Empro Manufacturing Co. v. Ball-Co Manufacturing Co.

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Empro Manufacturing Co. v. Ball-Co Manufacturing Co.
Court U.S. Court of Appeals, 7th Circuit
Citation 870 F.2d 423 (1989)
Date decided 1989

Facts

Ball-Co Manufacturing (defendant) floated its assets on the market and Empro Manufacturing (plaintiff) showed interest. Plaintiff sent defendant a three-page letter of intent to purchase the assets, with a proposed price of 2.4 million. The letter stated “Empro’s purchase shall be subject to the satisfaction of certain conditions precedent to closing including, but not limited to, the definitive Asset Purchase Agreement and among five other conditions the approval of the shareholders and board of directors at Empro. An agreement could not be made on the security interest, so Ball-Co began negotiating with someone else.


Procedural History

Empro filed a diversity suit contending that the letter of intent obliges Ball-Co to sell only to Empro, and asked for a restraining order. The district judge dismissed the complaint for failure to state a claim on which relief may be granted. Empro appealed based on the intent of the parties to be bound.


Issues

Whether a party is to be bound to a contract when in the formation of the contract a party makes the pact subject to a later definitive agreement.Whether the manifestation of an objective intent not to be bound or a subjectively understood intent to be bound should be upheld.


Holding/Decision

Judgment affirmed.


Reasoning

A party is not to be bound to a contract when the contract is made subject to a later definitive agreement and its terms are still being negotiated.The manifestation of an objective intent not to be bound takes precedence over a subjectively understood intent to be bound.