In the
United States Court of Appeals
For the Seventh Circuit
No. 08-1081
B USINESS S YSTEMS E NGINEERING, INC.,
Plaintiff-Appellant,
v.
INTERNATIONAL B USINESS M ACHINES C ORP.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 8254—Elaine E. Bucklo, Judge.
A RGUED S EPTEMBER 4, 2008—D ECIDED N OVEMBER 10, 2008
Before M ANION, W OOD , and T INDER, Circuit Judges.
M ANION, Circuit Judge. Business Systems Engineering,
Inc. (“Business Systems”) brought this diversity suit
against International Business Machines Corp. (“IBM”).
Business Systems alleged, among other things, that IBM
had an agreement with Business Systems to provide
Business Systems with $3.6 million in work as a subcon-
tractor on a project IBM was completing for the Chicago
2 No. 08-1081
Transit Authority (“CTA”). Because IBM had provided
Business Systems with only $2.2 million in work, Business
Systems claimed that IBM still owed it $1.4 million. The
district court granted IBM summary judgment, and
Business Systems appeals. We affirm.
I.
In December 2001, the CTA entered into a contract with
IBM under which IBM agreed to implement a new com-
puter system for the CTA. A condition appended to the
contract required IBM to subcontract not less than 30%
of the total dollar value of the contract (which was
$42 million) to “disadvantaged business enterprises.” 1
Business Systems was certified by the CTA as a disad-
vantaged business enterprise, and it was one of ten disad-
vantaged business enterprises that provided technical
consultants for IBM to work on the CTA contract.
When utilizing the services of a supplier like Business
Systems, IBM would first enter into a base agreement
with the supplier that would govern their overall
business relationship. Such agreements are common in
the industry. The “Customer Solutions Agreement”
(“CSA”) was the specific base agreement governing the
1
The contract defined a “disadvantaged business enterprise” as
“a small business concern awarded certification by the CTA
as a business owned and controlled by socially and economically
disadvantaged individuals in accordance with U.S.
DOT Regulation 49 CFR, Part 23 and Section 106(c).”
No. 08-1081 3
relationship between IBM and Business Systems; it was
created prior to IBM’s contract with the CTA. According to
the detailed terms of the CSA, Business Systems was to
provide “deliverables and services” according to the
specifications contained in the relevant “statements of
work.” The CSA defined a “statement of work” as “any
document . . . which describes the Deliverables and
Services, including any requirements, specifications or
schedules.” Business Systems was not to begin the
tasks described in a statement of work, however, without
a corresponding “work authorization,” which the CSA
defined as “a purchase order, bill of lading, or other
[IBM] designated document.” The CSA limited what IBM
owed Business Systems to the amounts specified in state-
ments of work and authorized in work authorizations. It
stated that “the only amount due to [Business Systems]
from [IBM]” was the “pre-approved expenses specified
in the relevant” statements of work and the amount IBM
would pay for “Deliverables and Services specified in a
[purchase order] and accepted by” IBM.
Before the CTA executed its contract with IBM and
work began, IBM had to submit to the CTA a “Schedule C:
Letter of Intent from DBE to Perform as Subcontractor,
Supplier and/or Consultant” signed by each disad-
vantaged business entity that was to provide work as a
subcontractor, as well as a “Schedule D: DBE Utilization
Plan” signed by IBM. The original Schedule C for Business
Systems, attached as Exhibit 3 to Business Systems’s
original complaint, listed the “quantity/unit price” of
“services” Business Systems was “prepared to provide” for
the CTA project as $8,560,000. A revised Schedule C listed
4 No. 08-1081
“services” of $2,124,550 and “software” of $1,500,000 as
the “quantity/unit price” of what Business Systems was
“prepared to provide” for the CTA contract. The Schedule
D IBM submitted to the CTA for Business Systems listed
“provid[ing] development resources for conversions,
interfaces, and customizations” as the “type of work to
be performed” in accordance with the revised Schedule C.
It also listed $3.6 million under the heading “Contract
Amount.” All of the schedules stated that, after the CTA
executed the contract, the parties would “enter into a
formal written agreement for the above work.”
