Title: Cochran v. Norkunas

State: maryland

Issuer: Maryland Supreme Court

Document:

Rebecca Cochran, et al. v. Eileen W. Norkunas 
No. 43, September Term, 2006.
CONTRACTS - FORMAL REQUISITES - LETTERS OF INTENT: Letter of intent
was not enforceable as a binding contract for the sale of real
property where the letter of intent unambiguously indicated that a
standard form contract would be delivered and specified how certain
terms in that contract would be construed.
CONTRACTS - FORMAL REQUISITES - OFFER AND ACCEPTANCE: Contract for
the sale of real property was not enforceable where the offeree did
not manifest acceptance of the contract by mailing or other action.
In the Circuit Court for Baltimore City
Case No. 24-C-04-002546
IN THE COURT OF APPEALS
OF MARYLAND
No. 43
September Term, 2006
REBECCA COCHRAN, ET AL. 
v.
EILEEN W. NORKUNAS
Bell, C.J.
Raker
        *Wilner
Harrell
Cathell
Battaglia
Greene,
JJ.
Opinion by Raker, J. 
Filed:   March 20, 2007
* Wilner, J. now retired, participated in the
hearing and conference of this case while an
active member of this Court; after being recalled
pursuant to the Constitution, Article IV, Section
3A, he also participated in the decision and
adoption of this opinion.
This case arises out of the execution of a letter of intent for the purchase of property
in Baltimore City between petitioners, Rebecca Cochran, et al., (“Buyers”) and respondent
Eileen W. Norkunas (“Seller”).  We granted certiorari to consider the following two
questions:
“1. When a contractual document, which states that it is a
complete agreement, contains an integration clause and a clause
stating that it cannot be modified except by an agreement in
writing signed by the parties is duly executed by all parties, is it
an error for a court to look outside of the four corners of the
document to determine that a contract was formed?
2. Is a negotiated letter of intent that contains all essential and
material terms of a proposed contract to be entered, supported
by consideration, and executed by all parties an enforceable
agreement under Maryland law?”
Cochran v. Norkunas, 393 Md. 477, 903 A.2d 416 (2006).  We shall hold that because the
parties did not intend to be bound, the letter of intent is unenforceable.  We shall also hold
that the contract is unenforceable because it was not accepted by the Seller.
I.
Eileen Norkunas is the owner of property known as 835 McHenry Street, Baltimore,
Maryland 21230.  The petitioners, Robert and Hope Grove, and Robert and Rebecca
Cochran, expressed their interest in purchasing the property.  Assisted by a real estate agent,
the Buyers drafted a handwritten letter of intent that spelled out key terms of an offer.  The
text of the letter of intent stated as follows:
1 The Buyers jointly stipulated that Brian Best was their real estate agent.  Ms.
Norkunas did not have an agent.
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3/7/04
LETTER OF INTENT
We, Rebecca Cochran, Robert Cochran, Hope Grove and Robert
Grove, Buyers – offer to buy 835 McHenry Street, Baltimore,
Md. 21230 for $162,000.  Payment by $5,000 check, this date
and $157,000 by certified or cashiers funds not later than April
17, 2004.
A standard form Maryland Realtors contract will be delivered to
Seller within 48 hours.  Seller to pay only 1/2 normal transfer
taxes and a 3% commission to Long & Foster.  All other costs
of closing to be paid by buyers.
The contract will contain a financing requirement for buyers, but
buyers will guarantee closing and not invoke the financing
contingency.
We will delete the standard home inspection contingency.
[written in margin:] Buyer to honor seller’s lease and offer
tenants any renewal up to 12 months.
Buyers:
Robert Cochran:   /s/   
Rebecca Cochran:   /s/   
Hope Grove:   /s/   
Robert Grove:   /s/   
Agent:
Brian Best:   /s/   [1]
Seller:
Eileen W. Norkunas:   /s/   
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The Buyers presented the letter of intent and a deposit check for $5,000 to Ms.
Norkunas.  The parties signed the letter of intent on March 7, 2004.  The Seller accepted the
check, but there is no evidence in the record that the check was ever deposited or negotiated
by the Seller.
Shortly after signing the letter of intent, Ms. Norkunas received a package of
documents from the Buyers’ real estate agent.  The package included a cover letter that stated
as follows:
Dear Ms. Norkunas,
It was a pleasure meeting you yesterday.  Enclosed with this
folder are all the documents needed to complete the sale of your
home.  The basic Real Estate contract, along with a couple of
documents I need you to fill out to ratify the contract.  The first
is a Disclosure/Disclaimer.  You can either fill out the first 3
pages (the Disclosure) or you can just sign the last page (the
Disclaimer).  Also included is a property fact sheet.  This is just
basic information on the property that needs to accompany the
contract.  The Groves and the Cochrans are so excited about
your home.  If you have ANY questions please feel free to call
me or have someone near you look over the contract.  Rest
assure[d] that we want this to go as smooth as possible for you
and both the Groves and Cochrans asked me to tell you if there
is anything they can do please feel free to ask.  I look forward to
hearing from you.
You can either fax me the contract and disclaimer back or I’ll
include a Fed-X envelope for you to send back.
Thank you again
   /s/   
Brian Best
2 The addenda were titled as follows: (1) Conventional Financing Addendum to
Contract of Sale, (2) Understanding Whom Real Estate Agents Represent, (3) General
Addendum to Contract of Sale, (4) Notice to Purchaser of Purchaser’s Rights Under
Maryland’s Property Disclosure Law, (5) Notice to Buyer, Addendum Required by Maryland
Homeowners Association Act, (6) Disclosure of Information on Lead-Based Paint and Lead-
Based Paint Hazards, (7) Affiliated Business Arrangement Disclosure Statement, (8) Special
Conditions (1): Commission to Long And Foster Realtors, (9) Notice to Buyers of Property
in Baltimore City, (10) Property Inspections, (11) Commission, Fee Sharing and Bonus
Disclosure, and (12) Sellers Proceeds from Settlement (Sellers Net).
