There Can Be No Contract – Express or Implied – When the Terms are Still Being Negotiated
The Appellate Division, First Department recently established that there can be no recovery on breach of contract or implied contract claims when the terms of the contract were still being negotiated. In Brennan Bee Gorman/Architects, LLP v. Cappelli Enterprises, Inc., the First Department upheld the dismissal of the claims for breach of contract and breach of implied contract.
There, plaintiff submitted a proposal for architectural and engineering services to defendants relating to a proposed resort project. Four days later, plaintiff informed defendants that it was still “working on formal agreement” but nonetheless asked defendants to give them authorization to proceed. Although defendants authorized plaintiff to start working, defendants expressly noted that plaintiff’s “proposal and associated pricing” were “still under review and . . . subject to formal agreement.” Also, although plaintiff started working on the project, the parties continued to exchange contract drafts and comments for several months and never came to an express agreement on price and other terms.
The Court found that it was evident based upon circumstances of this case that the parties never came to an express agreement on price and other terms. Accordingly, the Court found that defendants were entitled to summary judgment dismissing the claims for breach of an express contract.
As for the implied contract claims, the Court likewise found that defendants were entitled to summary judgment on these claims also. The Court emphasized that the parties never came to an express agreement on price. Also, the Court ruled that defendants’ statement that they would only be bound by a formal agreement and their repeated rejection of plaintiff’s proposed lump sum pricing overrode their act of paying for one invoice in August 2008 (that billed for work in June 2008).
On the account stated claim, the Court ruled that defendants’ consistent objection to plaintiff’s invoices required dismissal of this claim.
But on the quantum meruit claim, the Court ruled that the lower court properly declined to dismiss this claim as there were issues of fact as to whether plaintiff could have reasonably expected to be compensated for its services and the reasonable value of those services. The Court found that although the parties never reached an agreement on price, the record indicated that the defendants agreed to pay plaintiff at least some amount for its services. The Court rejected defendants’ claim that plaintiff cannot establish that defendants benefitted from the plaintiff’s services as the Court relied upon case-law establishing that it is immaterial whether any defendants in any economic senses benefitted from the performance. The Court likewise rejected defendants’ claim that plaintiff cannot establish its value of services as it did not maintain itemized billing records. The Court noted that there are other means of establishing the reasonable value of services rendered.