The CTA approved the contract with IBM, and the work
on the CTA project proceeded as follows. When IBM
needed a specific task performed on the CTA project by an
outside technical consultant, it advertised the open posi-
tion to one of the approved disadvantaged business
enterprises, like Business Systems. If Business Systems
presented a candidate for the open position that was
acceptable to IBM as well as the CTA (which retained
the right to reject any individual candidate put forth
by IBM or one of IBM’s subcontractors to work on the
project), then IBM would send Business Systems a state-
ment of work. Those statements of work expressly incorpo-
rated all of the terms and conditions of the CSA, the
base agreement. Each statement of work set forth in
detail the project scope, tasks that Business Systems’s
consultants were to perform, the time frame within
which the consultants were to perform them, the hourly
rate of pay and estimated hours required to complete
the tasks, and the conditions under which IBM would
deem Business Systems to have fulfilled its obligations
No. 08-1081 5
under each statement of work. After Business Systems
received the statement of work, IBM would issue a
work authorization in the form of a purchase order au-
thorizing the allocation of funds to Business Systems.
In total, Business Systems received 38 statements of
work from IBM for the CTA project. Together with the
corresponding purchase orders, the statements of work
authorized roughly $2.2 million in work on the project.
It is undisputed that IBM paid Business Systems for all
the work that Business Systems did pursuant to those
statements of work. It is further undisputed that, at
certain times during the project, Business Systems failed
to submit candidates to fill an open position on the
CTA project. Business Systems also fell behind in
paying some of its own subcontractors, causing those
subcontractors to threaten to leave the CTA project.
At the conclusion of the CTA project, IBM had provided
work to disadvantaged business enterprises in the
amount of 42% of the total contract value, a figure in
excess of the 30% requirement set forth in the condition
accompanying the contract between IBM and the CTA.
Of the ten disadvantaged business enterprises that partici-
pated in the CTA project, eight exceeded the dollar value
listed on their Schedules C and D. Two, however, did not.
One of those two was Business Systems, which only
received $2.2 million in work as opposed to the $3.6 million
listed on its Schedules C and D.
Business Systems believed it was entitled to the addi-
tional $1.4 million—the difference between the $3.6 million
listed on its Schedules C and D and the $2.2 million for
6 No. 08-1081
the completed subcontracting work it had actually re-
ceived. It therefore filed suit in state court alleging, among
other things, that the Schedules C and D constituted a
written contract that IBM breached by failing to provide
Business Systems with $3.6 million in work on the CTA
project. IBM removed the action to the district court
and moved to dismiss the complaint. It argued that the
Schedules C and D were not contracts but merely letters
of intent that “evidence[d] the parties’ anticipation of a
future executed contract.” The district court agreed with
IBM and dismissed the suit.
Business Systems then filed an amended complaint. In
its amended complaint, Business Systems still alleged
that the Schedules C and D were part of the “written
agreement” between Business Systems and IBM. How-
ever, the amended complaint also detailed a collection
of other documents that Business Systems asserted
“evidence[d] the written agreement” between itself and
IBM. One of the documents described in the amended
complaint was an email from IBM’s client director Jim
Lautenbach to the CTA explaining that Business
Systems’s participation in the CTA project had been set
at $3.6 million “by mutual agreement.” The email con-
tained a spreadsheet attachment entitled “BSE
Work” that set forth how IBM and Business Systems
planned to achieve the $3.6 million objective. Under the
heading “Description of Work,” the spreadsheet listed
“Wage Rate/Wage Progression Study,” “Supplemental
Training Services,” “IT Replacement Services,” “Post
Production Support,” “HR Functional Resources,” “HR
Technical Resources,” and “Wage Rate/Wage Progression
No. 08-1081 7
Customization.” Corresponding to each of those entries
under the “Description of Work” heading was a spread-
sheet entry for “Related Task Order,” “Projected BSE
Revenue,” and “Estimated Contract Date.”
IBM unsuccessfully attempted to have the amended
complaint dismissed, and the case proceeded to discovery.
After discovery, IBM moved for summary judgment on
all of Business Systems’s claims. In that motion, IBM
argued that it was entitled to judgment as a matter of
law on Business Systems’s breach of contract claim
because the statements of work, along with the corre-
sponding purchase orders, formed the only contractual
relationship between the parties, and it was undisputed
that IBM had fulfilled all that the statements of work
had obliged it to do. In response to that argument,
Business Systems argued that genuine issues of material
fact remained concerning whether IBM had formed an
oral agreement with Business Systems for $3.6 million
in work on the CTA project, and whether IBM had
breached that agreement by only providing $2.2 million
of work on the project.
