“Offer and Acceptance” and “Meeting of the Minds” Déjà vu

This was originally posted on the SGR Blog.

In first year “contracts” (in 1966) at NYU Law, Professor Francis J. Putman spent (what seemed like) several weeks on “offer and acceptance” and “meeting of the minds.” Five decades later, our courts still periodically address those threshold issues. A recent case illustrates the point.

In March 2015, William Collins entered into negotiations with Utica Builders, LLC, for the sale of the Collins’ real property located in Brooklyn. On March 6, 2015, Utica submitted a proposal to purchase the property for $590,000, with a deposit of $29,500. Collins then sent Utica an unexecuted proposed contract of sale that included Utica’s proposed price terms and provided that the property would be sold as is. On March 19, 2015, Utica sent Collins a check in the amount of $29,500, as a deposit,  and four signed copies of the contract of sale– with handwritten additions stating that Collins represented that the “[p]remises are a legal (2) family dwelling as per the certificate of occupancy.” On March 26, 2015, Collins’ attorney changed the handwritten description of the premises from “(2) family dwelling” to “(1) family dwelling,” and sent two original copies of the fully executed contract of sale back to Utica’s attorney.

On May 18, 2015, Collins attempted to schedule a closing. On May 22, 2015, Utica told Collins that it would not close unless Collins provided either a certificate of occupancy designating the premises as a two-family dwelling or a letter to that effect. Utica further stated that, if Collins failed to comply with that request, Utica would consider the contract canceled and demand the return of the deposit. On May 28, 2015, Collins declared that Utica had defaulted under the contract and stated that, if Utica did not cure the default by closing on or before June 8, 2015, Collins would treat the default as final. Utica then denied the existence of a binding contract between the parties and demanded return of the deposit.

On June 2, 2015, Collins objected to Utica’s demand for the return of the deposit; declared Utica to be in breach of the contract; and demanded the release of the deposit to him. Collins’ counsel asserted that the parties’ correspondence in preparing for the closing “does not suggest that there was no meeting of the mind[s].” On the same day, Utica responded with a letter restating its demand for the return of the deposit and reiterating its argument that no contract had ever been formed because the handwritten modifications to the proposed contract were material to the transaction.

In May 2016, Utica “switched gears” and filed suit for specific performance of the contract of sale. Collins filed an answer with counterclaims seeking liquidated damages in the amount of Utica’s deposit for the alleged breach of the contract. Collins moved for summary judgment dismissing the complaint and canceling the notice of pendency and for summary judgment on his breach of contract counterclaim.

Supreme Court determined that the parties never entered into an enforceable contract of sale. The Court granted that branch of the Collins’ motion which was for summary judgment dismissing the complaint and canceling the notice of pendency. And denied that branch of Collins’ motion for summary judgment on his breach of contract counterclaim. Both parties appealed.

The Appellate Division agreed with Supreme Court’s determination that there was no binding contract of sale. The existence of a binding contract was not dependent on the subjective intent of the parties. In determining whether the parties entered into a contractual agreement, the Court looked to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds. To create a binding contract, there must have been a meeting of the minds, such that there was a manifestation of mutual assent sufficiently definite to assure that the parties were truly in agreement with respect to all material terms.

Generally, courts look to the basic elements of the “offer and the acceptance” to determine whether there was an objective ”meeting of the minds”. Specific performance may be awarded only where was a valid existing contract for which to compel performance.

In this case, the Appellate Division found that documentary evidence established that the parties were never truly in agreement with respect to all material terms. Utica did not intend to pay the proposed contract price for a one-family dwelling. And Collins could not or would not represent that the property was a legal two-family dwelling. Utica’s signing of the proposed contract did not create a binding agreement between the parties because Utica’s acceptance was conditioned on material changes to the contract and, thus, constituted a counteroffer that Collins did not accept. Because the parties never came to a meeting of the minds regarding essential terms of the agreement, there was no binding and enforceable contract between them.

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