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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 13-CV-912
UNITED HOUSE OF PRAYER FOR ALL PEOPLE, APPELLANT,
V.
THERRIEN WADDELL, INC., APPELLEE.
Appeal from the Superior Court
of the District of Columbia
(CAB-4562-11)
(Hon. Michael L. Rankin, Trial Judge)
(Argued September 18, 2014 Decided March 26, 2015)
Mickie Bailey for appellant.
Leonard A. Sacks, with whom Jesse S. Keene was on the brief, for appellee.
Before FISHER and THOMPSON, Associate Judges, and STEADMAN, Senior
Judge.
THOMPSON, Associate Judge: After a bench trial, the Superior Court (the
Honorable Michael Rankin) entered judgment in favor of appellee Therrien
Waddell, Inc. (―TWI‖), and against appellant United House of Prayer for All
People (―UHP‖), requiring UHP to pay damages for what Judge Rankin found to
be UHP‘s breach of a binding and enforceable oral agreement between the parties,
2
under which TWI was to construct an apartment building (the Bailey Park
Apartments) at 625 Rhode Island Avenue, N.W. (―the apartment building‖), on a
lot owned by UHP. UHP seeks reversal of the judgment, contending that there was
no intent to be bound and no enforceable agreement because the parties never
reached a meeting of the minds on several material terms. Our analysis differs
from the trial court‘s, but we conclude that the evidence and the law support a
conclusion that the parties reached an enforceable oral agreement — specifically, a
binding preliminary commitment to negotiate in good faith toward a written
construction agreement, within the framework the parties had agreed upon during a
meeting between their representatives in December 2010. We find it necessary,
however, to remand the matter to the trial court (1) for an additional finding as to
whether UHP acted in bad faith in declining to negotiate with TWI; and, if so, (2)
for the court also to determine whether, absent UHP‘s bad faith, the parties would
have entered into a final construction agreement; and (3) for recomputation of a
damages award.
I. Background
3
The following factual background is drawn from Judge Rankin‘s July 30,
2013, Memorandum Opinion and from the supporting trial testimony and exhibits.1
In 2009, UHP retained the firm of Suzane Reatig Architecture, PLLC (―SRA‖) to
perform architectural services in connection with the planned apartment building
project (the ―Project‖). SRA principal Suzane Reatig worked with SRA architect
Megan Mitchell to prepare a bid solicitation package. The package included a
manual (the ―Project Manual‖ or the ―Manual‖) containing the specifications for
the building; provided that a standardized contract developed by the American
Institute of Architects (―AIA‖), known as AIA A-101-2007, would be the form of
contract between UHP and the contractor whose bid was selected; and provided
that the general conditions for the contract would be as set forth in Articles 1
through 14 of another standardized agreement known as AIA A-201-2007.
SRA distributed the bid solicitation package in late November 2010, and on
December 20, 2010, TWI Senior Project Manager Richard Whalen sent SRA
1
We treat the trial court‘s factual findings as ―presumptively correct unless
they are clearly erroneous or unsupported by the record.‖ Duffy v. Duffy, 881 A.2d
630, 634 (D.C. 2005) (internal quotes omitted); see also Stanford Hotels Corp. v.
Potomac Creek Assocs., L.P., 18 A.3d 725, 741 (D.C. 2011) (―An appellate court
will not reverse trial court findings unless they are clearly erroneous or
unsupported by the evidence.‖). Judge Rankin specifically noted that ―[c]redibility
of the witnesses was considered in weighing the evidence‖ and arriving at his
factual findings. See infra note 9.
4
TWI‘s bid. TWI‘s bid, the lowest of the four bids SRA received, proposed a total
price of $4,899,000 (including profit of $141,000, representing 3% of the contract
cost excluding the cost of obtaining a performance bond) and ―a duration of 9
months‖ (based on an assumption that the Project would start in January or
February of 2011). The ―Notes & Clarifications‖ attached to TWI‘s bid stated that
―[w]hile the basic contract form has been indicated, [TWI] reserve[s] the right to
negotiate mutually agreeable terms of the construction agreement if selected for the
project.‖
On December 21, 2010, architect Mitchell invited Whalen to a meeting with
SRA and UHP representatives to discuss the Project. The meeting took place on
December 22, 2010, and was attended by Whalen and Dan Coffey, a TWI vice-
president, representing TWI; by Reatig and Mitchell, representing SRA; and by
Apostle Sterling Green, the owner‘s representative for UHP.
At the December 22, 2010, meeting, there was a ―comprehensive‖
discussion of TWI‘s proposal and the Project. This included a discussion of the
―Notes & Clarifications‖ that TWI had attached to its bid. The Notes &
Clarifications reflected TWI‘s proposal to ―use a less expensive satin finish for the
exterior Trespa Meteon façade panels instead of the more expensive metallic finish
5
called for‖ in the Project specifications. SRA ―insisted that the owner wanted the
more expensive metallic finish cost included in the contract[,]‖ which ―meant that
the cost of the project would increase.‖ Another major point of discussion at the
meeting was the need for a supplementary vapor barrier system: ―the architects
directed TWI to use a more expensive E.P. Henry product and to include the costs
of the system in the contract.‖2 The meeting participants also discussed the
importance of obtaining Leadership in Energy and Environmental Design
(―LEED‖) certification for the Project. ―The project manual specified that the
Project should qualify for LEED certification but did not specify which LEED
credits would be pursued‖; during the meeting, the SRA representatives for the
first time ―identified . . . the [specific] LEED credits the Project would try to
meet[.]‖ Coffey informed the meeting participants that Whalen ―did not have . . .
