Budget Mktg. v. Centronics Corp. - 927 F.2d 421 (8th Cir. 1991)

Rule:

Under Iowa law, a party claiming recovery under promissory estoppel must establish: (1) a clear and definite agreement; (2) that it acted to its detriment in reasonable reliance on the agreement; and (3) that the equities support enforcement of the agreement.

Facts:

Budget Marketing, Inc. (“BMI”) and Centronics Corporation (“Centronics) executed a letter of intent outlining the basic terms of a proposed acquisition of BMI by Centronics, including a disclaimer that the letter was not to be construed as a binding agreement on the part of either party. BMI and Charles A. Eagle, the president and principal shareholder of BMI, began taking the steps necessary to meet the conditions imposed by the letter of intent, until Centronics abruptly stopped the merger. BMI and Eagle brought an action against Centronics, alleging failure to negotiate in good faith, promissory estoppel, and negligent misrepresentation. Centronics counterclaimed for negligent misrepresentation. The district court entered summary judgment against all claims. Both parties appealed. 

Issue:

Was it proper to grant summary judgment on the sellers’ claim of failure to negotiate in good faith, promissory estoppel, and negligent misrepresentation? 

Answer:

No, but only with respect to the promissory estoppel claim.

Conclusion:

On appeal, the court reversed on the sellers' promissory estoppel claim and affirmed the rest of the judgment. The court rejected the buyer's argument that the letter of intent foreclosed the promissory estoppel claim and held that the sellers' allegations of the buyer's oral assurances it would close the deal, the sellers' reliance on those assurances, and the buyer's knowledge of the sellers' reliance, created a jury question. The court affirmed the judgment on the sellers' theory of an implied duty on the part of the buyer to negotiate in good faith, holding that finding an implied duty would contradict the express terms of the letter of intent. The court affirmed the judgment against the negligent misrepresentation claims of both parties because, under Iowa law, that theory was inapplicable to parties negotiating a commercial transaction at arm's length.