Opinion ID: 1456676
Heading Depth: 2
Heading Rank: 1

Heading: Conduct of the Parties

Text: Several aspects of the parties' conduct following July 23, 2004, support the inference that the parties impliedly extended and modified the Letter of Intent. See Fischer v. Pinske, 309 Minn. 202, 243 N.W.2d 733, 735 (1976) (holding that continuation of a business relationship without material change after expiration of contract resulted in extension of original contract); see also House v. Baxter, 371 N.W.2d 26, 29-30 (Minn.Ct.App.1985) (reversing and remanding with instructions to consider whether post-expiration conduct demonstrated an intent to impliedly extend terms of original contract). Initially, we note that neither party materially changed its course of performance after the Letter of Intent's stated expiration date. The only aspects of performance that arguably were inconsistent with the Letter of Intent and its addenda were the scope of, and financial cap upon, Cherne's work; Cherne's work and Marathon's payment exceeded that described in the Letter of Intent and its written addenda. Given the series of three written addenda preceding July 23, however, the parties had already established a pattern of extending the scope and scale of their time and materials relationship in the absence of a final written agreement. By its express terms, the Letter of Intent required Cherne to cease work and return materials to Marathon only if the deadline for execution of a contract passed and if Marathon failed to extend the Letter of Intent. See Letter of Intent, supra n. 3 (emphasized provisions). The Letter of Intent did not specify a particular means for Marathon to extend the Letter of Intent, but it clearly gave Marathon the right to extend. We can discern no basis for viewing Marathon's continued performance and acceptance of Cherne's continued, unaltered performance as anything other than an extension of the Letter of Intent. Second, after Marathon terminated the parties' relationship, Cherne expressly referenced the written termination provisions from the draft contract as incorporated into the Letter of Intent, returned materials in accordance with these provisions, and disclaimed any warranties, as per these provisions. Cherne stated expressly in its September 24, 2004 letter that it was returning materials to fulfill its material turnover responsibilities related to the contract. In the district court and on appeal, Cherne offers no explanation as to what it was referencing in the September 24 letter if not the Letter of Intent and the termination provisions incorporated therein. As explained below, Cherne made clear at oral argument that it is asserting the existence of an implied or oral contract largely void of any detailed terms addressing such fine matters as material turnover responsibilities. Accordingly, not only is Cherne's reference in the September 24 letter consistent with extension of the Letter of Intent and its incorporated termination provisions, it is inconsistent with the simple, unadorned contract Cherne urges us to find in the record. Finally, Cherne submitted invoices seeking payment and in fact received payment for services rendered, as per the April 29 Proposal incorporated into the Letter of Intent and as per its pre-July 23 conduct. Not until long after termination and after pursuing a course of conduct consistent with continued applicability of the Letter of Intent did Cherne eventually assert a claim for over $1.5 million in expectation damages based on an alleged promise of 170,000 worker-hours of labor and attendant material sales. While we do not suggest that Cherne is somehow estopped from presenting its current theory, it is difficult to appreciate how a reasonable jury might find the existence of this type of guaranteed contract for hours in light of Cherne's compliance with, and reference to, the Letter of Intent in September 2004. In sum, the parties' conduct points solely toward the conclusion, as reached by the district court, that the parties intended the Letter of Intent to continue governing their relationship after July 23 and in the absence of a final written agreement. Even if the record were amenable to a different interpretation, nothing that Cherne identifies suggests that the parties, at any time, contemplated a requirement that termination be allowed only for cause. See, e.g., House, 371 N.W.2d at 30 (There is no evidence of the parties' conduct following [the expiration date] which implies a contract to require cause.).