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Cochran v. Norkunas - 398 Md. 1, 919 A.2d 700 (2007)

Rule:

A letter of intent is a form of a preliminary agreement. Letters of intent have led to much misunderstanding, litigation, and commercial chaos. It is recognized that some letters of intent are signed with the belief that they are letters of commitment and, assuming that belief is shared by the parties, the letter is a memorial of a contract. In other cases, the parties may not intend to be bound until a further writing is completed.

Facts:

Respondent Eileen Norkunas owned certain residential property. Petitioners Robert and Hope Grove, and Robert and Rebecca Cochran (collectively, "Buyers"), approached Norkunas and expressed their interest in purchasing the property. Assisted by a real estate agent, the Buyers gave Norkunas a handwritten letter of intent that spelled out key terms of an offer they intended to present, together with a check for a $ 5,000 deposit. The letter indicated that a formal agreement to sell would have to be executed. Norkunas signed the letter of intent, and a few days later, she received other documents, including a standard sales contract. Norkunas signed the contract but did not return it or the other documents to the Buyers, but rather told the Buyers she was not selling. The Buyers filed a lawsuit against Norkunas in Maryland state court seeking specific performance of the letter of intent and the contract. The parties filed cross-motions for summary judgment; the trial court granted the Buyers' motion finding that the letter and the contract together constituted an enforceable contract for sale. The intermediate appellate court reversed. The Buyers were granted a writ of certiorari.

Issue:

Did the Buyers and Norkunas execute a enforceable contract for the sale and purchase of Norkunas' property?

Answer:

No.

Conclusion:

The Court of Appeals of Maryland affirmed the intermediate appellate court's judgment. The court ruled that the letter of intent did not indicate that the parties would be bound by it, but rather it was an agreement to make an agreement. A reasonable person would have understood the letter of intent to mean that a formal contract offer was to follow the letter of intent. Moreover, Norkunas did not manifest an acceptance of any offer, especially since she did not return the documents sent to her, including the sales contract.

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