Channel Home Centers, Division Of Grace Retail v. Grossman

795 F.2d 291 (3rd Cir. 1986)

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Nature of the Case

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Facts

Channel Home Centers (P) negotiated with Grossman (D), who was in the process of acquiring a shopping mall, to lease a site at the mall. D requested that P execute a letter of intent so that D could use it to secure financing for the mall's purchase. P’s letter of intent, signed by D, provided that D would withdraw the store from the rental market. The letter also indicated an acknowledgment of intent to proceed with the leasing of the store under the above terms, conditions, and understanding by signing an enclosed copy of the letter and returning it to P within ten days. D signed the letter and returned it to P. D contends that P also agreed orally that a draft lease was to be submitted within 30 days. P denied this statement. Both parties then proceeded to satisfy lease contingencies. The letter of intent specified that execution of a lease was expressly subject to P’s parent corporation approval, approval by P of the site, and P’s obtaining D's cooperation, all necessary permits and zoning variances for erection of P’s signs. P’s representatives visited the site and obtained measurements for alterations, renovations, and related construction. Detailed marketing plans were developed, and logistics were put in place. P’s parent company, Grace Retail Corp., had its legal department send a draft lease to D and requested several documents. D complied and sent a title report, a legal description of the mall, a site plan, and a description of the landlord's construction. D used the letter to obtain financing for the mall. D was then contacted by Mr. Good Buys, a competitor of P, for a rental site in the mall. Two days after this contact, P’s construction representatives met at the site to review design details and building alterations. A day later, representatives of Good Buys met with D and toured the location and discussed a lease. D, on February 6, 1985, notified P that negotiations were terminated due to P’s failure to submit a signed and mutually acceptable lease for the mall site within thirty days of the December 11, 1984 letter of intent. This was the first and only evidence of the purported thirty-day time limit. The letter of intent contained no such term. The next day, D leased the space to Mr. Good Buys. P filed suit, claiming that the letter of intent was a binding agreement to negotiate in good faith. D argued that the promise to negotiate was unenforceable because the parties had not reached an agreement on the transaction. The district court found that there was no contract. There was no valid unilateral or even a bilateral agreement, and the letter of intent didn’t bind the parties to any obligation, and it was unenforceable for a lack of consideration. P appealed.