IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
August 21, 2008 Session
TETRA TECH, INC. v. PERFORMA ENTERTAINMENT REAL
ESTATE, INC.
Direct Appeal from the Circuit Court for Shelby County
No. CT-002235-05 Karen R. Williams, Judge
No. W2007-02244-COA-R3-CV - Filed October 3, 2008
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed; and
Remanded
DAVID R. FARMER , J., delivered the opinion of the court, in which ALAN E. HIGHERS, P.J., W.S., and
J. STEVEN STAFFORD , J., joined.
Jeffrey A. Land, Germantown, Tennessee, for the Appellant, Tetra Tech, Inc.
Robert L. J. Spence, Jr. And Bryan Matthew Meredith, Memphis, Tennessee, for the appellee,
Performa Entertainment Real Estate, Inc.
OPINION
This is a contract action wherein the parties dispute which of two versions of a professional
services agreement is controlling. The trial court determined that the contract/counter-offer proffered
by Defendant buyer was the contract between the parties, and that there had been accord and
satisfaction when Plaintiff deposited Defendant’s check for the payment amount asserted by
Defendant. We reverse the trial court’s finding of accord and satisfaction. We further hold that the
contract found by the trial court to be the applicable contract is unenforceable where the contract
price is indefinite and where there was a lack of mutual assent to essential terms. We hold Plaintiff
is entitled to recover in quantum meruit for services rendered and remand for further proceedings
to determine that amount.
Background
Plaintiff/Appellant Tetra Tech, Inc., (“Tetra Tech”) is a publicly traded Delaware corporation
that provides consulting, engineering and technical services. Defendant/Appellee Performa
Entertainment Real Estate, Inc. (“Performa”) is a Tennessee corporation located on Beale Street in
Memphis. Performa manages and leases real property on Beale Street. Following oral negotiations,
on July 20, 2004, Tetra Tech sent its “Standard Agreement For Professional Services” to Performa
by fax. The agreement was for the design of compactor enclosures at three Beale Street locations
along Beale Street Alley between Third Street and Fourth Street. This project was part of a large
Beale Street improvement project which included the participation of the Center City Commission,
and was one of several projects for which Tetra Tech provided services.
The agreement faxed by Tetra Tech on July 20 recited a “Lump Sum Fee of $17,000 plus
reimbursable expenses” per an attached proposal breakdown. The contract also included and
referenced Attachment B-Proposal Breakdown for the scope of the services to be provided, and
recited that services would be performed in accordance with Attachment A, the terms and
conditions.1 It also provided: “This Agreement supersedes all prior agreements and understandings
and may only be changed by written amendment executed by both parties.” The signature lines were
located immediately following this provision. In addition to describing the scope of work,
Attachment B reiterated the lump sum fee of $17,000 and provided:
Per verbal agreement, Performa will pay a minimum of 10% of the construction cost
upon receipt of invoice and has committed to securing funding to pay the remainder
of the total fee. Tetra Tech recognizes that there may be some delay in receiving the
balance of the fee and will allow a grace period not exceeding 60 days.
Fees will be invoiced monthly based upon the percentage of services completed as
of the invoice date. Payment will be due within 30 days of the date of the invoice.
Outstanding balances of 30 days or more will accrue interest at 1.0% per month (12%
per annum).
Tetra Tech’s July 20 fax also included a budget estimate for enclosures at three locations and a cover
letter from its senior project manager, Adam Brown (Mr. Brown). Mr. Brown’s letter stated, in
relevant part:
Please find a Professional Services Agreement ready for execution - please sign and
return a copy. Language has been added to the Attachment B under “Fees and
Billing” in consideration of our discussion regarding Performa’s commitment to pay
a portion of the fees and secure funds from other sources for the remainder.
Performa’s President, John Elkington (Mr. Elkington), signed the first page of the contract
on July 21, 2004, and Performa faxed it to Tetra Tech on July 22, 2004. According to Tetra Tech,
it received only this one-page agreement via Performa’s return fax. Performa, however, asserts it
faxed four pages to Tetra Tech: the agreement, Attachment A, a modified version of Attachment B,
and Mr. Brown’s cover letter.
1
Attachment A includes a choice of law clause stating that Tennessee law governs any claims relating to the
agreement.