qualifications for the LEED‖ requirements, and that, instead of Whalen, TWI‘s
2
Although the Project Manual sent to bidders called for the Henry product,
the Manual also invited bidders to ―submit additional alternates for consideration
by the Owner, by way of proposal variations or value engineering changes.‖ Thus,
contrary to UHP‘s argument, TWI was not required to base its bid on more
expensive items as to which they had value-engineering suggestions. This
background undercuts UHP‘s contention that the evidence required Judge Rankin
to find that UHP ―refused to pay additional money for those items already required
to be included in the scope of work as dictated by the Project Manual‖ and
undermines UHP‘s contention that Judge Rankin ―erroneously assumed that [UHP]
. . . assented to some sort of price increase‖ by demanding that ―additional items be
included in the scope of work.‖
6
LEED-accredited project manager Jonathan Fuentes, who had been unable to
attend the meeting, would be the Project Manager because of his LEED
qualifications.3 Coffey also told the group that meeting UHP‘s newly-identified
LEED-credit demands ―could mean additional time and money.‖ The meeting
participants also discussed that ―there were certain things that needed to happen
pretty quickly . . . , mainly . . . some of the long-lead materials that require special
fabrication.‖ The meeting notes reflect that the participants discussed having a
pre-construction meeting with subcontractors in late January. Judge Rankin found
that ―Green told TWI‘s representatives that the owner expected a ‗long-lasting
marriage, not a short honeymoon.‘‖
3
Coffey testified that UHP and SRA ―wanted to make sure [TWI] had
somebody that was able to assist them [with LEED certification] and help them
through that whole process.‖ Per the meeting discussion, TWI ―was to make sure
[the] project team had . . . somebody that was very familiar with the LEED
standards[.]‖ According to Coffey, the architects were ―comforted‖ that Fuentes
would be there to help them through the LEED process. During the discussion of
this topic, Green was listening and made no objection. In particular, Green did not
stress that Whalen should stay as project manager. Indeed, Green testified that
Whalen was introduced to him as ―the estimator that had done all of the cost
analyses and prepar[ation of] the bid,‖ and did not even recall that Whalen had the
title of project manager. He also referred to having been introduced to ―Mr.
Coffey and Mr. Fuentes‖ at the December 22 meeting. As far as the record
reveals, Green made no objection when TWI sent a draft contract on January 17,
2011, that listed Fuentes as the ―Contractor‘s representative.‖
7
Judge Rankin found that ―[a]t the conclusion of the [December 22] meeting,
all parties — Apostle Green, SRA and TWI — had reached a meeting of the minds
on the material terms of the contract‖ and that ―Green directed TWI to prepare a
written contract based on [the parties‘] discussions.‖4 Judge Rankin further found
that ―[o]n leaving the meeting [TWI] understood that it had to modify its proposal
so that the written contract conformed to the specific requirements of the owner as
expressed by Apostle Green and SRA‖ at the meeting.
In preparing the modifications, TWI prepared a schedule of prices that
reflected replacement of the less expensive satin-finished panels with the more
expensive metallic-finished ones, added the considerably more expensive Henry
vapor barrier system,5 added allowances for LEED-credit items that had not been
included in TWI‘s original bid (including LEED-required interior bike racks), and
added temporary utility costs (which, per the discussion at the December 22
meeting, were to be borne by the general contractor rather than by the owner).
These modifications are reflected in the revised ―Notes & Clarifications‖ and
4
In Coffey‘s words, at the end of the meeting, TWI was asked to ―go ahead
and draft the contract for signature [by] the owner‖ using the required AIA forms.
5
Mitchell told Whalen in a post-meeting email on December 30 that Reatig
was ―pretty insistent on Henry‖ even though it was a ―big item‖ and, as Whalen
put it, a different vapor barrier would be ―quite a bit cheaper.‖
8
revised pricing information TWI sent to Mitchell by email on January 13, 2011. 6
The modified price document indicated a total price of $5,043,600 (up from the
original bid price of $4,899,000). The January 13 submission also increased the
time for substantial completion from nine months to 285 days. Gerald Therrien, a
principal of TWI, testified that the additional 15 days was ―because of a change in
one of the LEED provisions that [TWI was] asked to include[.]‖
On January 17, 2011, TWI sent SRA a draft of the AIA A-101-2007
Agreement, with an attached schedule showing, inter alia, TWI‘s revised
anticipated profit of $146,000. On January 19, 2011, Mitchell, referring to
questions from Green that she had discussed with Reatig, forwarded to Whalen a
short list of changes to be made to the Notes & Clarifications. TWI made the
requested changes. It couriered revised contract documents to SRA on January 25,
2011, in response to an email from Mitchell the same day that directed, ―If you can
get the original contract couriered over to us today, [Reatig] may be able to get it
signed tomorrow as the Bishop [UHP‘s CEO, Bishop C.M. Bailey] is in and out of
town and possibly will be in tomorrow.‖
6
Judge Rankin found that Green ―could not have been surprised by the
changes that TWI made following the meeting because he was there participating
and heard the architect directing the changes.‖
9
In the meantime, in late December 2010 and January 2011, TWI issued
letters of intent to subcontractors, and it also exchanged a number of emails with
SRA and Green related to the Project: SRA answered a TWI inquiry about
standpipes; provided information to TWI about the sprinkler room; exchanged
emails with Whalen about the bike racks and the Henry vapor barrier; provided
detailed responses to TWI subcontractor requests for information about stair
fabrication, fire dampers and gas furnaces; sent UHP‘s tax exempt number to TWI;
promised to send new structural plans for use by TWI‘s steel subcontractor and
metal deck supplier; and corresponded with Fuentes about a list of architectural
changes. On January 28, 2011, answering an email from an insurance agent, Green
directed the agent to contact Reatig about putting in place a builders‘ risk policy
naming UHP and TWI as the insureds. On January 31, 2011, an email was sent to
Fuentes and copied to Reatig, inviting Fuentes to join the LEED project at 625
Rhode Island Avenue as a ―Project Team Member‖ and ―Construction Manager.‖
As Judge Rankin found, the emails ―reflect[] that the architect and Jonathan
Fuentes were working together going forward on the Project.‖ Judge Rankin also
found that a series of emails between SRA and TWI ―beginning in the days
following the meeting and continuing through the end of January . . . is
circumstantial evidence showing that all parties, including Apostle Green, were
acting on the understanding that UHP and TWI had a contract.‖
10
Early February 2011 emails were to the same effect: Mitchell and Fuentes
corresponded about uploading design files, changes to structural engineering
drawings, structural steel shop drawings (on which Fuentes said TWI was
―continuing to work hard‖), and the colors for verification samples, and the
structural engineer who was working with SRA pronounced as ―acceptable‖ TWI‘s
steel contractor‘s proposed ―connection methods‖ and directed TWI to submit
related calculations. Reatig and Therrien expressed that they were looking forward
to working together on the Project, and Reatig promised to remind Green to
provide TWI with a confirmation of financing availability. On February 4, Green
emailed Therrien, directing him to see ―the attached Letter of Financial Good
Standing‖ and on February 10, wrote to Therrien and Coffey to say that Bishop
Bailey wanted him to speak with them about their ―followup questions.‖
Handwritten notes from a February 23 coordination meeting between the
architects and TWI representatives (including Fuentes and Therrien) indicate that
the contract was ―being signed.‖ On February 25, Therrien emailed Green to ask
about the status of the construction agreement.7 In a February 28 response to
7
Therrien testified that he had had ―several conversations‖ with Green
about the status of the contract, during which Green told him that it was being
(continued…)
11
Therrien‘s February 25 email, Green informed Therrien that, ―[p]er the objections
of our Counsel to a number of the terms and conditions you requested be inserted
into the standard AIA Contract . . . [UHP CEO] Bishop C.M. Bailey has declined
to enter into this referenced agreement, and will not proceed any further.‖8
Therrien testified that, immediately upon receipt of Green‘s message, he called
Green, who rebuffed Therrien‘s requests to speak with Bailey or UHP‘s counsel
regarding what ―terms and conditions‖ they had found objectionable. Therrien
then sent a letter later that day to Bailey, in which he wrote that ―[s]ince we were
asked to draft this construction agreement and we used a standard AIA form, we
are most certainly receptive to discuss any issues or concerns that your attorneys
have. . . . The terms of the agreement are open to discussion and any reasonable
negotiation.‖ Therrien noted that ―no one [had] . . . provided any indication of any
significant issue.‖ Bailey declined Therrien‘s invitation to further discussions,
(…continued)
reviewed by UHP‘s attorneys. Therrien further testified that notwithstanding the
lack of an executed contract, ―[b]ecause of all the interactions that we were having
with the architect, . . . the positive feedback I was getting from Apostle Green, . . .
