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1 I. AGREEMETNS TO AGREE II. MEMORIALS OF NEGOTIATIONS AND MEMOS OF INTENT a. What happens when the parties fail to reach the final agreement, and one party seeks to enforce a signed draft? b. Contract law treats memorandums of intent in 3 ways; i. 1. the memo is not legally enforceable at all [ its only a memorial of negotiations for later reference] 1. it will not be enforceable if one party did not believe it con- stituted the final agreement, restatement 27 comment b [p 497] ii. 2. OR it could be a legally enforceable contract [parties sought to bind themselves while they complete the remaining terms and refine the agreement] restatement 27 comment a iii. 3. OR a court could find that the memo constitutes a legal ob- ligation to make a reasonable effort to conclude the deal. [the parties have come to expect that their counterpart will not simple change its mind w/out a good business reason related to the partic- ular deal] Arnold Palmer v Fuqua c. Contract law sorts out the alternatives by trying to determine what the parties intended [under reasonable person standard] i. Courts look at: 1. language 2. degree of detail 3. importance of subject matter 4. statements and conduct of parties both inside and outside the formal negotiations 5. + any other relevant context matter d. Arnold Palmer Co v Fuqua Industries MEMO of intent laying out most of the agreement in detail [2 businesses forming new corporation to manu- facture golf supplies] agree that the final agreement will be subject to ap- proval by board of directors. One doesn’t sign, the other sues to enforce memo of intent. i. Determining if something is an enforceable contract, or a record of negotiations: e. How to look at agreements to agree? i. Look at it as an unenforceable writing – Corbin ii. As an enforceable contract iii. Or as an agreement to make a Reasonable effort to write final agreement – determine by parties’ intentions + circumstances? 1. Reasonable person test – what would a reasonable person think the parties’ intentions are? 2. Satisfaction clause included? 3. Mutuality of obligation? 4. Objective standard/ honesty 5. Look at: a. Language
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2 b. Circumstances (press releases, trade usage, course of dealing) c. Degree of completeness d. Signed by both parties? f. Restatement 27 - just because the parties agree to later execute a final agreement does NOT prevent a memorial from being an enforceable con- tract --- but the circumstances may indicate that it does prevent, and that the memorial is only preliminary negotiations. P 497 III. REQUIREMENT OF CERTAINTY IN BUSINESS AGREEMENTS a. Martin Delicatessen v Shumacher [ material elements must be specific ] i. Agreement on rent too vague to enforce because there is no object- ive method of calculating it; “T may renew this lease for an addi- tional period of 5 years with rent to be agreed upon ii. The Court has no basis for determining renewal rate 1. before the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained iii. Common Law Test for certainty: sufficiently certain and specific
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