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Tetra Tech completed the design work in July 2004. Apparently, at some point Performa
hired a contractor to perform some portion of the contracted work, and the parties agreed that final
contract amount would be reduced to $14,048.42. In August 2004, Tetra Tech mailed Performa an
invoice in the amount of $14,048.42 for services rendered through July 31, 2004. No payment was
received from Performa, and a dispute arose regarding whether Performa was the “real party” to the
contract and whether the contract had been “marked-up.”
In December 2004, Mr. Elkington advised counsel for Tetra Tech by letter that Performa had
never agreed to pay Tetra Tech $17,000. According to Mr. Elkington, Performa had agreed to pay
$3,500 and to “help them secure the balance of what they were owed from the Center City
Commission.” Mr. Elkington attached a copy of the agreement for services with a modified version
of Attachment B to his letter. The modified Attachment B consisted of a retyped attachment
containing a modified “Fee & Billing” provision. The provision, like the signed first page of the
agreement, recited a “lump sum fee” in the amount of $17,000. However, the modified typed section
provided:
Per our agreement, Performa will pay a minimum of 10% of the construction cost for
the three enclosures only upon receipt of invoice and has committed to help try to
secure funding to pay the remainder of the total fee. Tetra Tech recognizes that there
may be some delay in receiving the balance of the fee and will allow a grace period
not exceeding 60 days.
Fees will be invoiced monthly based upon the percentage of services completed as
of the invoice date. Payment will be due within 30 days of the date of invoice.
Outstanding balances of 30 days or more will accrue Interest at 1.0% per month
(12% per annum).
The section also included an undated handwritten notation, initialed by Mr. Elkington, stating:
Performa agrees to pay Tetra Tech $3,500 toward their bill and use their best efforts
to get the rest from the CCC.
In January 2005, Tetra Tech advised Mr. Elkington by letter that it would begin to pursue
collection options if the balance amount of $14,048.42, plus interest in the amount of $561.94, was
not received by January 28, 2005. In February 2005, Performa sent Tetra Tech a check for payment
in the amount of $3,500. The check included a notation that it was for full payment. The check was
negotiated by Tetra Tech on February 22. On March 10, Tetra Tech sent a letter to Performa
acknowledging “partial payment” and seeking an outstanding balance in the amount of $10,548.42,
plus interest. Performa asserted accord and satisfaction based on the negotiation of its February
payment, and in December 2005 Tetra Tech refunded Performa by cashier’s check in the amount of
$3,500. Tetra Tech continued to demand full payment. Performa apparently returned the cashier’s
check to Tetra Tech.
In April 2005, Tetra Tech filed a complaint against Performa in the Circuit Court for Shelby
County. In its complaint, Tetra Tech sought damages for breach of contract or, in the alternative,
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for recovery in quantum meruit. Tetra Tech attached the first page of the agreement for services
signed by Mr. Elkington to its complaint. It also attached the versions of Attachments A and B that
it had faxed to Performa on July 20, 2004.
In its answer, Performa denied that the version of the contract attached to Tetra Tech’s
complaint was a true copy of the contract between the parties. Performa asserted that the true
contract was the contract attached to its answer, which included modifications to Attachment B. It
asserted that Tetra Tech’s claim should be dismissed on the basis of accord and satisfaction where
Tetra Tech had accepted its tender of $3,500 as payment in full. Performa further asserted Tetra
Tech’s claims were barred by the doctrines of laches and equitable estoppel, and that its claim under
the doctrine of quantum meruit should be dismissed where Tetra Tech “may recover from other
unnamed third parties and has failed to exhaust its remedies against said parties.”
In October 2005, Tetra Tech moved to amend its complaint to add Mr. Elkington as a
Defendant. In its motion, Tetra Tech asserted Mr. Elkington had “attached a fraudulently altered
contract to [Performa’s] Answer” to its complaint. Tetra Tech asserted that, in its December 2004
letter to counsel for Tetra Tech, Performa had “fraudulently and deceptively stated” that the copy
of the contract “attached to his letter was a copy of the original contract document executed by him
on behalf of Performa.” Tetra Tech asserted the “fraudulent and unilateral change was made well
after the contract was executed, and well after work was performed.” Tetra Tech further asserted
Mr. Elkington was attempting to perpetrate a fraud on the court, and sought punitive damages in the
amount of $100,000.
Performa opposed Tetra Tech’s motion to amend, and the trial court denied the motion in
January 2006, and again in March 2007. In January 2007, the trial court also denied Performa’s
November 2006 motion for summary judgement. The matter was heard by the trial court in August
2007. The trial court entered judgment in favor of Performa in September 2007, and Tetra Tech filed
a timely notice of appeal to this Court.
