Settling Terms Through Course of Performance–Hall v. Fox, 2014 WL 284530 (Mo. Ct. App., W.D.)

A dispute arises whether a contractor had an enforceable contract with a client.  judgment was entered for the contractor, who the brief reports claimed compensation on a time-and-materials basis. The client’s argument that the contract was for a fixed price was evidently rejected below.  We seem to have an issue of whether subsequent actions of the parties can cure an otherwise fatal indefinitness of the terms of their bargain, though the brief does not seem to capture this aspect of the case.

More after the break …

So here is the body of the client’s argument, in full (indenting supplied):

Analysis

In Gateway Exteriors, Inc. v. Suntide Homes, Inc. 882 SW 2d 275 (Mo. App. ED 1994), The Court of Appeals held:

To establish a submissible case of breach of contract, a plaintiff must first establish the existence of an agreement. In order for a contract to be formed, the parties must mutually assent to its terms. Douros Realty & Constr. Co. v. Kelley Properties, Inc., 799 S.W.2d 179, 182 (Mo.App.1990). The nature and extent of the contract’s essential terms must be certain or capable of being certain. Id. If the parties have reserved the essential terms of the contract for future determination, there can be no valid agreement. Around The World Importing, Inc. v. Mercantile Trust Co., N.A., 795 S.W.2d 85, 90 (Mo.App.1990).

Negotiations or preliminary steps towards a contract do not constitute a contract. Cervantes v. Ryan, 799 S.W.2d 111, 116 (Mo.App.1990). The existence of a contract necessitates a “meeting of the minds” which the court determines by looking to the intention of the parties as expressed or manifested in their words or acts. Brand v. Boatmen’s Bank of Cape Girardeau, 824 S.W.2d 89, 91 (Mo.App.1992). Whether a contract is made and, if so, what the terms of that contract are, depend upon what is actually said and done and not upon the understanding or supposition of one of the parties. Bare v. Kansas City Federation of Musicians Local 34-627, 755 S.W.2d 442, 444 (Mo.App.1988).

Applying the foregoing to the facts of the instant matter reveal a sharp disagreement between the parties and no basis for the trial court to enter a judgment against the Appellant. Appellant testified:

A When I presented a bill, I was showing how many hours and how much per hour for both of us.

Q And how much were you getting paid per hour?

A I believe my rate was 55 or I’d have to — you have my tickets.

Q Did that rate also then apply to your assistant?

A That covered myself and my assistant.

Q So that was for two people?

A Two people for that amount of money.

(6:12-19)

Respondent paid the invoices presented on that basis. (Plaintiff’s Ex. 2, 3, 5, and 6 and Def. Ex. I). However, Respondent Gina Fox prepared a document (Def. Ex. B) on Appellants letterhead. (32:2-4) Respondent assume it was a fixed price, fixed time contract and plead as such. (LF28)

Q Did you tell him what were the specific discussions about time? What were your expectations you gave him?

A I expected it to be done by the end of February, first of March because I wanted to open March 1.

(165:2-5)

The course and pattern of dealing between the parties was a time and materials basis, not a flat fee contract. However, the testimony of the parties demonstrates that neither party had reached “mutuality of assent” to the terms.

To be clear, that is the complete text under the heading “Analysis”.

We shall have to await respondent’s brief to identify other pertinent factual information. However, one can immediately see that the appellant’s view does not completely address all the factors. Even if the parties did not initially agree on a necessary material term, that defect can be remedied if they subsequently addressed the term.  Metro-Goldwyn-Mayer, Inc. v. Scheider, 75 Misc.2d 418, 422 (N.Y. Sup. 1972), rev’d, 43 A.D.2d 922 (1974), aff’d, 360 N.E.2d 930 (1976), notes:

It is manifest that many of the essential or basic elements of the contemplated contract were left for future negotiation at the time of the original understanding. Irrespective of any custom or practice of an industry, there is no contract if material financial or time elements involving compensation or other kinds of payment or duration are left undetermined (Willmott v. Giarraputo, 5 N.Y.2d 250, 184 N.Y.S.2d 97, 157 N.E.2d 282; Ansorge v. Kane, 244 N.Y. 395, 155 N.E. 683). The court cannot write a contract which the parties have not made (Kusky v. Berger, 33 Misc.2d 564, 225 N.Y.S.2d 797, aff’d 20 A.D.2d 851, 249 N.Y.S.2d 858).

However, where the parties have completed their negotiations of what they regard as essential elements, and performance has begun on the good faith understanding that agreement on the unsettled matters will follow, the court will find and enforce a contract even though the parties have expressly left these other elements for future negotiation and agreement, if some objective method of determination is available, independent of either party’s mere wish or desire. Such objective criteria may be found in the agreement itself, commercial practice or other usage and custom. If the contract can be rendered certain and complete, by reference to something certain, the court will fill in the gaps (May Metropolitan Corp. v. May Oil Burner Corp., 290 N.Y. 260, 48 N.E.2d 13; Cohen & Sons v. M. Lurie Woolen Co., 232 N.Y. 112, 133 N.E. 370; Yarney v. Ditmars, 217 N.Y. 223, 111 N.E. 822).

Here, the subsequent agreement of the parties as to all the elements of the contract, except the starting date, provides a basis for finding a complete contract. Although there was no agreement on a start date, this missing element is not dispositive. Implicit in Scheider’s agreement to make the pilot and do the series, subject to MGM’s one year option, was a promise to report in time for the filming of the series, in the event ABC picked up the picture for a series with a September, 1972 start. Scheider’s agreement was “instinct with an obligation” so to report. (Wood v. Duff-Gordon, 222 N.Y. 88 at p. 91, 118 N.E. 214, quoting McCall Co. v. Wright, 133 App.Div. 62, 117 N.Y.S. 775). Enough has been shown as to the custom and practice of the industry, the understanding of the parties and their subsequent agreement as to terms to establish a contract requiring Scheider to report during the spring of 1972 for a September 1972 air date, if so requested by MGM. This is a reasonable time, which may be implied by law, even if not agreed upon. (Cohen & Sons v. M. Lurie Woolen Co., supra.)

Let us revisit the last two sentences of the appellant’s argument:

The course and pattern of dealing between the parties was a time and materials basis, not a flat fee contract. However, the testimony of the parties demonstrates that neither party had reached “mutuality of assent” to the terms.

If there was a “course and pattern of dealing” that evidenced an understanding the compensation was on a time-and-materials basis, Scheider informs us that is sufficient to clarify the prior ambiguity as to a material term. So, not so good for the appellant.

It would appear that all is not necessarily lost, however, for the appellant. It may be the above cryptic concluding sentences concede too much. It is surely possible to have a fixed-price contract involving progress payments based on time and materials. In such a case, progress payments based on time and materials need not manifest assent to the agreement as a whole not being on a fixed-price basis. This author cannot say whether the facts are amenable to that characterization.