3 For example, the contract provided that: (1) time was of the essence, (2) settlement
would occur on April 17, 2004, (3) the Seller would pay the costs of any agricultural land
transfer tax, (4) the Seller would pay to repair any termite infestation damage, (5) the Seller
would ensure all electrical, heating, air conditioning, plumbing, and any other mechanical
systems and related equipment, appliances, and smoke detectors were in working condition,
and (6) certain items of personal property would be included in the conveyance of the
property.
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The package of documents contained a number of pre-printed forms, including a form
titled “Residential Contract of Sale,” published by the Maryland Association of Realtors,
together with several form addenda.2  The contract incorporated the terms of the letter of
intent, and it contained several additional provisions that were not included in the letter of
intent.3  Many of the addenda appear to be forms published by the Maryland Association of
Realtors.  At least one of the addenda appears to be a form that the Buyers’ broker developed.
Some of the documents had blanks completed by the Buyers and/or their agent, including the
financing contingency form.  The “Property Inspections” contingency addendum that was
included appears to have been struck through, as promised in the letter of intent.
After receiving the package of documents, the Seller read the contract and addenda.
The Seller signed the contract and addenda on the majority of the signature lines, but the
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Seller crossed out and did not sign the financing contingency provisions in paragraphs 20 and
21.  After reviewing the documents, the Seller did not return the documents to the Buyers or
their agent, however.  Nor did she otherwise communicate to the Buyers or their agent that
she had accepted their offer.  The Seller simply retained the signed documents.  After a week
or so had passed, the Seller communicated to the Buyers that she was taking the property off
the market.
The Buyers initially filed suit seeking specific performance of the letter of intent.  At
her deposition, the Seller, Ms. Norkunas, was asked about her actions with regard to the letter
of intent and the package of documents.  During this deposition, the Buyers first learned that
the Seller had signed portions of the documents.  The colloquy proceeded as follows:
“[Ms. Norkunas]: I was probably going through [the contract
and addenda] at the time and kind of getting overwhelmed the
more I went through it and questioning parts and kind of
scratching out some parts.  This was what I thought was going
to be my counteroffer.  I signed what I thought was going to be
a counteroffer, and then it just got so overwhelming, it was too
much.  It was just too much.
[Buyers’ counsel]: Well, you did sign the document; correct?
[Ms. Norkunas]: I signed my counteroffer.
[Buyers’ counsel]: On Page 9 of 9 of Exhibit No. 3 [the
contract] is that your signature on the left-hand side, the third
signature down?
[Ms. Norkunas]: Yes.
[Buyers’ counsel]: And that was placed by you on the document;
correct?
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[Ms. Norkunas]: Un-huh.
[Buyers’ counsel]: It was placed there on March 11, 2004?
[Ms. Norkunas]: Un-huh.
[Buyers’ counsel]: Yes?
[Ms. Norkunas]: Yes.
***
[Buyers’ counsel]: What in the contract form that was sent to
you, Exhibit 3, were terms that were not contained in the
original offer as you state or – I’ll just limit it to that.  What in
the contract contained new terms that were not in the original
offer?
[Ms. Norkunas]: I think the financing.
[Buyers’ counsel]: For the record, state what paragraph number
you’re pointing to [on the contract].
[Ms. Norkunas]: Pardon me.  Page 4 of 9, Paragraphs 20, 21.
[Buyers’ counsel]: Those are the ones you in fact crossed out;
right?
[Ms. Norkunas]: Yes. I was really – I don’t know if this adheres
to your same question, but I was really very conflicted about
who was representing me in this deal, very conflicted.
[Buyers’ counsel]: Well, did you call Mr. Best or anybody
involved in that document, the letter of intent and the contract,
and say there are new terms here that aren’t in the original offer;
I think they should be taken out?
[Ms. Norkunas]: No, I didn’t say that.  I was just getting so over
my head and I wasn’t being represented.  I knew I was making
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a big mistake, and I just changed my mind.  I said I can’t do this.
I can’t do this.
[Buyers’ counsel]: So is it accurate to say that you never called
Mr. Best back or Mr. Grove, Mrs. Grove, Mr. Cochran, Mrs.
Cochran and said there are some things about this contract I
have a problem with; can we take them out or can you explain
them to me?  You didn’t do that, did you?
[Ms. Norkunas]: No.”
After learning for the first time at Ms. Norkunas’ deposition that she had privately
signed the contract and addenda that had been transmitted to her, the Buyers filed an
amended complaint in which they asked the trial court to order that “the Letter of Intent and
Contract of Sale between the parties be specifically enforced.”  The parties filed cross
motions for summary judgment.
The parties stipulated that “the [Buyers] were not aware that [Ms. Norkunas] signed
(and crossed out paragraphs 20 and 21 of) the Residential Contract of Sale dated March 7,
2004 until a copy of the Contract was produced by [Ms. Norkunas] through discovery in
these proceedings.”  The Buyers also filed an affidavit asserting that the changes Ms.
Norkunas had made to the unreturned contract documents would have been acceptable to the
Buyers.