getting the permit, . . . procuring a bond, getting my insurance certificate, . . . and
the extent of the work that we were doing, . . . [he] believe[d] that [the parties]
essentially had a contract,‖ even if there were ―fine . . . legal points‖ still to be
discussed and resolved, ―as [TWI] do[es] frequently with many, many owners.‖
8
Judge Rankin observed that it appeared that Green ―was as surprised as
anyone that Bishop Bailey refused to sign the written contract.‖ The court found
that both Reatig and Green ―expected Bishop Bailey to sign the papers.‖
12
writing in a February 28 letter forwarded by Green to Therrien, ―I stand by my
decision . . . I have declined to enter into this referenced Agreement, and will not
proceed any further.‖
Reatig testified that she changed her mind about recommending TWI for the
job because TWI had changed personnel and because she was hearing things from
subcontractors and anticipating big change orders. Judge Rankin found this
testimony ―incredible and without any support in the record.‖9 There was no
testimony from Bailey or UHP‘s counsel, and Judge Rankin found that ―they are
apparently the only people who know why the owner did not sign the contract.‖10
9
More generally, Judge Rankin found both Reatig and Green to be ―highly
honorable people‖ who demonstrated ―[u]nwavering loyalty to their employer,‖
but not to be credible witnesses. He found that ―[u]nwavering loyalty to their
employer appears to be the basis for the apparent bias . . . in their testimonies.‖
10
What is known is that, on March 4, 2011, just a week after Bailey wrote
that he would not proceed further with TWI, McCullough Construction LLC
(―McCullough‖) signed a contract to construct the Bailey Park Apartments. Bailey
countersigned that agreement on April 7, 2011. The contract price was $5,073,709
(approximately $30,000 more than TWI‘s price), and the contract called for
completion 390 days from the date of commencement (versus 285 days in the TWI
draft contract). McCullough‘s line item for profit, $235,000, also was higher than
TWI‘s ($146,000).
13
After Therrien received the response from Bailey, TWI submitted to UHP a
request for payment for the services it had already rendered, seeking $75,504.70
for time, materials that TWI had already ordered from various subcontractors, shop
drawings and submittals, and related expenses. UHP denied the request.11 On
June 9, 2011, TWI filed a complaint seeking damages for breach of contract or, in
the alternative, $75,504.70 under a quantum meruit theory.
After a three-day bench trial, Judge Rankin ruled in favor of TWI. He found
that the December 22 meeting ―result[ed] in the formation of a binding contract . . .
that was subsequently reduced to writing and fully enforceable‖; that the general
terms of the contract were found in the documents included in the Project Manual;
that ―the nature of the discussion at the meeting and the behavior of the parties
afterwards leads to the ineluctable conclusion that the parties understood and
agreed to the material terms of price, time, materials and mutual responsibilities
and intended to be bound by the agreement‖; that the credible evidence ―does not
support‖ UHP‘s claim that the parties ―did not intend to be bound until a document
was signed‖; that TWI did not materially breach the contract ―by any changes [it
made] . . . between the time it submitted its bid and the submission to UHP of the
11
Green wrote in an email to Therrien that ―in the absence of a written and
executed construction contract . . . no performance by [TWI], nor any payment to
[TWI] in the above matter has been, nor will be, authorized by [UHP].‖
14
draft written contract‖; that ―[t]he only evidence of changes to the material terms
of price, time and cost is the evidence that the owner‘s team told TWI that the
owner wanted additional items in the contract[,]‖ which ―resulted in driving up
costs and increasing the time to complete the job‖; that there was ―no proof of a
change to any material term that the owner‘s representative did not demand‖; and
that in the draft contract drawn up by TWI at Green‘s direction, there were ―neither
significant changes . . . nor . . . material terms still to be negotiated.‖ Judge Rankin
found UHP liable for damages based on TWI‘s anticipated profit ($146,000) and
the cost of work that had already been performed (―because time was of the
essence‖) before UHP‘s repudiation of the contract ($75,504.70), for a total of
$221,504.70, plus costs and interest. This appeal by UHP followed.
UHP argues that there was no enforceable agreement because the material
terms of ―price and duration were never fixed or agreed upon during the December
22nd meeting.‖12 It argues that this omission of material terms rendered any
agreement too ―vague and ambiguous‖ to be enforceable. It asserts that these
material terms were made known to UHP only when TWI submitted the draft
written contract, to which, UHP argues, it never assented. UHP also argues that
12
At oral argument, UHP‘s counsel also argued that it was not established
who the project manager would be, another term UHP contends was material.
15
the trial court erred in finding a clear intent to be bound by an oral agreement or
written draft contract since the evidence showed that UHP insisted that there be a
written contract signed by both parties before the commencement of work and that
the terms of any written draft contract be reviewed and approved by its legal
counsel prior to its execution of a contact. UHP contends further that it had no
reason to know that TWI had commenced any work, ―as such was in direct
contradiction to the terms of the oral agreement reached by the parties.‖ In the
alternative, UHP argues that TWI is not entitled to quantum meruit damages
because the parties agreed that certain conditions would be met before the
commencement of work on the project, a material term that TWI disregarded and
that excuses any obligation UHP had to perform under the alleged contract.13
II. Standard of Review and Applicable Law
13
UHP also argues that the trial court premised its decision on a number of
trial exhibits that were not admitted into evidence. However, UHP has not
adequately explained how, if at all, anything in the non-admitted exhibits impacted
the court‘s ruling, and it acknowledges that some of the non-admitted exhibits
contained information cumulative of information in admitted exhibits.
