Opinion ID: 1640631
Heading Depth: 1
Heading Rank: 1

Heading: Directed verdict on the contract count.

Text: Kristerin contends trial court erred in determining, as a matter of law, that no contract was created. At trial, Granson contended its partners had an oral agreement that all three partners' signatures were required to bind the partnership on a real estate conveyance. Trial court apparently found Granson's evidence persuasive on this point and directed a verdict for the partnership on the contract claim. Implicated here is the Uniform Partnership Act, Iowa Code chapter 544. Section 544.9 provides: 1. Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. Iowa Code § 544.9(1) (1979). Further, Iowa Code section 544.10 states that real property held by the partnership may be conveyed by any partner on behalf of the partnership. The partnership, however, may recover such property  unless the partner's act binds the partnership under the provisions of section 544.9[1]. Id. § 544.10(1) (emphasis added). Under these provisions one partner can bind the partnership to a contract if he or she appears to act in the usual course of the partnership business. See Owens v. Palos Verdes Monaco, 142 Cal.App.3d 855, 864-65, 191 Cal.Rptr. 381, 386-87 (1983); Ball v. Carlson, 641 P.2d 303, 305 (Colo.Ct. App.1981); Stone-Fox, Inc. v. Vandehey Development Co., 290 Or. 779, 785, 626 P.2d 1365, 1370-71 (1981); see also Hartford Coal Co. v. Helsing, 220 Iowa 1010, 1020, 263 N.W. 269, 274 (1935) (stating similar rule under Iowa common law). A contract to sell partnership real estate is no exception: [A] contract executed by one partner alone to sell partnership real estate is binding on the other partners provided the partnership is in the business of buying or selling real estate.... Owens, 142 Cal.App.3d at 865, 191 Cal. Rptr. at 387 (quoting Ellis v. Mihelis, 60 Cal.2d 206, 217-18, 384 P.2d 7, 14, 32 Cal. Rptr. 415, 422 (1963)) (emphasis omitted). Iowa Code section 544.9(1) invites a two-step analysis in these situations. First, the fact finder must determine whether the partner or partners executing the agreement apparently acted to carry on the partnership business in the usual way. An affirmative finding on this step ends the inquiry unless, in the second step of the analysis, it is shown the person with whom the partner was dealing knew the latter in fact had no authority to bind the partnership. An act that is done for apparently carrying on in the usual way the business of the partnership, Iowa Code § 544.9(1), is an act in furtherance of the partnership business. See Inland Real Estate Corp. v. Christoph, 107 Ill.App.3d 183, 188, 63 Ill. Dec. 9, 437 N.E.2d 658, 668 (1981). Moreover, the apparent scope of the partnership business depends primarily on the conduct of the partnership and its partners and what they cause third persons to believe about the authority of the partners. Blackmon v. Hale, 1 Cal.3d 548, 557, 463 P.2d 418, 423, 83 Cal.Rptr. 194, 199 (1970). We already have noted that here the partnership agreement did not state the business of Granson. Nonetheless, there is substantial evidence in this record upon which the jury could have found Granson was in the business of buying and selling real estate. Netteland testified John Grandquist stated the partnership was in the real estate business. Partner Kenneth L. Grandquist conceded on cross-examination that Granson was formed to buy and sell the apartment building. Granson suggests the transaction was not in the usual course of business because the 3707 Grand Avenue property was the only asset of the partnership during the relevant period. [5] If, however, the business of Granson was selling this property, the jury could have found the two partners were carrying on business in the usual way when they executed the offer. See Owens, 142 Cal.App.3d at 865-67, 191 Cal. Rptr. at 387-88; Ball, 641 P.2d at 305; Stone-Fox, Inc., 290 Or. at 790-91 & n. 7, 626 P.2d at 1371 & n. 7. In short, the fact this apartment may have been Granson's only asset at the time of these events would not be fatal to Kristerin's claim. In our analysis we next explore whether, as a matter of law, the two signing partners in fact did not have authority to bind the partnership and KJ knew of that lack of authority. Granson sought to show the three partners had an oral agreement that all partners would be required to execute a contract for sale of real estate in order to bind the partnership. There was scant evidence to show this agreement was communicated to KJ at any relevant time. Moreover, Kristerin produced direct testimony that two partners' signatures were sufficient to bind the partners to the contract. Pertinent here is the reasoning of the California Supreme Court: Sound public policy dictates that a partnership must inform those who deal with its members in the course of the partnership's business of any special restrictions on a particular partner's authority. A person dealing with a partnership usually is in no position to know