Farley v. Champs Fine Foods, Inc.

404 N.W.2d 493 (N.D. 1987)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Champs (D) hired Farley (P) to manage its four KFC restaurants in North Dakota and Minnesota. P had an option to purchase up to 50% of D’s common stock if he met minimum profit quotas. D rejected P’s attempt to exercise his option on the ground that P failed to meet quotas. P and D then began negotiations outside the terms and conditions of the option agreement. On June 3, 1983, P submitted to the chairman of D a detailed purchase agreement to buy D for $548,174. The agreement required D to finance the entire sale. That proposal was rejected by D. P then made another offer but with D only financing $148,174 of the purchase price and D rejected that proposal. D sent P a letter on September 12^th clearly indicating that D was not in a position to take a second position on security for monies owed in such a transaction. D then indicated that he would take $450,000 and carry the balance due secured in a first position on the property. And if that was not possible, D wanted the full sum of $550,000 plus money expended on the drive-through or any other changes in cash. D then gave P until October 1, 1983, and that if he did not complete a transaction, it was their intention to change the management of their units by October 15, 1983. On September 28^th, P phoned D and told D that he was not going to enter into any transactions with him. A letter from P to D was mailed September 28^th in which P accepted the cash offer. The parties dispute whether the letter was mailed before or after the phone conversation. D refused to accept the terms of P’s letter and P sued for specific performance. The trial court determined that the negotiations between the parties were for the sale of the stock of Champs rather than the assets, that P’s letter of September 28^th was mailed after his conversation with D, and that P conditioned his acceptance letter on terms outlined in his June 3^rd proposed purchase agreement which had been rejected by D. P’s action was dismissed concluding that D’s offer was orally withdrawn before it was accepted and that the September 12^th letter was not an offer but was part of preliminary negotiations of price terms. The court also found that P’s purported acceptance was not sufficient to form a specifically enforceable contract.