Accordingly, we reach no conclusion on this issue and decline to address it further.
16
―For an enforceable contract to exist, there must be both (1) agreement as to
all material terms; and (2) intention of the parties to be bound.‖ Georgetown
Entm’t Corp. v. District of Columbia, 496 A.2d 587, 590 (D.C. 1985). ―[T]he
determination of what the parties consider to be the material terms of their
agreement is a question of fact.‖ Strauss v. NewMarket Global Consulting Grp.,
LLC, 5 A.3d 1027, 1033 (D.C. 2010). We may reject that determination and any of
the trial court‘s other findings of fact only if they are ―clearly and manifestly
wrong‖ or ―without evidence to support them.‖ Id. By contrast, ―[t]he
determination whether an enforceable contract exists . . . is a question of law[,]‖
Rosenthal v. National Produce Co., Inc., 573 A.2d 365, 369 n.9 (D.C. 1990),
which this court reviews de novo. Dyer v. Bilaal, 983 A.2d 349, 355 (D.C. 2009).
While agreement as to material terms ―is most clearly evidenced by the
terms of a signed written agreement . . . such a signed writing is not essential to the
formation of a contract.‖ Kramer Assocs., Inc. v. Ikam, Ltd., 888 A.2d 247, 252
(D.C. 2005) (internal quotation marks omitted). Rather, ―[t]he parties‘ acts at the
time of the making of the contract are also indicative of a meeting of the minds.‖
Id. (internal quotation marks omitted). That can be so ―[e]ven if the parties intend
to subsequently enter into a written contract,‖ because ―it does not necessarily
follow that they have not made any contract until the writing is completed and
17
signed.‖ Jack Baker, Inc. v. Office Space Dev. Corp., 664 A.2d 1236, 1238 (D.C.
1995). ―The parties may be bound by their oral agreement if it meets the dual
requirements of intent and completeness.‖ Id. ―Regardless of the parties‘ actual,
subjective intentions, the ultimate issue is whether . . . they objectively manifested
a mutual intent to be bound[.]‖ Dyer, 983 A.2d at 357 (internal quotation marks
omitted) (emphasis omitted).
―Where the parties have intended to conclude a bargain, uncertainty as to
incidental or collateral matters is seldom fatal to the existence of the contract.‖
Restatement (Second) of Contracts, § 33 cmt. a (1981) (stating also that ―the
actions of the parties may show conclusively that they have intended to conclude a
binding agreement, even though one or more terms are missing or are left to be
agreed upon‖). It is also ―plain that all the terms contemplated by [an] agreement
need not be fixed with complete and perfect certainty for a contract to have legal
efficacy.‖ V’Soske v. Barwick, 404 F.2d 495, 500 (2d Cir. 1968). However, an
enforceable contract ―must be sufficiently definite as to its material terms . . . that
the promises and performance to be rendered by each party are reasonably
certain[,]‖ such that ―the contract provides a sufficient basis for determining
whether a breach has occurred and for identifying an appropriate remedy.‖
Rosenthal, 573 A.2d at 370; accord, Auger v. Tasea Inv. Co., 676 A.2d 18, 23 n.6
18
(D.C. 1996) (―A contract will be unenforceable if its terms are so uncertain that a
court cannot accurately assess damages.‖).
This court has long recognized the principle that if a ―document or contract
that the parties agree to make is to contain any material term that is not already
agreed on, no contract has yet been made[, because] the so-called ‗contract‘ to
make a contract is not a contract at all.‖ Jack Baker, 664 A.2d at 1239 (quoting
Corbin, Contracts § 29 (1963)). More recently, however, we have embraced ―the
well-known formulation‖ that establishes that there are ―two distinct types‖ of
preliminary agreements that can have ―binding force‖ and that ―classifies
preliminary agreements as ‗Type I‘ or ‗Type II‘‖:
[A ―Type I‖ agreement] occurs when the parties have
reached complete agreement (including the agreement to
be bound) on all the issues perceived to require
negotiation. Such an agreement is preliminary only in
form — only in the sense that the parties desire a more
elaborate formalization of the agreement. The second
stage is not necessary; it is merely considered desirable.
...
The second and different sort of preliminary binding
agreement is one that expresses mutual commitment to a
contract on agreed major terms, while recognizing the
existence of open terms that remain to be negotiated.
Although the existence of open terms generally suggests
that binding agreement has not been reached, that is not
19
necessarily so. For the parties can bind themselves to a
concededly incomplete agreement in the sense that they
accept a mutual commitment to negotiate together in
good faith in an effort to reach final agreement within the
scope that has been settled in the preliminary agreement.
To differentiate this sort of preliminary agreement from
the first, it might be referred to as a binding preliminary
commitment. Its binding obligations are of a different
order than those which arise out of the first type
discussed above. The first type binds both sides to their
ultimate contractual objective in recognition that that
contract has been reached, despite the anticipation of
further formalities. The second type — the binding
preliminary commitment — does not commit the parties
to their ultimate contractual objective but rather to the
obligation to negotiate the open issues in good faith in an
attempt to reach the alternate [i.e., ultimate] objective
within the agreed framework. In the first type, a party
may lawfully demand performance of the transaction
even if no further steps have been taken following the
making of the ―preliminary‖ agreement. In the second
type, he may not. What he may demand, however, is that
his counter-party negotiate the open terms in good faith
toward a final contract incorporating the agreed terms.
This obligation does not guarantee that the final contract
will be concluded if both parties comport with their
obligation, as good faith differences in the negotiation of
the open issues may prevent a reaching of final contract.
It is also possible that the parties will lose interest as
circumstances change and will mutually abandon the
negotiation. The obligation does, however, bar a party
from renouncing the deal, abandoning the negotiations,
or insisting on conditions that do not conform to the
preliminary agreement.
Stanford Hotels, 18 A.3d at 735-36 (quoting Teachers Ins. & Annuity Ass’n v.
Tribune Co., 670 F. Supp. 491, 498 (S.D.N.Y. 1987)) (footnote and citation
20
omitted); see also Jack Baker, 664 A.2d at 1239 (―[P]arties will not be bound to a
preliminary agreement unless the evidence presented clearly indicates that they
intended to be bound at that point.‖); Fairbrook Leasing, Inc. v. Mesaba Aviation,
Inc., 519 F.3d 421, 425-26 (8th Cir. 2008) (explaining that while New York courts
will not enforce ―‗a mere agreement to agree,‘ . . . a New York court may conclude
that [the parties] entered into an enforceable ‗good-faith contractual obligation to
cooperate‘ in the negotiation of a final agreement‖); Venture Assocs. Corp. v.
