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Copeland v. Baskin Robbins U.S.A. - 96 Cal. App. 4th 1251, 117 Cal. Rptr. 2d 875 (2002)

Rule:

A contract to negotiate the terms of an agreement is not, in form or substance, an agreement to agree. If, despite their good faith efforts, the parties fail to reach ultimate agreement on the terms in issue the contract to negotiate is deemed performed and the parties are discharged from their obligations. Failure to agree is not, itself, a breach of the contract to negotiate. A party will be liable only if a failure to reach ultimate agreement resulted from a breach of that party's obligation to negotiate or to negotiate in good faith. For these reasons, criticisms of an agreement to agree as absurd and a contradiction in terms do not apply to a contract to negotiate an agreement.

Facts:

Defendant Baskin Robbins U.S.A. ("Baskin") operated an ice cream manufacturing plant in the City of Vernon. When Baskin announced its intention to close the plant, plaintiff Kevin A. Copeland expressed an interest in acquiring it. The parties commenced negotiations. Copeland made clear from the outset his agreement to purchase the plant was contingent on Baskin's agreement to purchase the ice cream he manufactured there. Copeland testified at his deposition the ice cream purchase arrangement, known as "co-packing," was "critical" and "a key to the deal." Without co-packing, Copeland testified, the deal wouldn't work. Baskin did not deny the co-packing arrangement was an indispensable part of the contract to purchase the plant. When the parties failed to reach an agreement on the ice cream, Copeland a lawsuit against Baskin in California state court alleging breach of contract. Baskin filed a motion for summary judgment claiming the parties' agreement to agree could not be made the basis of a cause of action. The trial court granted Baskin's motion. Copeland appealed.

Issue:

Could Copeland sue for breach of the parties' contract to negotiate an agreement?

Answer:

Yes.

Conclusion:

The appellate court affirmed the trial court's judgment. The court held that these parties had a contract to negotiate an agreement, which was distinguishable from an unenforceable agreement to agree, and which could be formed and breached, just like any other contract. Nevertheless, the court held that Baskin was entitled to summary judgment, since the appropriate remedy for breach of a contract to negotiate was not damages for lost profits, but rather reliance damages, and Copeland failed either to allege in his complaint or to state in his answers to Baskin's interrogatories that he had sustained damages incurred in relying on the parties' agreement.

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