When contracts and subcontracts are negotiated, it is common for written drafts and redrafts to circulate between the parties, sometimes with a letter of intent to enter into a contract thrown into the mix, and sometimes with competing forms being used – a proposal or bid on one side, an expansive formal contract on the other. Occasionally this back-and-forth will produce disagreement on whether a contract was actually entered into, i.e., whether an offer has been accepted. The problem arises because acceptance doesn’t necessarily have to be in writing – and conversely, a signed writing doesn’t necessarily prove acceptance.
Just last week, in Skyrise Construction Group, Inc. v. Annex Construction, LLC, 956 F.3d 950 (7th Cir. 2020), a federal appeals court affirmed summary judgment for a general contractor against a subcontractor in a case where each party had signed the other’s form. The general contractor Annex requested bids to frame a multi-unit housing project in Wisconsin, and Skyrise submitted a bid to supply the rough framing carpentry labor. Annex sent back a Letter of Intent expressing its intention to “enter into a contract with Skyrise” for the work, and informing Skyrise that Annex would “work on getting you contract documents in the near future.” Skyrise immediately blocked off the project duration on its calendar and stopped pursuing other work for that period.
A few weeks later Annex sent Skyrise a six-page “Agreement Between Contractor and Subcontractor,” containing the general parameters of the agreement, along with a fourteen-page Exhibit A labeled “Subcontract General Conditions” detailing subjects such as timing, payment terms, insurance, modifications, and dispute resolution. Skyrise dragged its feet in responding, and ultimately requested that Annex sign Skyrise’s own proposal while Skyrise reviewed the contract documents. Annex did so, writing on the face of the document “Contract exhibit A.” Eventually Skyrise signed and returned the Proposed Contract, marked with some handwritten edits to the payment terms. Annex never signed that revised version.
Ultimately Annex decided to go with a different sub. Annex’s lawyer sent Skyrise a letter advising that Annex “will not be accepting and countersigning the Agreement as marked-up by Subcontractor and is therefore null and void.” 956 F.3d at 955. Skyrise sued, asserting that a contract was formed either when Annex signed Skyrise’s original framing proposal, or when Skyrise signed and returned Annex’s proposed contract.
The court rejected both assertions. It first reviewed the applicable Wisconsin law of contract formation: that there must be a “meeting of the minds” on the same material terms expressed by objective manifestations rather than subjective beliefs. (New Hampshire law is the same.) As to signing Skyrise’s proposal, the court said that by adding the words “Contract exhibit A” to it, Annex indicated that it “intended for it to become part of the final agreement, not a contract in and of itself” – and that Skyrise indicated a similar understanding by saying it was still reviewing the proposed contract. Thus, no contract was created “because neither party manifested an objective intent to do so at that time.” Id. at 957. As to Skyrise signing and returning a marked-up version of the proposed contract, the court said that by striking out its payment terms Skyrise was proposing “a material change to the contract” which Annex never accepted. Id. Hence, no contract was formed.
Skyrise demonstrates that getting a signature on a form in the hope of locking in a contract before all material terms have been agreed upon may be wasted ink. If both parties are not on the same page on all of the essential terms of the deal, signing other pages won’t help.
Interestingly, the court also rejected Skyrise’s insistence that Annex had verbally agreed to the change in payment terms, by pointing to language in the proposed contract stating that it superseded “all prior negotiations, representations or agreements, whether written or verbal.” Apparently Skyrise was tagged with having agreed to that provision by the act of signing without crossing it out. The court may have botched that one; any assumption that the parties had reached an agreement on everything not crossed out would seem to be at odds with the ultimate conclusion that there was no enforceable contract at all.
Just last week, in Skyrise Construction Group, Inc. v. Annex Construction, LLC, 956 F.3d 950 (7th Cir. 2020), a federal appeals court affirmed summary judgment for a general contractor against a subcontractor in a case where each party had signed the other’s form. The general contractor Annex requested bids to frame a multi-unit housing project in Wisconsin, and Skyrise submitted a bid to supply the rough framing carpentry labor. Annex sent back a Letter of Intent expressing its intention to “enter into a contract with Skyrise” for the work, and informing Skyrise that Annex would “work on getting you contract documents in the near future.” Skyrise immediately blocked off the project duration on its calendar and stopped pursuing other work for that period.
A few weeks later Annex sent Skyrise a six-page “Agreement Between Contractor and Subcontractor,” containing the general parameters of the agreement, along with a fourteen-page Exhibit A labeled “Subcontract General Conditions” detailing subjects such as timing, payment terms, insurance, modifications, and dispute resolution. Skyrise dragged its feet in responding, and ultimately requested that Annex sign Skyrise’s own proposal while Skyrise reviewed the contract documents. Annex did so, writing on the face of the document “Contract exhibit A.” Eventually Skyrise signed and returned the Proposed Contract, marked with some handwritten edits to the payment terms. Annex never signed that revised version.
Ultimately Annex decided to go with a different sub. Annex’s lawyer sent Skyrise a letter advising that Annex “will not be accepting and countersigning the Agreement as marked-up by Subcontractor and is therefore null and void.” 956 F.3d at 955. Skyrise sued, asserting that a contract was formed either when Annex signed Skyrise’s original framing proposal, or when Skyrise signed and returned Annex’s proposed contract.
The court rejected both assertions. It first reviewed the applicable Wisconsin law of contract formation: that there must be a “meeting of the minds” on the same material terms expressed by objective manifestations rather than subjective beliefs. (New Hampshire law is the same.) As to signing Skyrise’s proposal, the court said that by adding the words “Contract exhibit A” to it, Annex indicated that it “intended for it to become part of the final agreement, not a contract in and of itself” – and that Skyrise indicated a similar understanding by saying it was still reviewing the proposed contract. Thus, no contract was created “because neither party manifested an objective intent to do so at that time.” Id. at 957. As to Skyrise signing and returning a marked-up version of the proposed contract, the court said that by striking out its payment terms Skyrise was proposing “a material change to the contract” which Annex never accepted. Id. Hence, no contract was formed.
Skyrise demonstrates that getting a signature on a form in the hope of locking in a contract before all material terms have been agreed upon may be wasted ink. If both parties are not on the same page on all of the essential terms of the deal, signing other pages won’t help.
Interestingly, the court also rejected Skyrise’s insistence that Annex had verbally agreed to the change in payment terms, by pointing to language in the proposed contract stating that it superseded “all prior negotiations, representations or agreements, whether written or verbal.” Apparently Skyrise was tagged with having agreed to that provision by the act of signing without crossing it out. The court may have botched that one; any assumption that the parties had reached an agreement on everything not crossed out would seem to be at odds with the ultimate conclusion that there was no enforceable contract at all.
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