Opinion ID: 1196085
Heading Depth: 4
Heading Rank: 3

Heading: Open Terms

Text: The existence of open terms is always a factor tending against the conclusion that the parties have reached a binding agreement, Tribune, 670 F.Supp. at 499, and indeed, there is a `strong presumption against finding binding obligation[s]' in an agreement that `include[s] open terms... and expressly anticipate[s] future preparation and execution of contract documents,' Arcadian, 884 F.2d at 73 (quoting Tribune, 670 F.Supp. at 499). At the same time, the parties' intent is ultimately controlling: if the parties intended to be bound despite the presence of open terms, courts should not frustrate their achieving that objective or disappoint legitimately bargained contract expectations, Tribune, 670 F.Supp. at 499, provided that the agreement is not so fragmentary as to be incapable of sustaining binding legal obligation, id. at 497. If a preliminary agreement contains no issues outstanding that were perceived by the parties as requiring negotiation, their agreement should be seen as a[] Type I binding obligation, Shann, 84 F.3d at 82, notwithstanding that the parties may intend to memorialize their understanding in more formal documents, Adjustrite, 145 F.3d at 548. But if, in contrast, the parties enter into a preliminary agreement perceiving that open issues remain to be worked out and intending simply to bind themselves to good-faith efforts at further negotiation, then the preliminary agreement, if an agreement at all, is a type II obligation. Id. Here, nothing in the record reveals that the parties left anything for further negotiation, nor does the record show that the parties in fact negotiated anything between April 9 and June 1. In its Local Civil Rule 56.1 statement of disputed facts opposing the Ceramis' motion for summary judgment, Immunotherapy pointed to paragraphs 4 and 5 of the April 9 agreement in contending that it contained full paragraphs setting forth open terms that had to be negotiated to both parties' satisfaction, including no fewer than twelve contractual elements to be negotiated. The record, however, belies the assertion that anything had to be negotiated regarding these elements. To the contrary, the April 9 agreement referred to the undrafted stock purchase agreement, as well as the representations and warranties to be contained therein, as standard. And paragraph 5 of the April 9 agreement specifically set forth the substance of the provisions to be included in the technology transfer document to be executed at closing. The April 9 agreement itself thus strongly suggests that [a]lthough the parties recognized that the final contract would include additional `boilerplate,' they foresaw no disputes relating to the boilerplate. Shann, 84 F.3d at 77. In such a circumstance, the task of formalizing contract documentation does not negate the finding of a type I agreement, so long as the parties viewed their contract as ... a binding Type I agreement ... in which everything had been agreed and all that remained was the need for lawyers' embellishments. Id. at 77-78. We see nothing in the record to undercut the conclusion that CCC and Immunotherapy so viewed the April 9 agreement. Although the record is replete with drafts, markups, and comments to the document that eventually became the April 9 agreement, it is wholly silent regarding the parties' interactions after April 9. Immunotherapy has failed to point to evidence that, for example, the parties had ongoing negotiations after April 9 and hence more remained to be done besides adding lawyers' embellishments. We therefore see no evidence from which we could conclude that the parties left material terms of their agreement open to further negotiation. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (when the burden of proof falls on the nonmoving party, summary judgment is appropriate if there is insufficient evidence to support an element of the claim).