Remedies where Agreement Incomplete or Indefinite

Case: Copeland v. Baskin Robbins U.S.A. (2002, CA 2nd) [PP. 443-449]

Parties: Plaintiff - Copeland

Defendant - Baskin Robbins

Procedural History: Trial court verdict for defendant (summary judgment). On

appeal.

Facts: D was going to close down a plant and P approached D on purchasing the
plant and manufacturing ice-cream for D. In May 1999, D sent P a letter where D
would sublet and sell the plant to P. D agreed that, subject to a co-packing
agreement (which was vital for the transaction b/c it specified the details of P's
supplying D of ice-cream), and subject to negotiated pricing, that D would
purchase from P 7million gallons of ice-cream from P over a 3-year period. For P
to accept he had to sign the agreement and send a $3k non-refundable check. P did
this. The parties then negotiated over the co-packing agreement and the pricing.
In July 1999, D broke off negotiations. Most of the key issues/terms were not yet
agreed upon. D returned the $3k, and offered to sell/sublet P the plant per the
original agreement. But P sued, claiming that D breached the contract to negotiate
the additional terms (the co-packing agreement and pricing), without any excuse (P
says they failed to negotiate in good faith). P could not afford to accept D's
offer for the sale/sublet without the co-packing agreement.

Issue: Whether the contract to negotiate an agreement is an enforceable contract

or an unenforceable agreement to agree. What kind of damages are available?

Holding: The contract to agree was enforceable, but D is entitled to summary

judgment because it has shown P cannot establish reliance damages. Affirmed for
defendant.

Reasoning: The failure to agree, is not by itself a breach of contract. It is

only enforceable so far as the parties are obligated to negotiate in good faith,
even if no agreement results. But, there is a duty of good faith when there is an
agreement to bargain, and D failed to do this (they unreasonably broke off
negotiations - they just changed their minds; in principle the negotiations could
very well have continued and a contract could have been formed).
Damages: However, since the parties had not yet decided on essential terms
of the agreement, there is no way of determining the lost profits (expectation
damages) because there was no way of knowing what the terms would have been, or if
there would have been an ultimate agreement. Therefore, reliance damages were the
only form of recovery available in an action on a contract to negotiate an
agreement. Here, the manufacturer showed through the purchaser's complaint and
discovery responses he could not establish reliance damages.

RULE:
· A contract to negotiate is enforceable and there is a natural duty of good faith
negotiation implied
· On a contract to negotiate an agreement, the only form of recovery available is
reliance damages (b/c court cannot know what the agreement would have been to be
able to award expectation damages), and reliance must be proven by P.

Notes

· In the may 1999 agreement, in (2) basically was interpreted as saying that
Baskin Robbins agreed to negotiate in good faith
· P won on an important point of law
 o Ppl can agree to contract on anything that’s not illegal or immoral,
including a contract to negotiate
o But still need to prove reliance damages
o P didn’t go after reliance damages - why didn’t he?
§ As a practical matter - you may want to seek the much bigger damages
as a whole or nothing prospect
§ P doesn’t want to give the court an easy way out - court may not want
to give whole amount or nothing, but somewhere in btwn. P didn’t want to give
court this option (the in-between), and tried to basically force them into
deciding.
· Contract negotiations are expensive - parties don’t want the other party to have
an easy way out, so that’s why they create the contracts to negotiate
· At what point was the contract created? Then court will fill in missing terms.
· Point blank, this case says that there's no obligation to negotiate in good
faith