The Circuit Court for Baltimore City granted summary judgment in favor of the
Buyers.  The Order granting summary judgment in favor of the Buyers stated that the court
was ordering specific performance because “the Letter of Intent and the Maryland Standard
Residential Contract signed by all parties constitute the contract in this case and together they
4 The Buyers moved to dismiss the appeal, alleging that the order did not fully dispose
of all claims, such as ancillary damages and attorneys’ fees.  Ms. Norkunas responded that
the court’s order was immediately appealable pursuant to Md. Code (1973, 2006 Repl.Vol.)
§ 12-303(3)(v) of the Courts and Judicial Proceedings Article, which authorizes an
interlocutory appeal from an order “[f]or the sale, conveyance, or delivery of real or personal
property.”  The Court of Special Appeals held that the Circuit Court’s order was appealable
pursuant to this provision.  The issue is not before this Court.
-8-
constitute an enforceable contract for sale.”  Accordingly, the court ordered that Ms.
Norkunas “is to settle the property known as 835 McHenry Street in Baltimore, Maryland
with Plaintiffs pursuant to the terms of the executed contract within 60 days.”  Ms. Norkunas
appealed.4
The Court of Special Appeals, reviewing whether it was error to grant summary
judgment for the Buyers, reversed the Circuit Court, holding that the Circuit Court erred in
determining that an enforceable contract was formed between the parties.  Norkunas v.
Cochran, 168 Md. App. 192, 895 A.2d 1101 (2006).  The intermediate appellate court first
concluded that the language of the letter of intent did not indicate that the parties had reached
final agreement at the time the letter of intent was signed.  Second, the court held that the
Seller did not accept the contract, even though she signed the documents, because the Seller
did not mail the signed contract to the Buyers so as to communicate her acceptance.  Based
on these holdings, the Court of Special Appeals vacated the Circuit Court’s judgment.  The
Buyers filed a petition for a writ of certiorari, which we granted.  Norkunas, 393 Md. 477,
903 A.2d 416.
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II.
We review de novo a circuit court’s grant of summary judgment.  Pasteur v.
Skevofilax, 396 Md. 405, 440, 914 A.2d 113, 134 (2006).  We independently review the
record to determine whether the parties properly generated a dispute of material fact and, if
not, whether the party in whose favor judgment was entered is entitled to judgment as a
matter of law.  Md. Rule 2-501(f).  See also Hill v. Knapp, __ Md. __, __, 914 A.2d 1193,
1199 (2007).  On appeal from an order entering summary judgment, we review only the legal
grounds relied upon by the trial court in granting summary judgment.  Md. Rule 2-501(f).
See also River Walk Apartments, LLC v. Twigg, 396 Md. 527, 541-42, 914 A.2d 770, 778-79
(2007).  In the case sub judice, there is no genuine dispute of material fact.
5 Preliminary agreements – whether oral or in writing – cannot be easily generalized,
as they range from firm binding commitments to agreements that presuppose no binding
obligations on the parties.  See Burbach Broadcasting Co. of Del. v. Elkins Radio, 278 F.3d
401, 406-07 (4th Cir. 2002); 1 JOSEPH M. PERILLO, CORBIN ON CONTRACTS § 2.8 and § 2.9,
p. 131-62 (Rev. ed. 1993).  Several courts and commentators have found it helpful to
distinguish between different types of preliminary agreements.  See 1 E. ALLAN
FARNSWORTH, FARNSWORTH ON CONTRACTS § 3.26b, p. 391-400 (3rd ed. 2004) (discussing
categories and compiling cases); C ORBIN ON CONTRACTS, supra at § 2.8 and § 2.9, p. 131-62
(addressing partial agreements and situations where formal documents are contemplated).
Courts have identified four main categories of preliminary agreements; these
categories are similar to those that have been identified for letters of intent.  Cf. CORBIN ON
CONTRACTS, supra at § 2.9, p. 157-58.  Judge Pierre N. Leval’s often cited decision,
Teachers Ins. and Annuity Ass’n v. Tribune Co., 670 F.Supp. 491 (S.D.N.Y. 1987), described
two types of preliminary agreements that have binding force.  A fully binding preliminary
agreement (also known as a “Tribune Type I”) occurs when the parties have reached
complete agreement (including the agreement to be bound) on all issues perceived to require
negotiation.  Id. at 498.  For such an agreement, a more elaborate formalization of the
agreement is not necessary because the agreement is preliminary only in form and is thus
enforceable as it stands.  Id.  The second type, a binding preliminary commitment (also
known as a “Tribune Type II”), exists when the parties accept a mutual commitment to
negotiate together in good faith regarding any remaining open terms.  Id.  See also CORBIN
ON CONTRACTS, supra at § 2.8(b), p. 142-44.  If negotiations fail, no final contract exists
because this type of preliminary agreement does not commit the parties to their ultimate
contractual objective, in contrast to a “Tribune Type I” agreement.  CORBIN ON CONTRACTS,
supra at § 2.8(b), p. 142-44.
The types of preliminary agreements that are generally not binding include the
agreement with open terms, where the parties agree to be bound by some terms but leave
others open for the court to fill in.  See FARNSWORTH ON CONTRACTS, supra at § 3.26b, p.
399.  The fourth type of preliminary agreement, one that is not considered an enforceable
agreement, is an agreement to agree.  See CORBIN ON CONTRACTS, supra at § 2.8(a), p. 131-
42.
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III.
A letter of intent is a form of a preliminary agreement.5  Letters of intent have led to
“much misunderstanding, litigation and commercial chaos.”  1 JOSEPH M. PERILLO, CORBIN
ON CONTRACTS § 1.16, p. 46 (Rev. ed. 1993).  It is recognized that some letters of intent are
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signed with the belief that they are letters of commitment and, assuming this belief is shared
by the parties, the letter is a memorial of a contract.  Id.  In other cases, the parties may not
intend to be bound until a further writing is completed.  Id.