Zenith Data Sys. Corp., 96 F.3d 275, 277 (7th Cir. 1996) (―[A]greements to
negotiate toward the formation of a contract are themselves enforceable as
contracts if the parties intended to be legally bound.‖).
In cases where the parties have an enforceable agreement to perform under
the terms of a contract (such as a Type I agreement), if a breach of contract
―consists in preventing performance of the contract, without fault of the other
party, who is willing to perform it, the loss of the latter will consist of two distinct
elements or grounds of damage, namely: First, what he has already expended
toward performance, less the value of materials on hand; secondly, the profits that
he would have realized by performing the whole contract.‖ Purcell Envelope Co.
v. United States, 51 Ct. Cl. 211, 220 (Ct. Cl. 1916), aff’d, 249 U.S. 313 (1919); see
also District of Columbia v. Cranford Paving Co., 271 F. 374 (D.C. Cir. 1921)
21
(affirming award of lost profits to the company where the District, over the
company‘s objection, decided to do a portion of the contracted-for work itself).
The rule may be different, however, where there is a Type II agreement and
the breach is a failure to negotiate in good faith. Some courts have held in such
cases that ―lost profits are not available,‖ but that ―out-of-pocket costs incurred in
the course of good faith partial performance are appropriate[.]‖ L-7 Designs, Inc.
v. Old Navy, LLC, 647 F.3d 419, 431 (2d Cir. 2011) (citing Goodstein Constr.
Corp. v. City of New York, 604 N.E.2d 1356, 1361 (N.Y. 1992) (reasoning that ―‗if
no agreement was reached and … it cannot even be known what agreement would
have been reached, there is no way to measure the lost expectation‘‖)). Other
courts have emphasized, however, that expectancy damages may be allowed ―if it
can be discerned what agreement would have been reached[.]‖ Fairbrook Leasing,
519 F.3d at 429.14 Adopting that approach, this court held in Stanford Hotels that
14
The Fairbrook Leasing court was ―not . . . confident . . . that Goodstein
. . . should be read as categorically precluding benefit-of-the-bargain damages for
all breaches of binding preliminary agreements to negotiate a final agreement in
good faith‖ and observed that ―[t]his is a difficult, largely unsettled question of
remedies.‖ 519 F.3d at 429. However, on the record before it, the court had ―no
difficulty affirming the district court‘s decision that expectancy damages may not
be recovered in this case . . . because The Term Sheet was silent on significant
issues such as the allocation of maintenance costs and the condition of returned
aircraft[,]‖ and thus the amount of profit that could have been expected was not
knowable. Id. at 430.
22
the trial court ―correctly noted that even though the parties had entered into a
preliminary Type II agreement, this may be the rare case in which a remedy based
on the anticipated contract [including ―expectation damages‖] may be appropriate
because all the terms of the deal had been agreed upon.‖ 18 A.3d at 739 (internal
quotation marks omitted); see also SIGA Techs., Inc. v. Pharmathene, Inc., 67
A.3d 330, 350-51 (Del. 2013) (―We now hold that where the parties have a Type II
preliminary agreement to negotiate in good faith, and the trial judge makes a
factual finding, supported by the record, that the parties would have reached an
agreement but for the defendant‘s bad faith negotiations, the plaintiff is entitled to
recover contract expectation damages.‖); Venture Assocs., 96 F.3d at 278
(―Damages for breach of an agreement to negotiate may be, although they are
unlikely to be, the same as the damages for breach of the final contract that the
parties would have signed had it not been for the defendant‘s bad faith . . . if the
plaintiff can prove that had it not been for the defendant‘s bad faith the parties
would have made a final contract[.]‖); JamSports & Entm’t, LLC v. Paradama
Prods., 336 F. Supp. 2d 824, 849 (N.D. Ill. 2004) (citing Venture Assocs. for the
proposition that ―lost profits may, in appropriate circumstances, be recovered
based on a party‘s breach of a contractual obligation to negotiate in good faith‖).
23
III. Analysis
UHP contends that the trial court erred in concluding that there was an
enforceable construction agreement when the parties had not agreed on several
material terms (including, UHP asserts, scope of work, price, duration, and
personnel). However, Judge Rankin found that the parties reached agreement on
those material terms, and we cannot say that he clearly erred in so finding. To be
sure, it was undisputed that, by the end of the December 22 meeting, the scope of
work had changed from the work assumed in TWI‘s initial bid. But the evidence
supports Judge Rankin‘s finding that the parties‘ representatives left the meeting
understanding that TWI was to draft a written contract and accompanying
schedules that added the metallic-finished panels, the Henry vapor barriers, and
additional LEED items needed to achieve the certification level that SRA
prescribed, and that they also understood that Fuentes would be project manager.
And, although TWI‘s overall price changed from the original bid price, the record
supports Judge Rankin‘s finding that the parties understood that the price would
increase to cover the cost of the more expensive and additional items that they
agreed were to be included in the scope of work. While the parties‘ understanding
that agreed-upon changes would ―increase the price and duration‖ of the contract
was not translated into precise figures by the end of the meeting, the costs of the
24
additional items, the impact of the additional costs on TWI‘s anticipated profit (3%
of costs other than bond costs), the additional time required for the LEED-related
work, and the additional temporary utility costs associated with that additional
time, were all reasonably ascertainable.15
However, we agree with UHP that the parties did not reach an agreement
that was sufficiently complete that a final written construction agreement was a
mere formality. As described above, in its original bid, TWI ―reserve[d] the right
to negotiate mutually agreeable terms of the construction agreement if selected for
the project.‖ The record supports Judge Rankin‘s finding that the parties reached
agreement as to the ―material terms of price, time, materials and mutual
responsibilities,‖ but TWI‘s reservation of the right to negotiate additional
unspecified terms meant that there might be additional terms that one or both
parties would deem material and as to which no agreement had been reached. As
UHP points out, when TWI forwarded the AIA A-201-2007 contract, it added
15
Cf. Camrex Contractors (Marine), Ltd. v. Reliance Marine Applicators,
Inc., 579 F. Supp. 1420, 1428-29 (E.D.N.Y. 1984) (reasoning that there was a
contract despite open terms because ―extrinsic evidence was available to render the
new work price reasonably definite‖ and because the court could ―fill the
contractual gap by utilizing the factual predicate in the record and by receiving
expert testimony on industry price standards‖ and could ―summon[] an expert to
fix the industrial standard for comparable work‖) (internal quotation marks
omitted).