Issues Presented
Tetra Tech presents five issues for our review. Succinctly stated, the issues raised by Tetra
Tech are:
(1) Whether the trial court erred by finding that the version of the contract
proffered by Performa contained the agreement of the parties.
(2) Whether the trial court erred by denying Tetra Tech’s motion to amend its
complaint to assert a cause of action against John Elkington for fraud.
(3) Whether the trial court erred by finding their had been accord and satisfaction
between the parties.
Standard of Review
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We review the trial court’s findings of fact de novo on the record, with a presumption of
correctness unless the evidence preponderates otherwise. Tenn. R. App. P. 13(d). Thus, we may not
reverse the trial court’s factual findings unless they are contrary to the preponderance of the
evidence. We review the trial court’s conclusions on matters of law de novo, with no presumption
of correctness. Tenn. R. App. P. 13(d); Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000).
However, if the trial court fails to make findings of fact, our review is de novo with no presumption
of correctness. Archer v. Archer, 907 S.W.2d 412, 416 (Tenn. Ct. App. 1995). We review a trial
court’s determinations on matters of witness credibility with great deference and will not re-evaluate
a trial judge’s credibility determinations unless they are contradicted by clear and convincing
evidence. Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn. 1999). The interpretation of a
contract, or the “ascertainment of the intention of the parties to a contract,” is a question of law
which we review de novo. Doe v. HCA Health Servs. of Tennessee, Inc., 46 S.W.3d 191, 196 (Tenn.
2001).
Analysis
The proceedings in the trial court included substantial debate regarding whether Performa
sent and Tetra Tech received four pages by fax on July 22, 2004, including Attachment B as
modified by Performa. The trial court found that the “fax line,” the imprint made on the agreement
faxed by Performa to Tetra Tech, indicated that Tetra Tech received four pages via fax transmittal.
Upon review of the record, we agree that the first page of the agreement appears to indicate that it
was the fourth page transmitted. The trial court also found that the agreement purported to be the
true agreement between the parties was the agreement submitted by Performa. Because there is
nothing in the exhibits included in this record to definitively indicate whether Tetra Tech in fact
received the modified version of Attachment B, the resolution of this matter required a credibility
determination with respect to whether Performa’s fax to Tetra Tech included the modified
Attachment. The trial court found Trial Exhibit 9, the version of the contract submitted by Performa,
to be the final version of the contract between the parties. Because the evidence does not
preponderate against the trial court’s finding that Performa included the modified version of
Attachment B in it July 22, 2004, fax to Tetra Tech, and where Tetra Tech performed under the
contract, we affirm the trial court’s determination that the modified Attachment B is part of the
written contract. However, upon review of the entire record, it is clear to us that the parties
perceived Performa’s obligation regarding payment to Tetra Tech differently. We thus turn to
whether the contract proffered by Performa and found by the trial court to be the contract between
the parties is enforceable.
Enforceability of the Contract
It is well-established that a contract “must result from a meeting of the minds of the parties
in mutual assent to the terms, must be based upon a sufficient consideration, free from fraud or
undue influence, not against public policy, and sufficiently definite to be enforced.” HCA Health
Servs., 46 S.W.3d at 196 (citations omitted). A contract may not be enforceable where an essential
element, such as price or compensation terms, is determined to be indefinite. Id. Further, a contract
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must be sufficiently explicit so as to enable a court to determine the respective obligations of each
party. Id. An inexplicit contract price, or the recitation of a “reasonable price,” does not render a
contract unenforceable because of indefiniteness “[i]f the parties provide a practicable method for
determining [the] price or compensation.” Id. (quoting 1 Joseph M. Perillo, Corbin on Contracts,
§ 4.3, at 567-68 (Rev. ed. 1993)). Additionally, in the absence of a signature, manifestations of
assent, including a party’s actions or inactions, may demonstrate an intent to be bound. Moody
Realty Co. v. Huestis, 237 S.W.3d 666, 676 (Tenn. Ct. App. 2007)(citations omitted). The existence
of an enforceable contract resulting from a “meeting of the minds” is to be determined not only by
the words used, but in light of the parties’ acts, conduct, and the entirety of the circumstances. Id.
at 675.
