Every law student known what it takes to form a contract. First the Offer, then Acceptance, and finally Consideration. Except for the law of Sales under the UCC Article 2, the acceptance of an offer must conform exactly to the terms offered, or it is deemed a counteroffer. (This last sentence is not entirely true, and many times and in many states minor, inconsequential changes do not become counter-offers.) Offer and counter-offer is the very essence of negotiations.
However, if you negotiate long enough, you just might lose the deal.
In a case from the recent past, and reported by the Chicago Business Litigation Lawyer Blog, the parties came to an agreement for the purchase and sale of the stock of the corporation doing business as an auto dealership. According to the decision, the parties reduced the agreement to writing, and the agreement was signed by the parties. The parties then continued to negotiate modifications to the agreement. And negotiate, and negotiate.
The Defendants Counsel sent the Plaintiff's counsel a revised agreement signed by the Defendant, that was represented to included all of the changes agreed by the parties. However, upon inspection, the document had some errors, including the Price in one section. (The price was correct in another part of the contract.) Defendants counsel asked that the document be returned for correction. Plaintiff's counsel did nothing for awhile. (This was a mistake.)
Eight or nine days later the Defendant notified the Plaintiff that he was selling the company to another party. Plaintiff's decided that they want to buy the dealership, so they made the necessary changes to the document, signed it and sent it back. The courts agreed that the changes by the Plaintiffs conformed to the parties intent and furthermore, they were NOT Material. The defendant completed the sale to the third party and naturally the Plaintiff's sued for breach of contract.
In the alternative the Plaintiff's argued that the sale of stock falls under the UCC. Since the UCC specifically excludes the sale of securities this argument was not persuasive.
The trial court's decision, affirmed on appeal, was that the Plaintiff's actions in modifying the document resulted in a counter-offer and no contract was made. This is a fun case, because there are some significant questions apparently not addressed by the court of appeals in their decision affirming the trial court decision.
The decision clearly states that the parties signed an agreement, and then negotiated changes. The court did not discuss why the first executed agreement was not valid. That's a good question, because if the first signed agreement met the requirements of a contract, the failure of the parties to agree on contract modifications does not void the written agreement.
Secondly, if the parties had clearly come to an agreement for the sale of the securities, why does this agreement need to be in writing?
Third, if there was no agreement prior to the execution of the contract by the Plaintiff, once the Plaintiff's learned that the defendant had entered into the another contract with another buyer (and this is not entirely clear) the Plaintiff's can not as a matter of law try to accept an offer to buy a business that they know has already been sold. Moreover, once the Defendant told the Plaintiff he was selling to another party - isn't this the same a withdrawing the offer?
Finally, there is another lesson to be learned. Parties can negotiate and negotiate until the cows come home. But, if you continue negotiating long enough, the deal will usually fall apart. Eventually parties get tired of negotiating and they want to move on. This case appears to be one where one of the parties decided to move on.
