Issue- Can parties introduce parol evidence of intent? -Parol Evidence- Oral, unwritten evidence. Holding- Yes, because the letter was unclear, the parol evidence of intent may be introduced. Court’s Reasoning- 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.