Where the court determines a contract is unenforceable, it may prevent unjust enrichment by
permitting recovery in quantum meruit. HCA Health Servs., 46 S.W.3d at 197. Quantum meruit is
an equitable recovery by which a party may recover the reasonable value of the goods or services
it provided. Id. Recovery in quantum meruit may be awarded where (1) there is no enforceable
contract covering the subject matter; (2) the party seeking to recover proves that it has provided the
goods or services; (3) the party being charged has received those goods or services; (4) under the
circumstances, the parties reasonably should have understood that the party providing the goods or
services expected compensation; and (5) it would be unjust to permit a party to retain the goods or
services without payment. Id. at 198.
In this case, the compactor enclosure project was a minor element in a large Beale Street
improvement project that also involved the Center City Commission. Mr. Brown’s July 20, 2004,
cover letter to Performa, which was faxed to Performa along with the services agreement, clearly
evidences that Performa had “commit[ed] to pay a portion of the fees.” It also indicates Mr. Brown’s
understanding that Performa would “secure funds” for the balance from “other sources.” Thus, it
is clear that Tetra Tech was aware, from the outset, that Performa did not anticipate being fully
responsible for the entire contract amount absent assistance from “other sources,” including the
Center City Commission. However, assuming the version of the contract submitted by Performa is
the final written agreement, the contract does not contain a definite payment amount or payment
terms.
The contract found by the trial court to be the final agreement between the parties is a
bilateral contract between Tetra Tech and Performa. It definitively recites a “lump sum fee” in the
amount of $17,000 on two pages, including Attachment B. As modified by Performa, however,
Attachment B commits Performa to a payment in the amount of $3,500, and Performa asserts it is
not responsible for payment of the remainder of the agreed upon contract price. Further, the contract
contains no term stating that Performa would not be liable for the remainder of the lump sum fee
should its efforts to secure amounts in excess of $3,500 from the Center City Commission be
unsuccessful. In essence, then, Performa’s argument, as we understand it, is that Tetra Tech agreed
to a contract price of either $17,000 or $3,500, depending on whether Performa was able to secure
funding from sources not a party to the contract. There is nothing in the contract or the record,
however, to suggest that Tetra Tech agreed to simply forego most of its fee should Performa be
unable to secure funding from other sources. In short, the record does not demonstrate mutual assent
to an indefinite contract price. The contract is therefore unenforceable for indefiniteness and lack
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of mutual assent. We accordingly award Tetra Tech recovery in quantum meruit, and remand for
further proceedings to determine that amount.
Accord and Satisfaction
We next turn to whether the trial court erred in determining that there had been accord and
satisfaction between the parties where, during the course of the dispute, Performa tendered and Tetra
Tech negotiated a check in the amount of $3,500 which purported to be “payment in full,” where
Tetra Tech continued to demand the outstanding balance, and where Tetra Tech later returned the
payment amount. The party asserting the defense of accord and satisfaction bears the burden of
proving it. Quality Care Nursing Servs., Inc. v. C. B. Coleman, 728 S.W.2d 1, 5 (Tenn.
1987)(citations omitted). A party asserting accord and satisfaction
has the burden of proving the material allegations of his plea, an accord or new
agreement, inclusion of the item or items of indebtedness in the action or suit,
satisfaction by performance of the agreement or the agreement itself, that the
payment was offered on the condition that, if accepted it would be in full settlement
of the demand, and that the creditor understood the conditions of the tender, or the
circumstances under which it was made were such that he was bound to understand,
an acceptance by plaintiff in full satisfaction of his demand.
Id. (quoting Inland Equip. Co. v. Tennessee Foundry and Machine Co., 241 S.W.2d 564, 565-66
(Tenn. 1951)). Further, it is “essential that the creditor shall have accepted” the debtor’s tender
with the intention that it should operate as a satisfaction. Both the giving and the
acceptance in satisfaction are essential elements, and if they be lacking there can be
no accord and satisfaction. The intention of the parties, which is of course
controlling, must be determined from all the circumstances attending the transaction.
Id. (quoting Helms and Willis v. Unicio County, 64 S.W.2d 200, 202 (Tenn. 1933)(quoting Lytle v.
Clopton, 261 S.W. 644, 666 (Tenn. 1924 )(quoting 1 Corpus Juris, 529))).
The trial court relied on Sawner v. Smith Construction Co., 526 S.W.2d 492 (Tenn. Ct. App.