Commentators have analyzed the variety of cases in which parties contemplated
memorializing their terms of agreement into a more formal document.  Based on this
analysis, they have classified letters of intent into four categories.  See CORBIN ON
CONTRACTS, supra at § 2.9, p. 157-58.  These four categories are described as follows:
“(1) At one extreme, the parties may say specifically that they
intend not to be bound until the formal writing is executed, or
one of the parties has announced to the other such an intention.
(2) Next, there are cases in which they clearly point out one or
more specific matters on which they must yet agree before
negotiations are concluded.  (3) There are many cases in which
the parties express definite agreement on all necessary terms,
and say nothing as to other relevant matters that are not
essential, but that other people often include in similar contracts.
(4) At the opposite extreme are cases like those of the third
class, with the addition that the parties expressly state that they
intend their present expressions to be a binding agreement or
contract; such an express statement should be conclusive on the
question of their ‘intention.’”
Id. (internal citations omitted).  A valid contract generally has been made if a letter of intent
properly falls within either the third or the fourth category.  Id. at 158.
IV.
We must decide whether the negotiated letter of intent at issue in this case created an
enforceable agreement under Maryland law.  Petitioners assert that the letter of intent
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constitutes an enforceable contract because it was formed by offer and acceptance, supported
by consideration, contained all definite and material terms, and was signed by the parties.
Respondent replies that the letter of intent was not an enforceable contract because it was not
intended, based on an objective review, to be the parties’ final expression of their mutual
assent.  Our analysis begins with whether the letter of intent constitutes an enforceable
agreement.
It is universally accepted that a manifestation of mutual assent is an essential
prerequisite to the creation or formation of a contract.  See Creel v. Lilly, 354 Md. 77, 101,
729 A.2d 385, 398 (1999); Eastover Stores, Inc. v. Minnix, 219 Md. 658, 665, 150 A.2d 884,
888 (1959).  Manifestation of mutual assent includes two issues: (1) intent to be bound, and
(2) definiteness of terms.  See CORBIN ON CONTRACTS, supra at § 2.8, p. 131.  Failure of
parties to agree on an essential term of a contract may indicate that the mutual assent required
to make a contract is lacking.  See Safeway Stores v. Altman, 296 Md. 486, 489-90, 463 A.2d
829, 831 (1983); Klein v. Weiss, 284 Md. 36, 63, 395 A.2d 126, 141 (1978).  If the parties
do not intend to be bound until a final agreement is executed, there is no contract.  See
Eastover Stores, Inc., 219 Md. at 665, 150 A.2d at 888; Peoples Drug Store v. Fenton, 191
Md. 489, 494, 62 A.2d 273, 275-76 (1948).  See also CORBIN ON CONTRACTS, supra at § 2.9,
p. 151; 1 RICHARD A. LORD, WILLISTON ON CONTRACTS § 4:8, p. 302 (Rev. ed. 1990);
Restatement (Second) of Contracts § 27 (1981).  In the case sub judice, we assume arguendo
that the letter of intent contained all essential material terms, and we need not address
6 We note that parol evidence may be used to contravene the legal existence of a
contract.  Gordy v. Ocean Park, Inc., 218 Md. 52, 62, 145 A.2d 273, 278 (1958).  See also
Burke v. Dulaney, 153 U.S. 228, 234, 14 S.Ct. 816, 818, 38 L.Ed. 698 (1894); In re Murphy,
810 F.2d 454, 455 (4th Cir. 1987).  Parol evidence presupposes the existence of a legally
effective written agreement.  Thus, parol evidence need not be excluded until it is established
that a contract is in effect.
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whether the letter of intent contained all the material terms essential to complete a contract,
because it is clear that the parties did not intend to be bound by the letter of intent alone.
Courts and commentators have identified several factors that may be helpful in
determining whether the parties have manifested an intention to be bound.  Judge Pierre N.
Leval, writing for the United States District Court for the Southern District of New York, set
forth five factors that have been widely cited by other courts: (1) the language of the
preliminary agreement, (2) the existence of open terms, (3) whether partial performance has
occurred, (4) the context of the negotiations, and (5) the custom of such transactions, such
as whether a standard form contract is widely used in similar transactions.  Teachers Ins. and
Annuity Ass’n v. Tribune Co., 670 F.Supp. 491, 499-503 (S.D.N.Y. 1987).  See also Burbach
Broadcasting Co. of Del. v. Elkins Radio, 278 F.3d 401, 408 (4th Cir. 2002).
Comment (c) to the Restatement (Second) of Contracts identifies additional factors
including: (1) whether the agreement has few or many details, (2) whether the amount
involved is large or small, and (3) whether it is a common or unusual contract.  Restatement
(Second) of Contracts § 27, cmt. c.  See also CORBIN ON CONTRACTS, supra at § 2.9, p. 159.
It is recognized that any or all of these factors may be shown by oral testimony or by
correspondence or other preliminary or partially complete writings.6  See Restatement
7 The interpretation of a contract, including the question of whether the language of
a contract is ambiguous, is a question of law subject to de novo review.  See Towson v.
Conte, 384 Md. 68, 78, 862 A.2d 941, 946 (2004).
8 The United States Court of Appeals for the Fourth Circuit described the challenge
that a court faces when granting summary judgment on a matter of contract interpretation in
Washington Metropolitan Area Transit Authority v. Potomac Investment Properties,
Incorporated, 476 F.3d 231 (4th Cir. 2007).  The Fourth Circuit stated as follows:
“A court faces a conceptually difficult task in deciding whether to grant
summary judgment on a matter of contract interpretation.  Only an
unambiguous writing justifies summary judgment without resort to extrinsic
evidence, and no writing is unambiguous if susceptible to two reasonable
interpretations.  The first step for a court asked to grant summary judgment
based on a contract’s interpretation is, therefore, to determine whether, as a
matter of law, the contract is ambiguous or unambiguous on its face.  If a court
properly determines that the contract is unambiguous on the dispositive issue,
it may then properly interpret the contract as a matter of law and grant
(continued...)