The district court granted IBM’s motion for summary
judgment. It held that there was no evidence of a written
contract for $3.6 million between IBM and Business
Systems. According to the court, the documents upon
which Business Systems relied were “too vague and
incomplete to establish a legally enforceable agreement
by which [Business Systems] could hold IBM accountable
for the alleged breach.” Bus. Sys. Eng’g, Inc. v. IBM
Corp., 520 F. Supp. 2d 1012, 1019 (N.D. Ill. 2007). The
8 No. 08-1081
district court also rejected Business Systems’s oral
contract theory. The court stated that although the
facts established that Business Systems may have
believed that it had an agreement with IBM for $3.6
million of work, the record did not contain any “evidence
about what promises [Business Systems] made in ex-
change” for the $3.6 million of work on the CTA project.
Id. at 1019.
After the district court granted IBM’s motion for sum-
mary judgment, it entered a final judgment on all of
Business Systems’s claims pursuant to Federal Rule of
Civil Procedure 54(b). That final judgement allowed
Business Systems to appeal the district court’s grant of
summary judgment despite IBM’s unresolved counter-
claim for defamation against Business Systems and
Nathan Paige, Business Systems’s CEO.
II.
On appeal, Business Systems only challenges the dis-
trict court’s determination that no contract for $3.6
million in work existed between Business Systems and
IBM as a matter of law. We review a district court’s grant
of summary judgment de novo. See Trask-Morton v. Motel 6
Operating L.P., 534 F.3d 672, 677 (7th Cir. 2008). We con-
strue all facts and inferences in the light most favorable
to Business Systems, the non-movant, when deter-
mining whether a genuine issue of material fact exists
that would preclude summary judgment. Id. Because
this is a diversity case, we apply the law of Illinois (the
forum state) to the question of whether a contract exists.
No. 08-1081 9
Id. In Illinois, “[t]he question of the existence of a contract
is a matter of law for determination by the court.” Arneson
v. Bd. of Trs., McKendree Coll., 569 N.E.2d 252, 256 (Ill.
App. Ct. 1991).2
At the outset, we note that Business Systems’s theory
of how the contract for $3.6 million arose has fluctuated
throughout the proceedings in this case. In its initial
complaint, Business Systems alleged that the original
Schedule C constituted a written agreement between it
2
Business Systems argues that the existence of a contract in this
case was a question of fact that should have been left for the
jury. Business Systems is correct that a jury should decide the
question of whether a contract exists when the facts bearing
on that issue are disputed. See, e.g., Hany v. Gen. Elec. Co., 581
N.E.2d 1213, 1217 (Ill. App. Ct. 1991) (“When a factual dispute
is present, the question of whether a contract exists is for the
jury to decide.”). But in this case the material facts are not
disputed. IBM does not question, for instance, the existence
or authenticity of the Schedules C and D, or even that IBM
evinced an intent to be bound to the $3.6 million figure. Rather,
the issue here is whether the evidence presented by Business
Systems suffices to show a binding contract obligating IBM to
provide Business Systems with $3.6 million in work. That
question was properly determined by the district court, and not
a jury. See Bank of Benton v. Cogdill, 454 N.E.2d 1120, 1125 (Ill.
App. Ct. 1983); see also Mansourou v. John Crane, Inc., 618 N.E.2d
689, 692 (Ill. App. Ct. 1993) (“The determination of whether
there exists a clear and definite promise is not for the trier of
fact to determine, but is, rather, ‘a threshold question of law to
be determined by the court.’” (quoting Harrell v. Montgomery
Ward & Co., 545 N.E.2d 373, 376 (Ill. App. Ct. 1989))).
10 No. 08-1081
and IBM that was “voluntarily modifi[ed]” by the
revised Schedule C. After the district court rejected that
theory, Business Systems amended its complaint, this
time alleging that the parties had a “written agreement”
composed of various emails and letters between the
parties along with the Schedules C and D. During discov-
ery, Business Systems waffled between a written con-
tract theory and an oral contract theory, sometimes assert-
ing that the contract between the parties was oral, and
at other points claiming that the Schedules C and D, as well
as other documents, constituted a written contract. Then
in opposition to IBM’s motion for summary judgment,
Business Systems switched entirely to an oral contract
theory. Now on appeal, Business Systems reiterates its
position on summary judgment that there was an oral
contract between the parties and that the documents
Business Systems cited in its amended complaint (in-
cluding the Schedules C and D) are simply evidence of
that oral agreement.
