Diesel Power Equip., Inc. v. ADDCO, Inc.

377 F.3d 853 (8th Cir. 2004)

 

RULE:

In order to establish an express contract under Nebraska law, there must be a definite proposal and an unconditional and absolute acceptance thereof. Further, there must be a meeting of the minds at every point; nothing can be left open for future arrangement. A contract is not formed if the parties contemplate that something remains to be done to establish contractual arrangements or if elements are left for future arrangement. An informal agreement may be binding, despite the parties' intentions to enter a formal agreement at a later time, only if the later, formal agreement contains no new provisions not contained in or inferred from the prior informal agreement. Although the parties to a contract must intend to be bound by the contract, the requisite intent is not the parties' subjective intent, but is determined by the parties' objective manifestations of their intent to be bound by the agreement.

FACTS:


Appellee was an engine distributor based in Omaha, Nebraska, whose distributorship covered Nebraska and six other states. Appellant was a Minnesota company that owned an engine division that distributed engines in states where appellee did not. Appellee sought to purchase appellant's engine division and sent a preliminary offer letter to appellant's president, who after requesting more money for goodwill, stated that he accepted the offer. Appellee's representative agreed to draft a letter of intent, and after he drafted several letters of intent, appellant's president signed the third version. However, no version of the parties' drafts of asset purchase agreements was ever signed. Appellant then sold the division to a third party. Appellee successfully sued appellant for breach of contract. On appeal, the court reversed and remanded.

ISSUE:

Was the agreement between the parties sufficiently definite to form a binding contract?

ANSWER:

No.

CONCLUSION:

Given the definiteness required under Nebraska law, the letter of intent did not bind the parties because they continued to negotiate and prepare subsequent documents. The court noted that the Supreme Court of Nebraska considered subsequent draft documents as a sign that the parties did not intend to be bound by an earlier document.

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