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(Second) of Contracts § 27, cmt. c.  Each of the above-named factors may be relevant in
determining whether a letter of intent is enforceable, but the most important factor is the
language of the agreement.  See Teachers Ins., 670 F.Supp. at 499.
We analyze the parties’ intent to be bound according to the principles of Maryland
contract law because petitioner asserts that a valid contract was formed.  Maryland adheres
to the principle of the objective interpretation of contracts.7  See Myers v. Kayhoe, 391 Md.
188, 198, 892 A.2d 520, 526 (2006); Tomran v. Passano, 391 Md. 1, 13, 891 A.2d 336, 344
(2006); Kasten Constr. v. Rod Enterprises, 268 Md. 318, 328, 301 A.2d 12, 17-18 (1973).
If the language of a contract is unambiguous, we give effect to its plain meaning and do not
contemplate what the parties may have subjectively intended by certain terms at the time of
formation.8  See Dennis v. Retirement System, 390 Md. 639, 656-57, 890 A.2d 737, 747
8(...continued)
summary judgment because no interpretive facts are in genuine issue.  Even
where a court, however, determines as a matter of law that the contract is
ambiguous, it may yet examine evidence extrinsic to the contract that is
included in the summary judgment materials, and, if the evidence is, as a
matter of law, dispositive of the interpretative issue, grant summary judgment
on that basis.  If, however, resort to extrinsic evidence in the summary
judgment materials leaves genuine issues of fact respecting the contract’s
proper interpretation, summary judgment must of course be refused and
interpretation left to the trier of fact.
Therefore, summary judgment is appropriate when the contract in
question is unambiguous or when an ambiguity can be definitively resolved by
reference to extrinsic evidence.”
Id. at 235 (internal citations omitted).
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(2006); Rourke v. Amchem, 384 Md. 329, 354, 863 A.2d 926, 941 (2004).  Thus, our search
to determine the meaning of a contract is focused on the four corners of the agreement.
Walton v. Mariner Health, 391 Md. 643, 660, 894 A.2d 584, 594 (2006).
Under the objective theory of contracts, we look at what a reasonably prudent person
in the same position would have understood as to the meaning of the agreement.  Id.
Ambiguity arises if, to a reasonable person, the language used is susceptible of more than one
meaning or is of doubtful meaning.  See United Services v. Riley, 393 Md. 55, 80, 899 A.2d
819, 833 (2006).  As we have previously explained:
“A court construing an agreement under [the objective theory]
must first determine from the language of the agreement itself
what a reasonable person in the position of the parties would
have meant at the time it was effectuated.  In addition, when the
language of the contract is plain and unambiguous there is no
room for construction, and a court must presume that the parties
meant what they expressed.  In these circumstances, the true test
of what is meant is not what the parties to the contract intended
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it to mean, but what a reasonable person in the position of the
parties would have thought it meant.”
General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261, 492 A.2d 1306, 1310
(1985).  When determining intent, the “customary, ordinary, and accepted meaning” of the
language is used.  Walton, 391 Md. at 660, 894 A.2d. at 594.  In addition, Maryland utilizes
the following rule of construction when interpreting contracts:
“A recognized rule of construction in ascertaining the true
meaning of a contract is that the contract must be construed in
its entirety and, if reasonably possible, effect must be given to
each clause so that a court will not find an interpretation which
casts out or disregards a meaningful part of the language of the
writing unless no other course can be sensibly and reasonably
followed.”
Sagner v. Glenangus Farms, 234 Md. 156, 167, 198 A.2d 277, 283 (1964).
V.
We first review the language of the letter of intent to determine if the parties intended
to be bound.  The letter of intent is a one-page, handwritten document with essentially five
paragraphs.  The first paragraph states that the Buyers “offer to buy” the property for
$162,000 with payment “by $5,000 check, this date and $157,000” not later than April 17,
2004.  The second paragraph states that a “standard form Maryland Realtors Contract will
be delivered to Seller within 48 hours” (emphasis added).  The letter of intent also sets forth
some financing details, specifically stating that “[t]he contract will contain a financing
requirement for buyers, but buyers will guarantee closing and not invoke the financing
contingency” (emphasis added).  The Buyers also stated that “[w]e will delete the standard
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home inspection contingency” (emphasis added).  Finally, the letter of intent states in the
margin that, “Buyer to honor seller’s leases.”
We conclude that a reasonable person would have understood the letter of intent to
mean that a formal contract offer was to follow the letter of intent.  Three of the paragraphs
in the letter of intent make direct reference to the Maryland Realtors Contract and the terms
that shall be included in that contract.  The plain language of the letter of intent in this case
is unambiguous and indicates clearly that the parties intended to finalize the property sale
through a standard form Maryland Realtors Contract.
