You Be the Judge:

Case: Quake Construction, Inc. v. American Airlines, Inc.

Actions

Facts: Jones Brothers Construction was the general contractor on a job to expand American Airlines facilities at OHare International Airport. Jones verbally accepted Quakes bid to work on the project and promised that Quake would receive a written contract soon. Jones wanted the license numbers of the subcontractors that Quake would be using, but Quake could not furnish those numbers until it had assured its subcontractors that they had the job. Quake did not want to give that assurance until it was certain of its own work. So Jones sent a letter of intent that stated, among other things:

We have elected to award the contract for the subject project to your firm as we discussed on April 15. A contract agreement outlining the detailed terms and conditions is being prepared and will be available for your signature shortly.

Your scope of work includes the complete installation of the expanded lunchroom, restaurant, and locker facilities for American Airlines employees, as well as an expansion of American Airlines existing Automotive Maintenance Shop. A sixty (60) calendar day period shall be allowed for the construction of the locker room, lunchroom, and restaurant area beginning the week of April 22. The entire project shall be completed by August 15.

This notice of award authorizes the work set forth in the attached documents at a lump sum price of $1,060,568.00. Jones Brothers Construction Corporation reserves the right to cancel this letter of intent if the parties cannot agree on a fully executed subcontract agreement.

The parties never signed a more detailed written contract, and ultimately Jones hired another company. Quake sued, seeking to recover the money it spent in preparation and its loss of anticipated profit.

You Be the Judge: Was the letter of intent a valid contract?

The argument for Quake: This letter was a valid contract. It explicitly stated that Jones awarded the contract to Quake. It also said, This notice of award authorizes the work. The letter included significant detail about the scope of the contract, including the specific facilities Quake would be working on. Furthermore, the work was to commence approximately 4 to 11 days after the letter was written. This short period of time indicates that the parties intended to be bound by the letter so that work could begin quickly. And, the letter contained a cancellation clause. If it was not a contract, why would anyone need to cancel it?

The argument for Jones: This letter was not a contract. It referred several times to the execution of a formal contract by the parties, thus indicating that they did not intend to be bound by the letter. Look at the cancellation clause carefully: It could also be interpreted to mean that the parties did not intend to be bound by any agreement until they entered into a formal contract.

For Chapter 20 Assignment, you are required to litigate the meaning of the letter of intent was a waste of time and money for both parties, so now you are to negotiate for Jones and wanted to clarify negotiations without committing your company, how would you do it? State in a letter that it is not a contract, and that neither side is bound by it. State that it is a memorandum summarizing negotiations thus far, but that neither party will be bound until a full written contract is signed. You are representing Jones Brothers and you can sign your letter as their lawyer or as a law clerk.

This is the pdf for the block letter template to help you format your letter.

[Your Name]

[Street Address]

[City, St Zip]

[Todays Date]

Mr. Thomas Jones

Jones Brothers Company, Inc.

4100 Meadow Lane

Bossier, LA 71111

Dear Mr. Jones,

[Short introduction paragraph, stating purpose]

[Additional information]

[Closing information, summary or thank you as appropriate]

Sincerely,

[Sign here for letters sent by mail or fax]

[Your Name]

[Title if applicable]

Enclosures: #

CC: