Is Your Contract Valid? Three Tips Based on a Recent Court Decision
Agreements are an integral part of our lives. Everything from our cell phone service to our dry cleaning involves some form of agreement. Many agreements, however, can be more nuanced and may result in a breach by another party. When this occurs, an individual or business may risk dire losses.
The Virginia Court of Appeals examined the parameters of a valid contract in its recent opinion, Waltzing Matilda Aviation d/b/a Connect Airlines v. MAHH Consortium Partnership et al. In Waltzing Matilda, WMA, a plane charter company, connected with Connected DMV (CDMV), a non-profit, to collaborate on a project bid to the Department of Energy (DOE). CDMV was seeking interested organizations to participate, including raising funds for the cost of the bid application. WMA’s allocated contribution was around $137 million; however, the company did not sign a Memorandum of Understanding (MOU) circulated by CDMV or pay any of their portion of the application fee. CDMV subsequently sued for breach of contract. The trial court held that WMA breached a contract with CDMV and was therefore liable for its share of the bid application. WMA appealed, citing that there was no valid contract because of the lack of a signature on the MOU (among other arguments).
The Court of Appeals agreed with the trial court, finding that WMA’s commitment was apparent, despite the fact that they did not sign an MOU or pay any of their share of the application fee. The Court focused on WMA’s participation in the kick-off meeting and subsequent email communications, noting their commitment to pay, as well as a separate letter to the DOE, noting their intention to participate in the bid, which was held to be a “separate contract.” I recommend the following based on this decision:
Be clear in all of your communications. The Waltzing Matilda Court reviewed the elements of a contract: offer, acceptance, and consideration. In applying each element, the Court cited precedent establishing that any correspondence could form a contract/the terms of an agreement and pointed to the parties’ offer and acceptance via their communications. I therefore recommend that any emails drafted surrounding a potential commitment clearly emphasize any indecision, disagreement, or concerns. A failure to formalize a lack of agreement may result in a court finding a contract.
Do not hinge an agreement on signatures alone. In Waltzing Matilda, WMA argued that the absence of their signature on the MOU (and lack of payment) solidified that they did not intend to participate in the bid (and therefore did not breach). In holding that the parties’ total written communications formed a contract, the Court highlighted that signatures are not dispositive. Despite this, I recommend that parties define key terms and indicate the totality of a writing, insisting on signatures. A clearly centralized and signed writing (missing in Waltzing Matilda) can carry significant weight.
Assume that the other party does not know what you know. Waltzing Matilda was a dispute involving a government contract. Nonetheless, the Court did not delve into the technical components of that industry – instead, reviewing the commitments or statements made by each party to determine whether there was an understanding. I recommend that parties err on the side of caution and always state an obvious or technical fact (i.e., an MOU is a dispositive writing) in forming contracts. A failure to do so could result in ambiguity and an unfavorable finding.
Feel free to reach out to me about concerns surrounding a potential breach of contract.
Theodora Stringham focuses her practice on bringing solutions-oriented representation and zealous advocacy to complex issues impacting individuals, organizations, and businesses. Ms. Stringham seeks to understand clients’ concerns and provide thorough and strategic options aimed at achieving their goals. She has been recognized for her work in the Real Estate, Labor and Employment, and Commercial Litigation practice areas, providing counseling and litigation support for a wide variety of concerns.