This Court has noted previously that parties may “enter into a binding informal or oral
agreement to execute a written contract; and, if the parties contemplate that an agreement
between them shall be reduced to writing before it shall become binding and complete, there
is no contract until the writing is signed.”  Eastover Stores, Inc., 219 Md. at 665, 150 A.2d
at 888.  In Eastover Stores, Inc., the owner of a shopping center contended that an
enforceable contract was entered into when the contractors’ bid was accepted, as opposed
to when a formal written agreement was executed by the parties approximately one month
later.  Id. at 664-65, 150 A.2d at 887-88.  We noted that parties who contemplated that their
agreement would be reduced to a final writing before it would become binding were at liberty
to withdraw from negotiations prior to when the final writing is signed.  Id. at 665, 150 A.2d
at 888.  We then affirmed the lower court’s determination that the contractors had not
manifested their assent to final formation of the contract prior to when the agreement was
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finally executed by the contractors and delivered to the shopping center owner.  Id. at 666,
150 A.2d at 888.
Similarly, in Peoples Drug Stores, 191 Md. 489, 62 A.2d 273, we held that the parties
did not intend to conclude their lease and building contract via correspondence letters, but
were only settling the terms of a future agreement that they planned to enter after the
particulars were completely reconciled.  Id. at 495, 62 A.2d at 276.  We summarized the
relevant contract law as follows:
“It is familiar law that a valid contract may be entered into by
letters.  Where one party makes a definite offer by letter and the
other party accepts the offer unconditionally on the same terms
on which it was made, the letters constitute a binding contract.
But, of course, the parties can make the completion of their
contract depend upon the execution of a written instrument.  The
question whether the parties negotiating a contract intended to
be bound by their oral agreement but contemplated a written
instrument merely as evidence of their agreement, or whether
they did not intend to bind themselves until a contract was
prepared and signed by them, must be decided from the facts
and circumstances in each particular case.  If it appears that the
terms of the contract are in all respects definitely understood and
agreed upon, and there is nothing left for future settlement, and
that a part of the understanding of the parties is that a written
contract embodying these terms shall be executed by them to
serve merely as evidence of their agreement, the mere fact that
the parties understood that the contract should be reduced to
writing does not leave the transaction incomplete and without
binding force.  If, on the other hand, it appears that the parties,
although they agreed upon all the terms of the contract,
intended to have them reduced to writing and signed before the
bargain should be considered as complete, neither party will be
bound until that is done, as long as the contract remains without
any acts done under it on either side.”
9 We note that the label “letter of intent” is not necessarily controlling, although it may
be a helpful indicator of the parties’ intentions.  See Burbach Broadcasting Co. of Del. v.
Elkins Radio, 278 F.3d 401, 406 (4th Cir. 2002) (“Calling a document a ‘letter of intent’
implies, unless circumstances suggest otherwise, that the parties intended it to be a
nonbinding expression in contemplation of a future contract.” (emphasis in original));
Teachers Ins. and Annuity Ass’n v. Tribune Co., 670 F.Supp. 491, 497 (S.D.N.Y. 1987)
(“Labels such as ‘letter of intent’ or ‘commitment letter’ are not necessarily controlling
although they may be helpful indicators of the parties’ intentions.”).  Similarly, express
conditions are indicative of parties’ intent.  See, e.g., Paramount Brokers, Inc. v. Digital
River, Inc., 126 F.Supp.2d 939, 947 (D.Md. 2000) (concluding that an express condition in
a letter showed the parties’ intent to make a finalized agreement); Phoenix Mut. Life Ins. v.
Shady Grove Plaza Ltd., 734 F.Supp 1181, 1186 (D.Md. 1990) (holding that the parties did
not enter an enforceable contract where a letter of intent was expressly non-binding);
Teachers Ins., 670 F.Supp. at 507-08 (determining that a letter of intent which expressly
stated it would be binding was an enforceable contract).
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Id. at 493-94, 62 A.2d at 275-76 (internal citations omitted) (emphasis added).  In Peoples
Drug Stores, the offer and acceptance letters indicated that the final agreement was “subject
to approval of the lease.”  Id. at 492, 62 A.2d at 275.  We concluded that the parties intended
to be bound by a final agreement that was carefully drawn and that the correspondence
leading up to that agreement was not enforceable.  Id. at 494-95, 62 A.2d at 276.
In the case sub judice, the letter of intent states explicitly that a “standard form
Maryland Realtors Contract will be delivered to Seller within 48 hours” and describes how
certain terms of that contract will be construed.9  We conclude that the language in the letter
of intent is indicative of an intent to memorialize the property sale through a final standard
form contract, just as a final agreement was intended by the parties in Eastover Stores, Inc.
and Peoples Drug Stores.  Here, there is no question that the parties demonstrated an intent
to use a Maryland Realtors Contract to formalize their agreement.
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Petitioner’s assertion that the letter of intent is enforceable because it was formed by
offer and acceptance, supported by consideration, satisfied the statute of frauds, and
contained all definite and material terms is unpersuasive because there is no binding contract
if the parties do not intend to be bound until a formal document is executed.  See Eastover
Stores, Inc., 219 Md. at 665, 150 A.2d at 888; Peoples Drug Stores, 191 Md. at 494, 62 A.2d
at 275-76.  See also CORBIN ON CONTRACTS, supra at § 2.9, p. 151; WILLISTON ON
CONTRACTS, supra at § 4:8, p. 302; Restatement (Second) of Contracts § 27; Restatement
(First) of Contracts § 26 (1932).  As stated by Professor Corbin, “If the court is convinced
that the parties intended not to be bound until the formal document is executed, there is no
contract until its execution by both parties.”  CORBIN ON CONTRACTS, supra at § 2.9, p. 151.
The language of the letter of intent does not support the Buyers’ contention that the
parties had reached a final agreement regarding the sale of the property at the time when the
letter of intent was signed because the parties had no intent to be bound until the standard
form Maryland Realtors Contract was signed.  Thus, the letter of intent is not an enforceable
contract for a sale of the property and is not subject to specific performance.  See Post v.
