Continental Laboratories v. Scott Paper Co.

Nature of the Case

This was a motion for summary judgment.

Facts

Continental Laboratories (P) and Scott Paper (D) entered into negotiations for Continental to supply Scott with hotel amenity products which Scott in turn would distribute. Many drafts of a potential agreement were prepared and considered by the parties. Scott eventually announced internally that a deal had been reached. Continental believed that an oral contract was reached that would be memorialized by writing. Scott’s position was that no contract had been reached and there was no intent to be bound until a signed written agreement had been consummated. More meetings were held with more changes and eventually Scott decided there was no longer any interest in the venture and terminated their relations. Continental sued Scott over an alleged binding oral contract and Scott moved for summary judgment.

Issue

How is a party’s intent to be bound prior to the execution of a written document determined?

Holding and Rule of Law

An intent to be bound prior to the execution of a written document is determined by objective factors.

Those objective factors that must be considered are whether a contract is of a class normally found to be in writing, it is of the type needing a writing for its full expression, it has many of few details, the amount is large or small, the contract is common or unusual, all the details have been agreed upon or some remain to be resolved, and the negotiations showed a writing was discussed or contemplated.

Scott’s position is supported by the fact that the matter was a large and complex commercial undertaking that is usually put in written form. There were negotiations for seven months and numerous drafts and proposals were exchanged. There were many details and agreements addressing exclusivity, price and purchase commitments, advance payments and payment terms, confidentiality and termination clauses. The commitment was for Scott to purchase $2.25 million in products during the term of the contract and this contract involved Scott’s entrance into a new market. Although Scott did announce internally that a deal had been reached there were still many details to be resolved. Scott intended to be bound only by a written and executed contract and that was never produced.

Disposition

Summary judgment in favor of defendant Scott granted.