St. Charles Design and Build, Inc. and Lindenwood Management LLC negotiated an o

Question

St. Charles Design and Build, Inc. and Lindenwood Management LLC negotiated an oral agreement whereby Lindenwood would provide management consulting services to assist in expanding St. Charles’s business. The two entities agreed to all of material terms of their relationship and shook hands on the deal. Lindenwood said it would have their in-house legal counsel put the agreement in writing within 24 hours and provide the written agreement to St. Charles for its signature. Lindenwood’s lawyer wrote up the contract, which accurately stated the terms of the parties' oral agreement. Lindenwood signed the agreement and mailed it St. Charles. St. Charles refused to sign the written agreement, explaining that it decided to put its expansion plans on hold. St. Charles claimed that it was not obligated to Lindenwood unless it signed the written contract. Lindenwood claims St. Charles is liable under the negotiated agreement and sues for breach of contract. What result?

Explanation / Answer

In this case St. Charles is liable for the breach of contract because a verbal agreement was entered into by St. Charles Design and Lindenwood Management. In this case the verbal agreement between the two entities had all the elements of a valid contract and hence the verbal agreement between St. Charles Design and Lindenwood Management will be valid and hence legally enforceable. The case facts points out that there is no reason to believe that the agreement was not reasonable, not equitable, and not made in good faith. Hence the verbal agreement will be considered as a valid contract and this will make St. Charles liable for breach of contract.

However, if the amount of the contract exceeds the total value of $500 then the contract has to be in writing and the legal agreement will not be enforceable. In such a case St. Charles cannot be held liable.

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