Regardless, however, of whether the alleged $3.6 million
contract was written, oral, or otherwise, the district court
was correct to grant summary judgment on Business
Systems’s breach of contract claim. The only contractual
relationship that existed between the parties was estab-
lished by the CSA in conjunction with the individual
statements of work and the corresponding purchase
orders. The CSA established, in writing, “the basis for a
multinational procurement relationship under which
[Business Systems would] provide [IBM] the Deliverables
and Services described in [statements of work] issued”
pursuant to the CSA. The CSA was clear that Business
No. 08-1081 11
Systems was to “provide the Deliverables and Services
as specified in the relevant” statements of work “only
after receiving” a purchase order from IBM authorizing
the work listed in each statement of work to be done.
(Emphasis added). And the CSA expressly limited what
IBM owed Business Systems to those amounts that were
specified in the purchase orders and statements of work
issued pursuant to the CSA. It stated that “pre-approved
expenses specified in the relevant” statements of work
and the amount IBM would pay for “Deliverables and
Services specified in a [purchase order] and accepted by”
IBM were to be “the only amount due to [Business Sys-
tems] from [IBM].”
The parties’ business relationship during the CTA project
unfolded exactly as the CSA defined it. IBM would
submit a statement of work and a purchase order to
Business Systems. Business Systems then would do the
work specified in the statement of work and receive
payment from IBM pursuant to the terms listed in the
statement of work. Because there is no dispute that IBM
timely paid Business Systems for all that it did pursuant
to the statements of work (which amounted to $2.2
million in work), Business Systems’s breach of contract
claim fails as a matter of law.
Business Systems attempts to step outside the frame-
work of the CSA and the statements of work. It admits
that no legally enforceable agreement for $3.6 million
existed in writing between the parties. But it argues that
the existence of an oral contract for $3.6 million can be
inferred from the documents referred to in its amended
12 No. 08-1081
complaint as well as from the parties’ interactions
during the CTA project. Appellant’s Br. at 8 (citing, inter
alia, Reese v. Forsythe Mergers Group, Inc., 682 N.E.2d 208,
213 (Ill. App. Ct. 1997) (“[O]ral contracts are proved not
only by what the parties have said, but also by what
they have done.”)).
Business Systems’s oral contract theory has no merit. To
begin with, the only reasonable inference that can be
drawn from the parties’ dealings during the CTA project is
that they were acting pursuant to the CSA, and it is
undisputed that neither the CSA nor the statements of
work issued pursuant to that agreement contained a
promise for $3.6 million in work. Furthermore, even
drawing all reasonable inferences from the documentary
evidence in Business Systems’s favor, a jury could not
find that a contract for $3.6 million existed as a matter of
law because Business Systems has failed to identify any
of the material terms of the alleged contract—other than
the $3.6 million it claims IBM agreed to pay it. “The
principles of contract state that in order for a valid con-
tract to be formed, an offer must be so definite as to its
material terms or require such definite terms in the accep-
tance that the promises and performances to be rendered
by each party are reasonably certain.” Acad. Chicago
Publishers v. Cheever, 578 N.E.2d 981, 983 (Ill. 1991) (internal
quotation marks omitted). “A contract ‘is sufficiently
definite and certain to be enforceable if the court is
enabled from the terms and provisions thereof, under
proper rules of construction and applicable principles
of equity, to ascertain what the parties have agreed to
do.’ ” Id. (quoting Morey v. Hoffman, 145 N.E.2d 644, 647-48
No. 08-1081 13
(Ill. 1957)). Put another way, “[p]arties do not have an en-
forceable contract unless, by the terms of the agreement, a
court ‘can require the specific thing contracted for [ ] be
done.’” Ass’n Benefit Servs., Inc. v. Caremark RX, Inc., 493
F.3d 841, 850 (7th Cir. 2007) (quoting Hintz v. Lazarus,
373 N.E.2d 1018, 1020 (Ill. App. Ct. 1978)).
The documents upon which Business Systems relies to
establish the alleged $3.6 million contract are too
indefinite to show the existence of a contractual relation-
ship. In particular, there is no way to tell from those
documents what Business Systems was to do in ex-
change for the $3.6 million. The revised Schedules C and
D are remarkably vague as to Business Systems’s part of
the bargain. They simply list “services” and “software” and
“provid[ing] development resources” as what Business
Systems was obligated to provide IBM in exchange for
the $3.6 million, with no further detail. They do not state,
with any reasonable specificity, what services, software,
and “development resources” Business Systems was to
provide. Beyond that, there is no mention of when and
where Business Systems was to provide those services,
software, and “development resources”; what set of
criteria was to be used to establish that Business Systems
satisfactorily provided them; and when and how the
parties were to handle payment.
