Bretz v. Portland Gen. Elec. Co. - 882 F.2d 411 (9th Cir. 1989)

Rule:

The mutual assent essential to the formation of a contract must be gathered from the outward objective manifestations of the parties and not by the subjective undisclosed intent of one of the parties. Whether a party has made a firm offer therefore turns on the facts and circumstances of each situation, as well as on what the other party might reasonably have inferred from the statements and behavior of the first.

Facts:

In the late summer of 1983, Bretz, identifying himself as special agent in Montana for Western States Energy Ventures, wrote PGE and Beartooth offering to buy the Beartooth stock for $ 2 million. Bretz sought a variety of representations from PGE concerning the Beartooth securities, their sole ownership by PGE, the nature and assignability of Beartooth's holdings, and so forth. The letter also detailed an elaborate procedure for PGE's acceptance of the offer and for the completion of the transaction. PGE responded on August 5, 1983, by sending Bretz a revised version of his offering letter, along with a request that Bretz "resubmit[] the letter as an offer so that it can be considered by Portland General Electric Company's officers." PGE's August 5 letter also included a disclaimer: "Although we have reworked the terms and conditions [of your offer], we have not discussed the same nor the amount of your offer with Company management. They may request other or different terms or additional compensation." On August 10, 1983, Bretz replied, noting that "you have redrafted my offer and it appears that we are coming to a meeting of the minds." ER 58. Bretz incorporated PGE's suggestions and added some "slight" revisions of his own. As in the first offer, Bretz's August 10 communication spelled out a detailed and precise means for PGE to indicate its acceptance. In its August 23, 1983, response to Bretz's August 10 letter, PGE stated “Your offer of $ 2,000,000 cash is not commensurate with the outstanding commitment we have for purchase of the stock. Financing arrangements have caused two delays in closing this commitment. Consequently we would be receptive to an offer of $ 2,750,000 from you and your associates provided the matter could be closed in a timely manner as proposed in your letter of August 10, 1983.” On August 29, 1983, Bretz mailed PGE an amended version of his reworked offer. The amendment, captioned "Acceptance of Offer," and signed by Bretz, stated that the "Foregoing Offer is amended to state a purchase price of $ 2,750,000.00. The joint venture accepts your counter-offer which includes our terms as set forth in letter, as above. We consider that a contract for sale exists." The following day, Bretz, allegedly under the impression that he had a contract to purchase PGE's interest in Beartooth, executed an agreement with a third party for the sale of coal from the Beartooth property. On September 7, 1983, Tom Owens of Beartooth telegraphed Bretz that "It is urgent that you contact me immediately re your offer for Beartooth Coal Co." ER 171. Bretz alleges that on or about that day PGE breached its contract for the sale of Beartooth. Bretz then filed this lawsuit, claiming breach of contract and seeking over $ 25 million in damages. PGE filed a motion for summary judgment, arguing that the exchange of letters did not create an enforceable contract because they did not comply with Montana's statute of frauds. Magistrate agreed, holding that the letters reflected only unconcluded negotiations, not a consummated contract.

Issue:

May PGE's August 23 letter could reasonably be construed as an offer?

Answer:

No.

Conclusion:

PGE's August 23 letter was merely an invitation to continue negotiations. The letter plainly stated that PGE remained "receptive to an offer" from Bretz, and suggests terms that might make the offer more acceptable to PGE. The letter also referred to another commitment PGE had for the sale of the stock, implying that PGE would have to free itself from that commitment before undertaking another. PGE's letter also specifies the manner in which the deal would be closed: "as proposed in [Bretz's] letter of August 10, 1983," which, in turn, provided an elaborate mechanism for closing the deal. Finally, PGE's letter concluded, not with an offer to close the deal, but with an invitation that Bretz "resubmit [his] offer on the above basis." The August 23 letter quite clearly evidenced PGE's intent not to make an offer. Neither PGE's August 23 letter alone, nor the letter considered in concert with the remaining documents and communications, established the existence of a written contract that would satisfy Montana's statute of frauds. The district court therefore did not err in concluding that the parties had failed to enter into an enforceable contract for the sale of the Beartooth stock and granting summary judgment on that issue.