1975) for the proposition that accord and satisfaction was attained when Tetra Tech negotiated the
check in the amount of $3,500 tendered by Performa in February 2005. The trial court quoted this
Court’s observation in Sawner that “prior to the time a check is cashed, a debtor may waive,
extinguish or condition any statement thereon which would otherwise render the check a complete
accord and satisfaction upon being cashed by the creditor.” Sawner, 526 S.W.2d at 496. We
disagree with the trial court, however, that Sawner stands for the proposition that the tender and
negotiation of a check containing the notation “payment in full,” without more, evidences an accord
and satisfaction. In Sawner, we held that the “marking through of the words ‘Acct. in full’ by [the
creditor] ha[d] the effect of removing those words from the face of the check.” Id. We also noted
in Sawner, however, that in Cole v. Henderson, the supreme court held that the negotiation of a
check with a notation of “commission in full” was an accord and satisfaction where the creditor
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contacted the debtor and was advised that the amount was all the debtor would pay. Id. at 495 (citing
Cole v. Henderson, 454 S.W.2d 374 (Tenn. 1969)).
In Quality Care Nursing, the supreme court emphasized that an accord or agreement, “by
definition, requires consent of both parties, express or implied.” Quality Care Nursing, 728 S.W.2d
at 5. In that case, the court noted that “especially in the present age of data processing and computer
billing,” something more than “the mere receipt and cashing of a check marked as payment in full”
is required to demonstrate accord and satisfaction. Id. at 4. The Quality Care Nursing court held
that there had been no automatic accord and satisfaction despite the tender and negotiation of a check
marked as “payment in full” where there was no evidence that the debt was in dispute or that the
creditor ever agreed to accept an amount less than the full amount owed. Id. The court stated:
[i]t would be unrealistic in the modern business world for a debtor to send an
installment payment to a creditor, which may be receiving hundreds or thousands of
such checks, and to have the balance of his debt deemed discharged as a matter of
law simply because of a legend the debtor placed thereon, absent any other proof of
a compromise or settlement.
Id. at 5.
In this case, it is clear that Tetra Tech never agreed to accept payment in the amount of
$3,500 in satisfaction of what Tetra Tech asserted was the contract price. On the contrary, in March
2005 Tetra Tech advised Performa that it had received its “partial payment” in February, and that
it continued to seek payment for what it asserted was the full amount due. Performa has simply
failed to carry its burden of demonstrating accord and satisfaction. We reverse on this issue.
Tetra Tech’s Motion to Amend
We next turn to Tetra Tech’s assertion that the trial court erred by denying its motion to
amend its complaint to assert a cause of action against John Elkington for fraud. The Tennessee
Rules of Civil Procedure provide:
A party may amend the party’s pleadings once as a matter of course at any time
before a responsive pleading is served . . . . Otherwise, a party may amend the
party’s pleadings only by written consent of the adverse party or by leave of court;
and leave shall be freely given when justice so requires.
Tenn. R. Civ. P. 15.01. After a responsive pleading has been served, the denial of a motion to amend
the pleadings lies within the sound discretion of the trial court. Welch v. Thuan, 882 S.W.2d 792,
793 (Tenn. App. 1994); Merriman v. Smith, 599 S.W.2d 548, 559 (Tenn. App. 1979). As we noted
in Merriman, when deciding whether to grant leave to amend, a trial judge should consider facts
including undue delay in filing, lack of notice to the opposing party, bad faith by the moving party,
repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party,
and futility of amendment. Merriman, 599 S.W.2d at 559. Tetra Tech’s allegations of fraud are
rendered moot in light of the trial court’s finding that the contract as submitted by Mr. Elkington
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was, in fact, faxed to Tetra Tech and represented the agreement of the parties. Thus, we decline to
address this issue on appeal. See Union Realty Co. v. Family Dollar Stores of Tenn. Inc., 255
S.W.3d 586, 590 (Tenn. Ct. App. 2007)(holding a controversy must remain live throughout the
course of litigation, including the appeal process, or be dismissed as moot).
Holding
We hold that the contract found by the trial court to be the contract between the parties is not
enforceable for indefiniteness and lack of mutual assent. We further hold Performa failed to
demonstrate accord and satisfaction, and that Tetra Tech is entitled to recover in quantum meruit.
We remand this matter to the trial court for further proceedings to determine the amount to be
recovered by Tetra Tech in quantum meruit. Costs of this appeal are taxed to the Appellee, Performa
Entertainment Real Estate, Inc.
___________________________________
DAVID R. FARMER, JUDGE
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