The Price Is Not Always Right—Fort Worth COA Takes a Close Look At Contract Formation

The Fort Worth Court of Appeal issued its opinion in Musallam v. Ali, Number 02-16-00282-CV, and upheld a jury award of $904,924 to Ali on a breach of contract suit involving the purchase and sale of a business. Musallam is important because the Fort Worth COA takes an intricate look into a specific element required to form a contract—the “meeting of the minds” element—to determine whether the parties agreed to all essential contract terms.

In July 2013, Musallam sued Ali to declare that an agreement the parties entered into for the sale of a business that distributes tobacco products to convenience stores was unenforceable and void because the parties did not agree on the total sales price. Ali counterclaimed for breach of contract for not closing on the sale. The jury in the trial court found that Musallam had breached the agreement and the trial court rendered judgment awarding Ali $904,924 in damages for past and future lost profits, plus prejudgment interest, attorneys’ fees, and costs. The Fort Worth COA affirmed.

The Fort Worth COA held that the jury is the appropriate factfinder to determine whether the parties reached a meeting of the minds on all essential terms of their contract. An essential term of a contract is one the parties regard as vitally important to their bargain. If the parties leave an essential term open for future negotiation a binding contract is not formed.

Here, the Fort Worth COA affirmed the jury’s finding that the parties reached a meeting of the minds on all the essential terms of the agreement, including the total sales price. The Court reached this conclusion despite the parties being unable to agree on the value of furniture, fixtures, and equipment (“FF&E”) prior to the closing date. The Court reasoned that the evidence established the parties either (1) left the value of the FF&E open for future agreement because its value was not an essential term; or (2) if an essential term, the parties agreed to other essential pricing terms in the agreement, giving rise to a presumption that they intended the FF&E to have a reasonable price.

The take away from this case is that some components of a total sales price may not always be an essential term for contract formation, and those components may need no more certainty than  a reasonableness presumption when surrounded by other essential pricing terms.

By: Schyler Parker

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