Kenneth W. Miller, II v. Eric Flegenheimer
161 A.3d 524
| Vt. | 2016Background
- Two cofounders (buyer and seller) each owned 50% of a successful document-shredding company but had deteriorating working relations and attempted (unsuccessfully) to negotiate a buy-sell agreement through counsel; negotiations ended December 9, 2013.
- On December 26, 2013 seller emailed an offer to sell his share to buyer at a price equal to the average of two prior appraisals and proposed a two‑year “claw‑back” splitting excess resale proceeds; offer open until January 10, 2014.
- Buyer replied December 31, 2013 “I will accept,” acknowledged the claw‑back, and said buyer would send “definitive documents” with “customary provisions” before January 10.
- On January 9 buyer sent a draft Stock Purchase Agreement and a separate Non‑Compete/Non‑Solicitation Agreement (the latter labeled a “condition precedent”) and reduced the purchase price by $50,000, allocating that amount to the non‑compete.
- Seller withdrew his offer January 14 after counsel review; buyer sued seeking specific performance. Trial court treated the emails as a Type II preliminary agreement obligating the parties to negotiate remaining terms in good faith; appellate court reversed and entered judgment for defendant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the email exchange created a binding contract (Type I — fully formed) | Buyer: emails + drafts show acceptance and agreed terms; enforceable as written | Seller: open material terms and reservation for definitive documents show no intent to be bound | Not a fully formed contract — no enforceable Type I agreement |
| Whether the emails created an enforceable preliminary agreement to negotiate in good faith (Type II) | Buyer: December emails manifested intent to be bound and only minor terms remained for negotiation | Seller: material terms (price allocation, claw‑back specifics, scope of non‑compete) left open; objective intent lacking | No enforceable preliminary agreement to negotiate in good faith; appellate court reverses trial court |
| Whether buyer’s December 31 reply was an acceptance or a counteroffer | Buyer: was acceptance with promise to deliver definitive documents and customary provisions | Seller: buyer’s subsequent drafts altered price and added material terms, terminating acceptance power | Objective law treated buyer’s reply as a counteroffer, not an acceptance |
| Whether court should supply or imply missing terms (e.g., claw‑back specifics, non‑compete) | Buyer: willing to accept remaining terms; court could fill gaps to effectuate parties’ bargain | Seller: courts should not make contracts for parties; material terms cannot be implied when core items unresolved | Court may not imply those material terms; to do so would be making a contract for the parties |
Key Cases Cited
- Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987) (distinguishes agreements that are "essentially done deals" from preliminary agreements to negotiate)
- Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 548 N.E.2d 203 (N.Y. 1989) (recognizes varying degrees of indefiniteness in preliminary agreements)
- Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir. 2007) (agreements leaving material terms for future negotiation are unenforceable)
- Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69 (2d Cir. 1989) (strong presumption against finding binding obligations where open terms and future documents are contemplated)
- Catamount Slate Prods., Inc. v. Sheldon, 845 A.2d 324 (Vt. 2004) (sets four‑factor test for intent to be bound when no fully executed document exists)
- Okemo Mountain, Inc. v. Okemo Trailside Condominiums, Inc., 431 A.2d 457 (Vt. 1981) (acceptance must correspond exactly with offer; variations are counteroffers)
- Brown v. Cara, 420 F.3d 148 (2d Cir. 2005) (courts reluctant to specifically enforce agreements that merely obligate parties to negotiate in good faith)