The spreadsheet attached to Lautenbach’s email is
similarly vague.3 It, too, lists only highly generalized
3
Business Systems did not argue before the district court, as it
does now, that the spreadsheet evidenced some of the terms
(continued...)
14 No. 08-1081
descriptions of the work Business Systems was to provide,
such as “Wage Rate/Wage Progression Customization”
and “HR Functional Resources.” No explanation is
given in the spreadsheet of what those tasks entail. Fur-
thermore, the revenue and contract dates corresponding
to each task are listed only as “projected” and “estimated,”
respectively. No mention is made in the spreadsheet
about criteria for determining when Business Systems
had performed each task, nor of any specifics about when
and how Business Systems was to receive payment.
Without the provision of such terms, we lack the ability
to enforce any agreement between the parties, since we
would not be able to determine what each party had
agreed to do. Cf. Ass’n Benefit Servs., 493 F.3d at 850 (find-
ing letter between the parties that was “silent on the issue
of [the appellant’s] precise performance obligations . . . so
lacking in its description of the exchange as to render
it wholly unenforceable as a contract”); Cheever, 578
N.E.2d at 983-84 (holding that publishing agreement
was not enforceable where the agreement lacked, among
other things, a definition of the criteria that would render
the manuscript satisfactory to the publisher); Reese, 682
N.E.2d at 214-15 (holding that alleged employment agree-
3
(...continued)
of the alleged contract. “[A]rguments not raised before the
district court are waived on appeal.” Hicks v. Midwest Transit,
Inc., 500 F.3d 647, 652 (7th Cir. 2007). Nevertheless, even
considering the spreadsheet, Business Systems still falls far
short of establishing, with any definiteness, what services it
was to provide for IBM in exchange for the last $1.4 million of
the alleged $3.6 million contract.
No. 08-1081 15
ment was unenforceable because it was “unclear” from
the alleged agreement “what [the plaintiff] and the de-
fendants [had] agreed to do”).
Contrast the Lautenbach spreadsheet and the Schedules
C and D with the statements of work. Each statement of
work expressly set forth in detail the specific services
Business Systems would provide IBM, the hourly rate
IBM would pay for those services, and the estimated
number of hours. Most importantly, the statements of work
gave specific conditions under which IBM would deem
Business Systems to have fulfilled its performance obliga-
tions. Those terms contained in the statements of work
were in turn supplemented by the detailed provisions of
the CSA, which each statement of work expressly incorpo-
rated. A court would have no difficulty determining
and remedying any breach of an individual statement of
work given those detailed and specific terms.
The same cannot be said of Business Systems’s alleged
$3.6 million agreement. At best, the evidence in the
record shows that IBM “intended” to offer Business
Systems $3.6 million in subcontracting work. But a mani-
festation of an intent to be bound, by itself, is not enough
to form a contract. Cheever, 578 N.E.2d at 983. “Even
though a manifestation of intention is intended to be
understood as an offer, it cannot be accepted so as to
form a contract unless the terms of the contract are rea-
sonably certain.” Vill. of S. Elgin v. Waste Mgmt. of Ill., Inc.,
810 N.E.2d 658, 672 (Ill. App. Ct. 2004) (quoting Restate-
ment (Second) of Contracts § 33(1) (1981)). The terms of a
contract are reasonably certain only if “they provide a
basis for determining the existence of a breach and for
16 No. 08-1081
giving an appropriate remedy.” Restatement (Second) of
Contracts § 33(2) (1981). As we have discussed above, the
documents that Business Systems points to as evidence of
IBM’s “intent to be bound” to the $3.6 million figure, such
as the Schedules C and D, do not provide “a basis for
determining the existence of a breach and for giving an
appropriate remedy.” Id. Put another way, conspicuously
absent from the record is the answer to the question:
“$3.6 million for what?” Because we have no way of
determining with any specificity what Business Systems
was supposed to do in exchange for the $1.4 million it
claims IBM still owes it under the alleged $3.6 million
contract, Business Systems’s breach of contract claim
fails as a matter of law, and the district court properly
granted summary judgment on that claim.
III.
The CSA, along with the statements of work and pur-
chase orders issued pursuant to that agreement, formed
the only basis of a contractually binding agreement be-
tween the parties. Regardless of what the parties
intended from the outset, IBM had no contractual duty to
provide Business Systems with any work beyond what
was authorized in the statements of work. Because it is
undisputed that IBM paid Business Systems all that was
due for performing work pursuant to the statements of
work, we A FFIRM the decision of the district court
granting summary judgment in favor of IBM on
Business Systems’s breach of contract claim.
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