Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281 (1990)

Case Name: Quake Construction, Inc. v. American Airlines, Inc.
Plaintiff: Quake Construction, Inc.
Defendant: American Airlines, Inc. and Jones Brothers Construction Corporation
Citation: 141 Ill.2d 281 (1990)


Issue:
Whether the letter of intent from the defendant is an enforceable contract.

Key Facts: The defendant received an invitation to bid on a project and submitted a bid to the defendant. The defendant notified the plaintiff that it had been awarded the contract for the project and asked for the license numbers of the subcontractors it intended to use. The plaintiff told the defendant that he could not use the license numbers until he received a signed subcontract agreement. The defendant informed Quake that he would shortly receive a written contract but to induce Quake to enter into agreements with its subcontractors, Jones sent Quake a letter of intent. At a preconstruction meeting, Jones told Quake, the subcontractors, and government officials that Quake was the GC for the project. Immediately following the meeting, American Airlines informed Quake that their involvement was terminated.

 Procedural History: The trial court granted the defendant’s motion to dismiss but the Court of Appeals reversed the decision.

Holding: The letter of intent may be regarded as a contract in its own right: a contract to engage in negotiations. The letter of intent was ambiguous to the parties’ intent to be bound.

Judgment: The court remanded it back to the trial court to review more evidence, in addition to the LOI, on the parties’ intent.

Rule: The fact that parties contemplate that a formal agreement will eventually be executed does not necessarily render prior agreements mere negotiations, where it is clear that the ultimate contract will be substantially based upon the same terms as the previous document. (Common Law)

 

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