United House of Prayer for All People v. Therrien Waddell, Inc.
112 A.3d 330
| D.C. | 2015Background
- UHP solicited bids for construction of Bailey Park Apartments; SRA prepared the Project Manual specifying AIA A-101/A-201 forms. TWI submitted the low bid on Dec. 20, 2010.
- On Dec. 22, 2010, TWI, SRA, and UHP representatives met; parties agreed to add more expensive façade, a Henry vapor barrier, specific LEED credits, and to have TWI’s LEED‑qualified manager (Fuentes) on the team; Green asked TWI to draft a written AIA contract reflecting those changes.
- After the meeting TWI revised its price and schedule, exchanged drafts of an AIA A‑101 contract with SRA/UHP, procured subcontractor letters of intent, pursued bonds/insurance, and submitted shop drawings and coordination work.
- On Feb. 28, 2011, UHP (via Bishop Bailey) refused to execute the contract citing counsel’s objections; UHP then stopped negotiations and shortly thereafter contracted with another builder.
- TWI sued for breach of contract (or quantum meruit). Trial court found a binding oral contract and awarded TWI lost profit plus out‑of‑pocket costs. Appellate court concluded there was no fully enforceable final construction contract but found a binding Type II (preliminary) commitment to negotiate in good faith; remanded for findings on UHP’s bad faith and appropriate damages.
Issues
| Issue | Plaintiff's Argument (TWI) | Defendant's Argument (UHP) | Held |
|---|---|---|---|
| Existence of an enforceable contract | Parties agreed on material terms at Dec. 22 meeting and intended to be bound | No meeting of minds on material terms (price, duration, scope, personnel); required signed written contract | No final Type I contract; yes a binding Type II preliminary commitment to negotiate in good faith within the agreed framework |
| Intent to be bound | Parties’ conduct (award, emails, drafts, letters of intent, pre‑construction work) objectively showed intent | UHP insisted on a written, counsel‑approved contract before performance; no intent to be bound pre‑signature | Objective conduct supported intent to be bound to negotiate in good faith (Type II), not to be fully bound to all written draft terms |
| Effect of open/unspecified terms | Open minor terms were reasonably ascertainable; TWI reserved right to negotiate but acted consistently with agreement | Numerous additional provisions in TWI’s draft were never discussed and may be material, making agreement too vague | Some contract terms remained open; that supports Type II characterization (binding to negotiate), not immediate enforceability of the full draft AIA contract |
| Remedy / Damages available | Lost profits and out‑of‑pocket preparatory costs | If only a Type II agreement exists, lost profits are improper; at most restitution/quantum meruit | If UHP refused to negotiate in bad faith and would have reached a final deal, expectation damages (lost profits) may be available; otherwise out‑of‑pocket/preparatory costs are recoverable. Remand for findings on bad faith and causation and recomputation of damages |
Key Cases Cited
- Georgetown Entm’t Corp. v. District of Columbia, 496 A.2d 587 (D.C. 1985) (elements of contract: agreement on material terms and intent to be bound)
- Jack Baker, Inc. v. Office Space Dev. Corp., 664 A.2d 1236 (D.C. 1995) (no contract where material terms remain to be negotiated)
- Stanford Hotels Corp. v. Potomac Creek Assocs., L.P., 18 A.3d 725 (D.C. 2011) (recognizes Type I and Type II preliminary agreements; Type II can bind parties to negotiate in good faith)
- Kramer Assocs., Inc. v. Ikam, Ltd., 888 A.2d 247 (D.C. 2005) (parties’ acts can evidence a meeting of the minds absent a signed writing)
- Rosenthal v. National Produce Co., Inc., 573 A.2d 365 (D.C. 1990) (existence of a contract is a question of law reviewed de novo)
- Fairbrook Leasing, Inc. v. Mesaba Aviation, Inc., 519 F.3d 421 (8th Cir. 2008) (discusses limits on expectancy damages for breached preliminary agreements)
- L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419 (2d Cir. 2011) (out‑of‑pocket costs recoverable for breached Type II agreements; lost profits generally disfavored absent proof of what final terms would have been)
- SIGA Techs., Inc. v. Pharmathene, Inc., 67 A.3d 330 (Del. 2013) (if bad faith prevented final agreement, expectation damages may be awarded)
- Vacold LLC v. Cerami, 545 F.3d 114 (2d Cir. 2008) (distinguishes completed preliminary agreements from binding preliminary commitments to negotiate in good faith)