Contracts – Something Missing?

The definition of a contract is relatively simple and has been the same for decades. A contract is an offer and an acceptance supported by consideration. That seems simple enough, but those same decades have seen numerous court battles arguing what is an offer, what is an acceptance, what is consideration and even what is agreement.

Courts have enforced numerous contracts lacking agreement on all terms, as long as there was agreement on all essential terms. Price is usually an essential term. Time for performance is usually non-essential. The court will apply a reasonable time for performance. Other aspects of the contract can also be “filled in” with the usual and customary practices or something similar. 

Courts often seem driven to find an enforceable agreement. But that is not always the case, especially when a counteroffer is involved. It is not uncommon for the recipient of an offer to make a counteroffer. A counteroffer may be more than just a price adjustment and may include new terms and conditions. The new terms and conditions may be presented in form of an addendum to the original offer. 

If response to an offer changes any of the terms, response must normally be accepted by the recipient and that acceptance communicated to the counteroffer. A strange thing can happen when an addendum with additional or new terms and conditions accompanies the signed and returned offer. Two cases from the Third District Court of Appeal are good examples of what might surprise a counter-offeror. 

In the Muniz case, a homebuilder gave prospective buyers a contract under which the homebuilder would build, and the buyers would buy a model home. The buyers signed the contract and gave it back to the builder with a separate “additional options list.” The builder signed the contract, did not sign the extra list, and gave it back to the buyers. The builder later tried to get out of the contract arguing that there was no contract because the builder did not accept the extra list. The buyers countersued for specific performance, asking the court to order the builder to perform in accordance with the terms of the contract. 

In Muniz, the buyers argued the builder accepted both their contract and the additional list because the agreement provided by the builder provided that an additional “Option and Upgrade Agreement” would be executed by both parties and incorporated into the agreement. The builder argued no contract was formed because the builder did not accept the buyers’ counteroffer.

The court ruled that the buyers’ additional list was not part of the agreement, was not actually referenced in the agreement and since it was not signed by the seller, was not part of the contract. The court granted the buyers’ request for specific performance, but only of the agreement without the additional list. The court rejected the argument that the list created a counteroffer that was never accepted and therefore no contract was formed.

Seventeen years later, that same court was asked to review a similar case which focused on whether a separate writing created a counteroffer. In the Mercado case the buyers thought they had a contract to buy property from the Mercados. When the Mercados refused to close, the buyers sued for specific performance. As part of the suit, the buyers filed a lis pendens which is notice in the land records (Public Records in Florida) that there was a lawsuit affecting title. The Mercados countersued for slander of title caused by that lis pendens.

The Mercados contract was a form contract that defined the “contract” as including “any riders and addenda” and further provided that the riders and addenda would control all printed provisions of the contract in conflict with them. The form included a paragraph that stated the parties were to expressly incorporate any addenda within the form agreement, including boxes to check for various form addenda available for use with the agreement form. No box was checked.

Even though no box was checked under the list of addenda, the buyers included an addendum with the buyers’ original offer. The seller apparently accepted the form agreement but changed terms in the addendum which addressed the buyers purchasing the furnishing and the seller leasing back the home.

Buyers argued that the form agreement was a contract with all essential terms and that the parties simply failed to agree on the separate agreement proposed by the addendum. The trial court agreed, and the seller appealed. The appellate court also agreed with the buyers.

The appellate court explained that failure to check a box referencing an addendum was a failure to incorporate the addendum into the form agreement. Because the form agreement provided that the parties were to incorporate any addendum by checking the appropriate box or boxes, failure to do so meant that the addendum was not incorporated and not part of an offer requiring acceptance. Since the separate addendum was not signed by both parties, it was not effective and was not considered part of a counteroffer. Different results may have been obtained if the form agreement itself was not sufficient to create a contract.

Failing to check the box in the Muniz case was a simple mistake that kept the addendum from being a part of the contract. If you want terms of a separate writing to be included in a contract, you should make them integral. Merely preparing a separate list of items may not be sufficient. Retaining an attorney to help would also be a great idea. In both of these cases from the Third  District it does not look like anyone had a lawyer assist with drafting. That may have been the bigger mistake.