Gillespie, 219 Md. 378, 386, 149 A.2d 391, 396 (1959) (holding that specific performance
is not an available remedy when a valid and enforceable contract is lacking).  The letter of
intent does not fall into one of the categories of enforceable letters of intent or preliminary
agreements.  See CORBIN ON CONTRACTS, supra at § 2.9, p. 157-58; Teachers Ins., 670
F.Supp. at 491.  We hold that the letter of intent is the type of preliminary “agreement to
10 Because the parties’ intent can be discerned on the face of the letter of intent, we
do not consider other factors that have been utilized to determine whether parties have
manifested an intent to be bound.  For example, we do not consider the relevance of the fact
that the Buyers delivered a deposit check of $5,000 upon the signing of the letter of intent.
The Buyers have not alleged that the Seller negotiated the check improperly or that the Seller
ever negotiated the check, and these issues are not before this Court.  We need consider only
the language in the letter of intent stating that the Buyers offered to buy the property “by
$5,000 check, this date and $157,000 by certified or cashiers funds.”  The aforementioned
language expresses the Buyers’ offer, but does not persuade us that transfer of the deposit
check indicated a finalized sale of the property.
11 In their petition for writ of certiorari, petitioners ask whether it is error for a court
to look outside the four corners of a document to determine if a contract was formed.  As
discussed supra, note 6, extrinsic evidence may be used to contravene the legal existence of
a contract.  Thus, on review of a summary judgment motion where there are no disputed
material facts, a court’s analysis may consider all the facts and circumstances of the case.
The parties’ briefs do not focus on the question presented in the writ of certiorari, but ask us
to consider whether the contract was enforceable.  Thus, we address this question infra.
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agree” that has generally been held unenforceable in Maryland.10  See Horsey v. Horsey, 329
Md. 392, 420, 620 A.2d 305, 319 (1993).
VI.
We now consider whether the standard Maryland Realtor’s Contract is enforceable.11
Petitioners argue that the contract is enforceable because the document states that it is a
complete agreement, contains an integration clause and a clause stating that it cannot be
modified except by an agreement in writing signed by the parties, and was duly executed by
all parties.  Petitioners further assert that the Court of Special Appeals erred by holding that
delivery of the contract by the Seller was required to create an enforceable contract.
Respondent replies that the contract was not enforceable because it was neither delivered nor
12 Respondent asserts that, in crossing out paragraphs 20 and 21 of the contract, she
converted the document into a counteroffer.  Because of our holding, we need not determine
whether the changes made by respondent to the contract and addenda would have required
further assent from the Buyers in order to complete formation of the contract.
-22-
manifested through the Seller’s acts, and, at most, the signed contract represented the Seller’s
counteroffer, as opposed to acceptance, which was not communicated to the Buyers.12  We
hold that the Seller did not accept the contract, and thus it is not enforceable.
Creation of a contract requires an offer by one party and acceptance by the other party.
See Bramble. v. Thomas, 396 Md. 443, 455, 914 A.2d 136, 143 (2007); Buffalo Steel Co. v.
Kirwan, 138 Md. 60, 64, 113 A. 628, 630 (1921).  Acceptance of an offer is requisite to
contract formation, and common to all manifestations of acceptance is a demonstration that
the parties had an actual meeting of the minds regarding contract formation.  See Creel, 354
Md. at 101, 729 A.2d at 398 (reiterating that to establish a contract the minds of the parties
must be in agreement as to its terms); Pavel v. A.S. Johnson, 342 Md. 143, 162-63, 674 A.2d
521, 531 (1996) (holding that no contract was formed because there was no meeting of the
minds).
Acceptance may be manifested by acts as well as by words.  See, e.g., Porter v.
General Boiler Casing Co., 284 Md. 402, 411, 396 A.2d 1090, 1095 (1979) (determining that
summary judgment was inappropriate where a material issue of fact existed as to whether a
parties’ conduct clearly manifested an intention to accept and to be bound by the terms of the
contract); Chesapeake, Etc. v. Manitowoc, 232 Md. 555, 567, 194 A.2d 624, 630 (1963)
(receipt of check finalized a contract of sale); Envelope Co. v. Balto. Post Co., 163 Md. 596,
13 The cover letter enclosed with the contract and addenda indicates that the Buyers’
expected the Seller to respond in a manner that would follow the principles established in the
postal acceptance rule.  The cover letter states, “[y]ou can either fax me the contract and
disclaimer back or I’ll include a Fed-X envelope for you to send back.”
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605, 163 A. 688, 691 (1933) (holding that where plaintiff delivered as per the contract and
defendant accepted such items, “an acceptance may be indicated by acts as well as by
words”).  In some cases, we have held that silence or inaction upon receipt of an offer may
constitute acceptance, but this is the exception and not the general rule.  See Teamsters v.
Corroon Corp., 369 Md. 724, 738 n.3, 802 A.2d 1050, 1058 n.3 (2002) (stating that as “a
general rule of contract law, silence and inaction upon receipt of an offer do not constitute
an acceptance of the offer”); cf. GEICO v. Medical Services, 322 Md. 645, 655, 589 A.2d
464, 468-69 (1991) (silence and inaction can operate as an acceptance of an offer in a few
limited circumstances).  Silence is generally not to be considered an acceptance of an offer
unless the parties had agreed previously that silence would be an acceptance, the offeree has
taken the benefit of the offer, or because of previous dealings between the parties, it is
reasonable that the offeree should notify the offeror if she does not intend to accept.  See
Attorney Griev. Comm’n v. McIntire, 286 Md. 87, 93, 405 A.2d 273, 277 (1979).  See also
CORBIN ON CONTRACTS, supra at § 3.21, p. 416; Restatement (Second) of Contracts § 69.