25
―more than two dozen other provisions to its draft contracts which were never
discussed during the December 22nd meeting,‖ which did not appear in the
standard form document, and which UHP had apparently not seen before.16 Judge
Rankin did not specifically consider whether any of these additional terms was
material,17 and we cannot say as a matter of law that they were not.18 We conclude
that there was no enforceable oral construction agreement; we cannot agree with
Judge Rankin‘s legal conclusion that the parties ―behaved as though they intended
to be bound by [all] the terms written in the January Draft contract.‖ See Jack
Baker, 664 A.2d at 1241 (holding that there was no binding oral construction
contract where ―[t]he form contract sent to [plaintiff by defendant] was a complex
16
As UHP explains in its brief, the AIA forms ―are templates wherein the
parties are able to insert or change language to reflect the negotiated terms of their
specific agreement.‖ Areas where changes or additions have been made are
indicated by vertical lines in the left margin of the document.
17
These included provisions pertaining to the date of commencement,
liquidated or consequential damages, progress payments, retainage, the date of
final payment, dispute resolution by arbitration, interest on late payments, time for
release of liens, provisions related to any ―Change in the Work‖ or suspension of
work, liability insurance, Code interpretation, work delays due to adverse weather,
and provisions relating to LEED certification. Thus, the record does not fully
support Judge Rankin‘s finding that there was ―no proof of a change to any
material term that the owner‘s representative did not demand.‖
18
We note, for example, that TWI added a provision that ―[n]o actual
liquidated or consequential damages shall apply‖ for failure to achieve substantial
completion on time. A provision relating to liquidated damages has been held to
constitute a ―material term[].‖ See, e.g., Lumbermens Mut. Cas .Co. v. United
States, 654 F.3d 1305, 1318 (Fed. Cir. 2011).
26
document [that] included sixteen articles and was ten pages long‖ and where
―some few articles contained typed-in provisions especially relating to this project,
and the scope of work and payment schedule were separate attachments, drafted
especially for this project‖).
Nevertheless, on the facts found by the trial court, we conclude that the
parties did enter into an enforceable agreement by which they intended to be
bound: specifically, a ―‗binding preliminary commitment,‘‖ Stanford Hotels, 18
A.3d at 735, that obligated both sides to seek to reach a final construction
agreement upon the agreed terms by negotiating in good faith to resolve additional
terms. The agreement was preliminary because it ―contemplate[d] the preparation
and execution of additional documentation,‖ Vacold LLC v. Cerami, 545 F.3d 114,
123 (2d Cir. 2008); it was not the case that the parties had ―agree[d] on all the
points [that] require[d] negotiation[,]‖ Id. at 131, were merely awaiting
―memorializ[ation of] their agreement in a more formal document[,]‖ and were
―‗fully bound to carry out the terms of the agreement even if the formal instrument
[was] never executed.‘‖ Id. at 124. Rather, ―‗the parties agree[d] on certain major
terms, . . . [left] other terms open for further negotiation[,]‘‖ and, we conclude,
―‗b[ou]nd themselves to negotiate in good faith to work out the terms remaining
open.‘‖ Id.
27
UHP asserts that it had no intention to be bound, but Green acknowledged in
his testimony (and, as Judge Rankin noted, UHP acknowledged in its Post-Hearing
Closing Argument and Legal Memorandum) that UHP ―awarded TWI the Project
based upon TWI‘s December 22nd bid.‖19 TWI submitted its original bid on
December 20, 2010. If there was a ―December 22 bid,‖ it was the original bid plus
the costs of the additional items that SRA, by the end of the December 22 meeting,
instructed TWI to add.
If the award of the Project to TWI is not a sufficient objective indication of
UHP‘s intent to be bound, ―there is no surer way to find out what parties meant,
than to see what they have done.‖ Vacold, 545 F.3d at 123 (internal quotation
marks and alterations omitted). They did a great deal that evinced their mutual
intent to be bound. As described above, Green made repeated efforts to provide
TWI with assurance of its UHP‘s good financial standing and also put UHP‘s
insurance agent in touch with the architects so that the agent could put in place a
builder‘s risk policy that named TWI as one of the insureds for the Project. TWI
19
Green testified that, as the owner‘s representative, he was allowed ―to
speak for the owner, to make commitments for the owner, [and] to bind the
owner.‖
28
pressed UHP for financial responsibility and tax exempt information, pursued a
bond, and issued letters of intent to its subcontractors and transmitted to SRA their
requests for information needed for shop drawings and requests for approval of
construction methods and product samples. In the weeks following the
December 22 meeting, SRA — which Judge Rankin found was responsible for
―awarding the contract to the low bidder‖ — corresponded with TWI, including
both Whalen and Fuentes, about a number of matters that were necessary to move
the project forward, and it provided UHP‘s tax-exempt number20 and other
information that TWI needed only if it was to be the construction contractor for the
Project.21 SRA‘s structural engineer was ―working like crazy‖ to get to TWI new
structural plans that TWI said it needed to deliver to its steel subcontractor and
metal deck supplier, and, on January 14, 2011, Mitchell promised to expedite the
delivery to TWI because, she said, she knew TWI was ―anxious to get the steel
going.‖ No evidence was presented about UHP or SRA providing such
information or materials to any other prospective contractor.
20
Mitchell testified that she did not provide the tax-exempt number to any
other bidder in connection with this Project.
21
As Judge Rankin found, ―[p]ursuant to the A201 General Conditions, the
contractor and UHP were required to communicate with each other through SRA
on all matters arising out of or relating to the contract and the Project.‖ It appears
that Reatig had a particularly close working relationship with UHP, having
―worked with UHP on between forty and fifty projects.‖
29
At the same time, the parties exchanged drafts of the construction
agreement, comments on the drafts, and inquiries or reminders about the status of
the contract and suggestions about moving it forward for signature. Mitchell
testified that ―we were all working towards making this thing happen[.]‖ As Judge
Rankin found, the evidence showed that UHP, the architects and TWI ―were all
working harmoniously to get the project underway.‖ We discern no basis for
disturbing his finding that ―[t]he credible evidence does not support [the] view‖
that the parties did not intend to be bound in any way until a document was signed.
