Breach of Contract

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7^th Circuit Court of Appeals

Case Name: C.G. Schmidt, Inc. v. Permasteelisa North America

Case No.: 15-3617

Officials: WOOD, Chief Judge, and FLAUM and WILLIAMS, Circuit Judges.

Focus: Breach of Contract

Parties never entered into a binding contract and promissory estoppel claim fails as a matter of law.

“First, given both parties’ expectation of further negotiations, it is questionable whether we can construe PNA’s bid as a promise upon which CGS could reasonably rely. Soon after submitting its initial bid, PNA announced that it expected to review the prime contract and negotiate certain aspects of the subcontract prior to executing an agreement. Conditional promises of this kind are not a reasonable basis for reliance. Gruen Indus., 608 F.2d at 281. Once CGS selected PNA’s bid, the parties entered a negotiation that spanned over the next year. CGS was perhaps reasonable in expecting that the parties would ultimately form a binding agreement. But it was not reasonable for CGS to rely on any of PNA’s specific bids. CGS knew, or at least should have known, that the negotiations could fall apart before the parties entered into a binding agreement. Second, there is no injustice in permitting PNA to withdraw its bid. Applying promissory estoppel to this case would essentially give CGS an option contract on PNA’s bid that it did not bargain for. Correspondingly, it would put PNA at the mercy of CGS’s superior bargaining position. In other words, it would “transform these complex negotiations into a ‘no lose’ situation” for CGS. Id. at 282. In complex negotiations between sophisticated parties, it is preferable to leave the losses where they fall, rather than enforcing preliminary negotiation positions wrought with contingencies and uncertainty. Id.”

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.