A common way to communicate acceptance of an offer is through the mail.13
Maryland has long followed the “postal acceptance rule” for determining when an offer
received by mail has been accepted.  See Lee v. State, 332 Md. 654, 663 n.3, 632 A.2d 1183,
1187 n.3 (1993) (noting that Md. Rule 1-321(a) uses the “mailbox rule” and stating that the
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rule provides that acceptance by mail of an offer is ordinarily effective upon depositing that
acceptance in the mailbox); Reserve Insurance v. Duckett, 249 Md. 108, 117, 238 A.2d 536,
541 (1968) (applying the postal acceptance rule to conclude that an individual had accepted
an insurance policy by mailing a money order in time to have it received before expiration
of the original insurance policy); Wheat v. Cross, 31 Md. 99, 103 (1869) (adopting postal
acceptance rule).  The postal acceptance rule “is a principle of the common law of contracts
that basically provides that acceptance by mail of an offer is ordinarily effective upon
depositing that acceptance in the mailbox.”  Lee, 332 Md. at 664 n.3, 632 A.2d at 1187 n.3.
We have described the traditional postal acceptance rule as follows:
“The well established rule is that in the absence of any limitation
or provision to the contrary in the offer, the acceptance of the
offer is complete and the contract becomes binding upon both
parties when the offeree deposits the acceptance in the post box.
This rule was originally promulgated in the leading case of
Adams v. Lindsell, [(1818) 106 Eng. Rep. 250 (K.B.)], and has
been generally adopted by the highest courts of appeal in the
United States.  This rule was adopted in M aryland by this Court
in Wheat v. Cross, 31 Md. 99 (1869).”
Reserve Insurance, 249 Md. at 117, 238 A.2d at 541.  As stated in the Restatement (Second)
of Contracts, “an offer is operative and completes the manifestation of mutual assent as soon
as put out of the offeree’s possession.”  Restatement (Second) of Contracts § 63; accord 2
WILLISTON ON CONTRACTS, supra at § 6:37, p. 395 (stating that an “acceptance is dispatched
within the meaning of the rule under consideration when it is put out of the possession of the
14 Section 48 of the contract states as follows:
“ENTIRE AGREEMENT: This Contract and any Addenda thereto contain the
final and entire agreement between the parties, and neither they nor their
agents shall be bound by any terms, conditions, statements, warranties or
representations, oral or written, not herein contained.  The parties to this
Contract mutually agree that it is binding upon them, their heirs, executors,
administrators, personal representatives, successors and, if permitted as herein
provided, assigns.  Once signed, the terms of this Contract can only be
changed by a document executed by all parties.  This Contract shall be
(continued...)
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offeree and within the control of the postal authorities, telegraph operator, or other third party
authorized to receive it”).
In the instant case, the parties stipulated that “the [Buyers] were not aware that [Ms.
Norkunas] signed (and crossed out paragraphs 20 and 21 of) the Residential Contract of Sale
dated March 7, 2004 until a copy of the Contract was produced by [Ms. Norkunas] through
discovery in these proceedings” (emphasis added).  Thus, the Seller did not manifest an
assent to the contract in accordance with the postal acceptance rule because she did not put
the contract out of her possession until production of the contract was required through
discovery.  Nor did the Seller manifest her assent through silence.  Acceptance through
silence is generally not considered acceptance and none of the exceptions to the general rule
are present in this case.  See Restatement (Second) of Contracts § 69.  Indeed, after receiving
the contract, the Seller communicated to the Buyers that she had rejected their offer and did
not intend to sell her property.
The Buyers argue that the Seller accepted the contract merely by signing the
document, particularly because of the provisions in Section 48 of the contract.14  The Buyers
14(...continued)
interpreted and construed in accordance with the laws of the State of
Maryland.  It is further agreed that this Contract may be executed in
counterparts, each of which when considered together shall constitute the
original Contract.”
15 The Buyer’s reliance, for example, on Ray v. Eurice, 201 Md. 115, 93 A.2d 272
(1952) is misplaced.  Both parties in Ray manifested acceptance because they signed the
contract in the presence of each other.  Id. at 118, 93 A.2d at 275.  The only question in that
case was whether both of the parties had assented to certain building specifications attached
to the agreement.  Id. at 122, 93 A.2d at 276.
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rely on the language in Section 48 of the contract that states: “The parties to this Contract
mutually agree that it is binding upon them . . .  Once signed, the terms of the Contract can
only be changed by a document executed by all parties.”  But Section 48 of the contract also
specifies that “this Contract shall be interpreted and construed in accordance with the laws
of the State of Maryland.”  The Buyers do not cite any supporting authority for their assertion
that a document signed in private and never delivered or manifested by the Seller’s acts
constitutes an enforceable contract.15  Indeed, under Maryland law, a contract is not formed
until there is acceptance.
In the case sub judice, the Seller had second thoughts about selling her home and,
although she signed portions of the contract, she did not manifest her acceptance by
communicating with the Buyers.  The Buyers were unaware that the contract was signed until
discovery occurred, and thus the parties did not have a meeting of the minds regarding the
contract.  To create a contract, notice of acceptance must be communicated to the offeror.
Signing the contract in private without transmitting the documents or otherwise
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communicating acceptance to the Buyers or their agent does not create an enforceable
agreement.  The Seller’s only communication to the Buyers after receipt of their contract
offer was that she was no longer selling her property and this constituted a rejection of their
offer.  We hold that the Seller did not accept the contract, and thus it was not an enforceable
agreement.
JUDGMENT OF THE COURT OF
SPECIAL 
APPEALS 
AFFIRMED.
C O S T S  
T O  
B E  
P A I D  
B Y
PETITIONERS.