The time, effort, and resources that UHP and its architects and TWI devoted
to these various pre-construction matters evidence that each side understood itself
to be bound to go forward toward a construction agreement that would enable TWI
to commence the work onsite. Cf. Channel Home Ctrs., Div. of Grace Retail Corp.
v. Grossman, 795 F.2d 291, 294, 299-300 (3d Cir. 1986) (holding that there was
sufficient evidence to support a finding that the parties intended to be bound by
their letter of intent to enter into a lease where, after the letter was executed, both
parties ―initiated procedures directed toward satisfaction of lease contingencies,‖
plaintiff ―directed its parent corporation to prepare a draft lease[,]‖ and plaintiff‘s
representatives took steps to ―obtain measurements for architectural alterations,
30
renovations, and related construction‖); Greene v. Rumsfeld, 266 F. Supp. 2d 125,
137 (D.D.C. 2003) (―the parties clearly evinced an intent to be bound by the
agreement. The parties‘ counsel described themselves as excited and relieved to
have reached agreement‖). The time, effort, and resources amounted to ―partial
performance, [which] cuts strongly in favor of finding‖ a binding preliminary
commitment. Brown v. Cara, 420 F.3d 148, 158 (2d Cir. 2005).
Judge Rankin found that ―all parties, including Apostle Green, were acting
on the understanding that UHP and TWI had a contract.‖ We conclude, more
specifically and as a matter of law, that they had an enforceable Type II agreement,
and the record supports Judge Rankin‘s finding that TWI (which, as we have
noted, had specifically reserved the right to negotiate mutually agreeable additional
terms) did nothing to breach that agreement.22 On the record that was before him,
22
Judge Rankin found that Green made clear at the December 22 meeting
that Bailey ―did not want changes in price and did not want the contractor to
change the personnel on the contract.‖ UHP argues that the increase from TWI‘s
original bid price and the transition to Fuentes as project manager violated those
parameters. However, Judge Rankin credited the evidence that by the end of the
December 22 meeting, all participants understood and agreed that the contract
price would increase to cover the LEED and other more expensive UHP-demanded
items, and also that Fuentes would work on the Project because of his LEED
qualifications. Therrien testified that he had three or four conversations with
Green after Fuentes was on board, and Green expressed no objection to Fuentes‘s
role.
(continued…)
31
Judge Rankin could also readily conclude that UHP breached the binding
preliminary commitment when it terminated discussions with TWI without
offering any explanation of what terms its lawyer purportedly found unacceptable
and by declining to negotiate with TWI, or even to discuss the matter with
Therrien, even after Therrien indicated to Bailey TWI‘s receptivity ―to discuss any
issues or concerns‖ and told him that the terms of the agreement were open to
discussion. Cf. Brown, 430 F.3d at 152, 159 (holding that it was error to dismiss
suit based on breach of Type II agreement where allegation was that the defendant,
―not pleased with the terms described in‖ plaintiff‘s proposed construction
management agreement, ―refused to continue with negotiations and ceased all
communication and collaboration with [the plaintiff]‖). There was no credited
evidence that UHP repudiated the parties‘ agreement on any basis other than the
purported ―objections of our Counsel to a number of the terms and conditions you
(…continued)
Moreover, while Whalen transferred project management responsibilities to
Fuentes, the undisputed evidence was that Whalen was not removed from the
Project team. Thus, Green‘s insistence that ―the TWI people who started the job
would not change‖ was satisfied. It is also noteworthy that, as far as the record
reveals, when architect Mitchell invited Whalen to a meeting with SRA and UHP
representatives to discuss the Project, TWI was not asked or instructed to bring to
the meeting everyone who would work on the Project if awarded. Further,
following the December 22 meeting, SRA‘s Mitchell expressed that it was ―nice to
meet‖ Fuentes and told him that she ―look[ed] forward to getting this project
going[.]‖ We follow the trial court in rejecting UHP‘s argument that TWI altered
the terms of the December 22 agreement by changing its personnel.
32
requested be inserted into the standard AIA Contract,‖ and, at the same time, no
evidence that TWI insisted unalterably on any of the terms it had added in the draft
written construction agreement. UHP simply refused to proceed further — and,
within a week after announcing its position, had in hand McCullough‘s signature
on a construction agreement. Cf. Stanford Hotels, 18 A.3d at 734-35 (observing
that the hotel seller ―‗broke faith‘‖ with its preliminary-agreement obligation ―to
negotiate exclusively and in good faith with Stanford and to sign a Definitive
Agreement if they were able to agree on terms‖ when it ―‗abandoned‘ the
negotiations, . . . deceived Stanford as to its real intentions, [and] led Stanford to
believe that [it] intended to sell the Hotel when it had already agreed to include the
Hotel in a refinancing with a third party‖).
Had Judge Rankin found that UHP breached the parties‘ preliminary
agreement through bad-faith refusal to negotiate, and had the matter been before
him for a decision before the Project had been completed, TWI might have been
entitled only to specific performance: an order that UHP negotiate in good faith.
See Stanford Hotels, 18 A.3d at 739 (―[T]he trial court had authority to grant
specific performance of the Preliminary Agreement[.]‖); Brown, 420 F.3d at 151
(―[W]hile the preliminary agreement is not enforceable as to the ultimate
contractual goal contemplated in the document, it is enforceable as an obligation
33
between the parties to negotiate in good faith within the framework of the
agreement.‖). But since specific performance was no longer an available remedy at
the time of trial and decision in 2013, we agree that TWI‘s remedy for breach
would be an award of damages. See Stanford Hotels, 18 A.3d at 740 (recognizing
that money expectation damages may be an adequate remedy).
Had Judge Rankin found both that UHP breached the parties‘ preliminary
agreement by refusing to negotiate in good faith and that, absent UHP‘s bad faith,
the parties would have entered into a final construction agreement, the record
would have permitted the court to award damages based in part on TWI‘s
expectation of earning $146,000 in profit from performing under an executed
contract.23 The parties did not reach agreement on all the terms of a written
23
It is worth observing that the AIA-A-201-2007 General Conditions that
were part of UHP‘s bid solicitation package provided that the contract would be
terminable by UHP for its own convenience, and that upon such a termination, the
contractor would be ―entitled to receive payment for Work executed, and costs
incurred by reason of such termination, along with reasonable overhead and profit
on the Work not executed‖ (italics added). ―It would be a paradox to place a lower
ceiling on damages for bad faith [refusal to negotiate] than on damages for a
perfectly innocent breach[.]‖ Venture Assocs. Corp., 96 F.3d at 279.
