Klein v. PepsiCo, Inc.

845 F.2d 76 (4th Cir. 1988)

 

RULE:

Courts must give effect to every word, phrase, and clause in a contract and avoid an interpretation that would render any part of the contract surplusage or nugatory.

FACTS:

A buyer was looking for a particular corporate jet. He contacted petitioner to act as an intermediary. Petitioner was able to reach the seller. The petitioner offered on behalf of the buyer for $ 4.5 million subject to satisfactory inspection and a definite contract.  The seller countered on the price. Eventually, the seller and the intermediary agreed at $ 4.6 million, with the intermediary intending to sell the jet to his buyer at $ 4.75 million. The jet was flown for pre-purchase inspection and it was found that some repairs were necessary. The buyer agreed to shoulder the price for the repair. After some time the seller refused to deliver the jet, thus filed suit. The trial court ruled that there was a perfected contract of sale and ordered specific performance, but this was reversed on appeal. The seller insists that there is no perfected contract until there was a written agreement. Also, they argue that the condition of inspection was not satisfied.

ISSUE:

Was there a perfected contract of sale despite the agreement not being reduced in writing?

ANSWER:

Yes.

CONCLUSION:

The court concluded, however, that the district court's extensive findings of fact, leading to the determination that a contract did exist, were consistent, were corroborated by extrinsic evidence, and were not clearly erroneous. There was merely an intent to memorialize the contract in writing which was not necessarily a condition to the existence of the contract itself. As for the requirement of inspection, the seller’s off to pay for the repairs resolves this issue. The court, however, determined that the district court's grant of specific performance was inappropriate. The court observed that the aircraft in question was not so unique, within the meaning of the Virginia Uniform Commercial Code, Va. Code Ann. § 8.2-716, as to merit an order of specific performance. Further, the court observed that money damages were available to the buyer and would be clearly adequate. The court found that an increase in the price of a replacement jet, as testified to by the buyer, was not, alone, a reason to order specific performance.

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