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Avidan v. Steinberg

A-4112-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; FORMATION—A contract is formed when there is a manifestation of mutual assent to the same terms; merely exchanging proposals does not constitute mutual assent.

Two companies met to form a joint venture to acquire a property. One of them forwarded a written proposal to the other. It stated that the proposal was “being made subject to a mutually satisfactory agreement and legal documentation.” The recipient admitted that it verbally agreed to pay one-half of the legal fees of the proposing company should efforts toward the joint venture fail. Two weeks later, the attorney for the proposing company forwarded a proposed operating agreement. The transmittal letter stated that the operating agreement had not been reviewed by the attorney’s client, and was therefore subject to the client’s review. This document was rejected leading the receiving company to purchase the property on its own. This led the proposing company to bring suit, alleging promissory estoppel, breach of contract, and constructive fraud.

The lower court granted the purchasing company’s motion for summary judgment, and dismissed the complaint. The Appellate Division affirmed, holding that a contract is formed when there is a manifestation of mutual assent to the same terms. There must be a “meeting of the minds” on the subject matter or there is no legally enforceable obligation. That is why the Court found that no contract existed. Specifically, no documents were signed by the parties showing an intent to be bound in a joint venture. The only exchanges that took place were proposals. The lower court placed special emphasis that this was an $11,000,000 transaction, but there were no signed agreement. Therefore, aside from the agreement to pay “soft costs,” there was no evidence that the parties agreed to anything beyond a new proposal to enter into a joint venture.

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