UHP points out that the construction agreement it eventually signed with
McCullough ―deleted the contractor‘s right to demand anticipated profits in the
event the Owner elects to terminate the agreement for its own convenience.‖ It
also sought to introduce exhibits showing that its regular practice was to modify
the General Conditions to delete recovery of lost profits upon its election to
(continued…)
34
construction agreement, but none of the terms that TWI added (to what Judge
Rankin aptly referred to as UHP‘s ―own agreement‖) appear to be ones that would
have impacted the cost of performance or TWI‘s entitlement to its anticipated
$146,000 base profit amount (which, as we have explained, was calculated as 3%
of the contract amount excluding bond costs). See supra, note 17. For that reason,
this is a case in which lost profit may be an appropriate element of any damages
remedy. See Fairbrook Leasing, 519 F.3d at 429 (explaining that expectancy
damages may be allowed ―if it can be discerned what agreement would have been
reached‖). But, importantly, Judge Rankin did not make an explicit finding as to
bad faith, and thus necessarily, did not find that the parties would have entered into
a final construction agreement but for UHP‘s bad faith. Because we are unable to
(…continued)
terminate for convenience. But notwithstanding the particular terms of the
McCullough contract (and perhaps others), the fact remains that UHP awarded the
Project to TWI subject to the standard AIA A201-2007 provision, and, when, SRA
relayed Green‘s comments on the January 17, 2011, draft contract, it did not
request any change in the AIA A-201-2007 General Conditions. UHP argues that
TWI ―cannot now disavow‖ provisions of the General Conditions document that
were incorporated by reference, but attempts to do that itself by distancing itself
from the termination-for-convenience provision.
In any event, upon the remand that we conclude is necessary, Judge Rankin
will be free to revisit his ruling that the McCullough contract did not ―have
probative value on what might have been negotiated if there had been further
negotiations with these parties [i.e., between UHP and TWI]‖ (a ruling that UHP
asserts was erroneous).
35
say that the evidence compelled him to so find, we conclude that a remand is
necessary to permit the trial court to make findings on these points.
Even without a finding that the parties would have entered into a final
construction agreement absent bad faith, upon a finding that UHP‘s refusal to
negotiate was in bad faith, an appropriate measure of damages would also include
the out-of-pocket costs TWI incurred in doing preparatory work.24 The evidence
(including testimony by Coffey) was that ―the ability to be able to start very
quickly was important‖ to UHP, that the parties discussed that ―certain things
[needed] to happen pretty quickly,‖ and that the steel fabrication required for the
Project required a lead time of eight to ten weeks. Thus, the record permitted
Judge Rankin to find that here, as in Brown, one party (TWI, through its own
efforts and those of its subcontractors) ―provided extensive and valuable
performance within the framework‖ to which the parties had agreed at the
December 22 meeting.25 Id. at 158.
24
UHP argues that TWI did not prove its bond costs, but the record
indicates that no bond expense was included in TWI‘s claim on which the
compensatory award of $75,504.70 was premised. We also see no basis for UHP‘s
claim that TWI improperly included in its claim for compensatory damages the
costs of ―Computer-Aided Design & Drafting‖ files.
25
This is so even though SRA‘s structural engineer testified that he threw
away TWI‘s shop drawings after he was told to stop working with TWI. It appears
(continued…)
36
We have not overlooked UHP‘s argument that TWI cannot be entitled to
reimbursement of the costs it incurred in preparing to perform under the
contemplated contract because, UHP claims, the parties agreed at the December 22
meeting that TWI would not commence any work on the Project until there was a
fully executed contract, until UHP gave TWI receipt of written notice to proceed,
and until required permits were in place and demolition (by UHP) was completed.
UHP contends that any performance of work by TWI thus ―was in breach of its
agreement‖ with UHP. However, Judge Rankin found that there was no breach by
TWI and, on the subject of when work could commence, found that UHP was
required to demolish existing structures ―[b]efore construction could begin at the
site‖ (italics added). That finding is not clearly erroneous. Further, Coffey, whose
testimony Judge Rankin appears to have credited, testified that the parties
expressed that a building permit ―need[ed] to be in place before [TWI] could . . .
start work onsite,‖ and that TWI was given authorization at the December 22
(…continued)
to us, however, that the award of costs incurred by TWI in preparing to perform
includes an allocated portion of TWI‘s anticipated profit (specifically, $2,190),
which would be duplicative of a portion of any award of lost profits. On remand,
any compensatory damages award should be reconsidered and re-computed as
appropriate.
37
meeting to ―start . . . preparations,‖ i.e., ―to fabricate things, prepare shop
drawings, submittals, [and] get those approved in order to do those fabrications.‖
UHP also notes that the AIA A-201-2007 General Conditions provide that
―Work‖ refers to ―the construction and services required by the Contract
Documents‖ and includes ―all . . . labor, materials, equipment and services
provided or to be provided by the Contractor,‖ making no distinction for
preparatory work. UHP then asserts that § 3.1 of the AIA A-101-2007 form
contract specifies that ―[t]he date of commencement of the Work shall be the date
of this [written] Agreement[,]‖ and it emphasizes that no signed written agreement
ever followed. What UHP fails to mention is the clause that follows: ―unless a
different date is stated below or provision is made for the date to be fixed in a
notice to proceed issued by the Owner.‖ The standard form instructs, ―Insert the
date of commencement if it differs from the date of this Agreement‖; thus, it left
the ―date of commencement of the Work‖ an open term. TWI inserted, ―The date
of commencement shall be the five (5) full Work Days (Monday through Friday –
excluding holidays) after receipt of this fully executed agreement, written notice to
proceed, all required permits, and completion of demolition scope performed by
others.‖ Notably, TWI‘s insertion did not refer to the date of commencement of
the (defined term) ―Work,‖ and, as noted above, Coffey testified that the parties
38
agreed that it was onsite work that was not to commence until these conditions
were satisfied. Thus, the documentary evidence did not compel Judge Rankin to
find that the parties agreed that TWI would do no ―Work‖ of any sort before the
date of a fully executed contract. Also, while Green and Reatig testified that they
did not know that TWI was incurring costs prior to contract execution, Judge
Rankin did not credit their testimony. He did credit Coffey‘s testimony that UHP
wanted to commence quickly, that the structural steel requirements necessitated
lead time, and that time was of the essence. For all these reasons, we reject UHP‘s
argument that TWI should not in any event be permitted to recover its out-of-
pocket costs for preparatory work on the Project.
IV. Conclusion
For the foregoing reasons, we conclude that the parties were bound by an
enforceable agreement to negotiate in good faith toward the signing of a written
construction agreement within the framework agreed to at the parties‘ December
22, 2010, meeting. We remand the matter for additional findings as to whether
UHP breached that agreement by refusing to negotiate in good faith and, if so,
whether the parties would have reached an agreement but for UHP‘s bad faith. See
Ross v. Hacienda Coop., 686 A.2d 186, 187, 192 (D.C. 1996). The trial court may,
39
in its discretion, reopen the record for additional evidence. See id. at 192. Any
award of damages should be determined in a manner consistent with this opinion.
So ordered.