So Do We Have a Deal? Maybe Not

By: Asha Echeverria, Shareholder, LEED AP, Bernstein Shur

A written contract signed by both parties is always best. So what happens when negotiations take months and only one side signs the contract? Is there a contract? Was there a meeting of the minds? According to the court in Ellis Construction, Inc. v. Town of Farmingdale (Kennebec Sup. CV-16-009), whether the parties are still negotiating a contract or entering into a contract is purely a question of intent, which is a question of fact. The mutual assent of both parties has to be shown and is an essential component to the formation of the contract.

In this case, a contractor attempted to claim that a renewal sewer maintenance contract had been formed in June 2015 when they emailed the secretary of the Sewer committee to confirm receipt of the draft contract and that they were “agreeable to the changes.” The court disagreed because it was obvious from reviewing the Sewer Committee and Select Board meetings that the parties were still in negotiations as to whether the Town would agree to the renewal. The evidence did not establish that the Town had the intent to enter a contract just yet.

The fact that negotiations were still ongoing was made clearer as further modifications were made to the contract in August/September 2015 and these terms became a point of contention between the parties.

The contractor’s final attempt to establish a contract was based on the Town’s ultimatum “that if the Sewer Maintenance Contract is not signed tomorrow night, that the contract will be put out to bid” and its quick response by signing the contract. The court did not interpret the Town’s action as being an intent or assent to be bound if the contractor signed, but rather, the court interpreted it to mean that the Town wanted to know the contractor’s position by the next day but had not decided if it would countersign the agreement. And then, just days later, the Town officially declined to renew the contract. Because no contract was ever formed, the contractor was not entitled to contract damages.

The court declined to find an implied contract but did determine that the contractor had completed some work after the expiration of the prior contract. Therefore, the contractor was entitled to unjust enrichment damages of $1,100.

Finally, the court did confirm that Maine’s Prompt Payment Act (10 M.R.S.A. § 1111 et seq.) applies to both express and implied contracts (quantum meruit claims) although it was not applicable in this instance since the contractor was only able to collect under Unjust Enrichment. This means that if a contractor is forced to sue to recover amounts owed by an owner, which includes a municipality, the contractor can recover penalties and attorney’s fees even if the contract was only implied from the actions of the parties.

The final takeaway from this case is to try and always have a written contract signed by both parties—then at least you know you have a deal.

Original Publication: The Construction Advantage, June 1, 2018

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