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Note: Bob & Dave’s Lawn and Landscape Maintenance, Inc. (Buyer), a Wisconsin, U.S., company, provided snow removal services and occasionally made bulk sales of rock salt to other firms. In 2014, Buyer realized that its normal suppliers would be unable to meet its needs and decided to approach Mid-American Salt, LLC (Seller) regarding a bulk purchase of Moroccan salt. The parties engaged in “extensive negotiations” regarding a 24,000-ton purchase, which was to be the “largest salt order” in the history of Buyer’s business. Following the exchange and revision of several draft agreements, Seller sent Buyer a nearly finalized draft and insisted that a “fast decision” was required due to “market conditions” that could otherwise cost both parties money. Apparently, Buyer “orally confirmed” its acceptance of the terms provided by Seller and Seller in turn issued a USD 700,000 wire payment to its supplier, Pardira Premium S.L. (Supplier).

Unknown to Seller, however, Buyer intended to resell the salt but its expected arrangement “broke down”; thus, Buyer informed Seller that it would not purchase the salt as agreed and Seller failed to find a replacement buyer. Subsequently, Seller sued Buyer for breach of contract alleging that Buyer’s breach of the agreement caused it to lose USD 561,000, Seller’s “entire [expected] profit” from the deal. Buyer moved for summary judgment. The United States District Court for the Northern District of Indiana, Brady, J., denied Buyer’s motion.

Buyer argued that Seller’s claim of damages due to breach of contract were baseless because (1) the contract failed for a condition precedent; and (2) in any event, Seller could not demonstrate damages from the alleged breach. As a threshold matter, however, the Judge had requested that the parties file briefs on the issue of whether the choice of law provision in the contract ought to control where the validity of the contract was also at issue. That issue was rendered “moot” as the parties both asserted in their briefs that Indiana law applied. Although the parties devoted much of their motions to the issue of parol evidence, the Judge noted that the available “evidence suggests to the Court that genuine issues of material fact exist regarding the finality of the Agreement.” After its oral acceptance, Buyer signed the contract but not before the date provided for which it was to be “null and void if not accepted and signed by both parties”. Accordingly, the Judge noted “there is ample support for the idea that the parties did not intend to be bound by the strict terms of the Agreement.” Moreover, another provision of the agreement regarding payment terms stated that the agreement would not become effective until monies had been “transferred in accordance with this Agreement.” Further terms provided that payment would be made in stages with sixty percent of the contract price due by advanced wire payment on one date and the remainder to be paid by letter of credit “upon the salt being off-loaded on to the Terminal and prior to removal.” The agreement, however, had not been fully executed until after the stated date on which the first payment from Buyer was due. Thus, the Judge noted the “temporal impossibility” that the parties intended to be bound by the strict terms of the agreement.

As to whether the contract failed for a condition precedent, the Judge accepted Seller’s argument that the payment terms requiring an advanced payment by Buyer before the contract would become binding was a condition precedent of which the benefit inured to Seller; thus, Seller could waive that condition by its conduct, here wiring USD 700,000 to Supplier. In noting the genuine dispute over the enforceability of the condition precedent as well as whether Seller incurred any damages as a result of Buyer’s alleged breach (conflicting evidence existed as to whether Seller would have been able to have salt timely delivered), the Judge denied Buyer’s motion for summary judgment and ordered that the matters be set for trial.

[MJK]

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