of special agreements between the partners, and thus cannot be charged with knowledge of such agreements absent specific notice. Blackmon, 1 Cal.3d at 558, 463 P.2d at 423, 83 Cal.Rptr. at 199 (emphasis added); cf. Sutton v. Weber, 127 Iowa 361, 364-65, 101 N.W. 775, 777 (1904) (Partner executing agreement informed plaintiff that contract was subject to approval of absent partner. The latter's failure to approve agreement could provide good defense to enforcement of contract because plaintiff had knowledge of restriction of one partner's authority to bind partnership.). We hold the contract count should have been submitted to the jury and trial court erred in directing a verdict for Granson on this cause of action. At trial Granson made several alternative arguments for holding no contract existed as a matter of law. Trial court rejected the arguments as did the court of appeals. On further review Granson reasserts those arguments and contends the court of appeals erred in ordering a new trial on the contract claim. We disagree. In order to be bound, the contracting parties must manifest a mutual assent to the terms of the contract, and this assent usually is given through the offer and acceptance. Hayne v. Cook, 252 Iowa 1012, 1021, 109 N.W.2d 188, 192 (1961). Whether such assent has been given here is determined objectively. See McCarter v. Uban, 166 N.W.2d 910, 913 (Iowa 1969). Granson contends such assent has not been given. It argues no contract exists because the acceptance was not delivered to KJ. We have said that delivery is a matter of intent. Such intent may be actual or constructive. ... [I]t actually refers to the communication or notification of an acceptance to the offerer. Ordinarily it is essential to the operation and validity of ... a written contract, but... we have held that neither manual transfer of the instrument nor any particular form of ceremony is necessary.... It may be by acts without words, or words without acts, or by both words and acts, it being necessary merely that the grantor or promisor intends actually or constructively that the instrument shall become operative and take effect as a valid obligation. Hayne, 252 Iowa at 1022, 109 N.W.2d at 193 (emphasis added). We indicated in our above discussion that Kristerin presented substantial evidence of Granson's intent to be bound. Granson's agent, Meggison, returned the executed offer to KJ. Moreover, in addition to evidence of Granson's actual representations that it was bound, the record shows that between September and December 1980 Granson made efforts to facilitate a closing of the real estate sale. We hold the record contains sufficient evidence to generate a jury question on this issue. Granson next asserts no contract was made because there was a failure of consideration. The offer set out the financial terms of purchase, which included $100 earnest money to be held by Meggison. Meggison, however, did not collect the funds upon Granson's acceptance. Granson argues because the earnest money was not collected a contract was not formed. Granson confuses the issue. A failure of consideration is not synonymous with a lack of consideration. See 1 A. Corbin, Corbin on Contracts § 133 (1963). The former does not prevent the formation of a contract whereas the latter may do so. Id. A failure of consideration may sometimes serve as a defense to enforcement of an existing contract. Union Story Trust & Savings Bank v. Sayer, 332 N.W.2d 316, 322-23 (Iowa 1983). The alleged failure of consideration ordinarily must be total to serve as a complete defense to a breach of contract claim. Id. at 322. We presume a written, signed agreement is supported by consideration. Iowa Code § 537A.2; see Insurance Agents, Inc. v. Abel, 338 N.W.2d 531, 534 (Iowa Ct.App.1983). Granson had the burden to prove a lack of consideration. See Hubbard Milling Co. v. Citizens State Bank, 385 N.W.2d 255, 259 (Iowa 1986); Insurance Agents, Inc., 338 N.W.2d at 534. Consideration may take many forms. Recker v. Gustafson, 279 N.W.2d 744, 749 (Iowa 1979). In this case the offer and acceptance contained mutual promises as consideration to support an agreement. KJ promised to pay $600,000 in exchange for Granson's promise to transfer the property. The court generally will not inquire further into the adequacy of the consideration given. The $100 earnest money was part of KJ's $600,000 consideration for the purchase. The record contains no evidence Meggison ever attempted to collect the money from the buyer after the seller accepted the offer. We need not explore the issue whether the seller waived the earnest money requirement. In these circumstances failure to pay $100 of a $600,000 contract price could not constitute a total failure of consideration. Consequently, it could not serve as a total defense to plaintiff's contract action. See Union Story Trust & Savings Bank, 332 N.W.2d at 322-23. Granson finally contends the written instrument was too incomplete as a matter of law to constitute a contract. We again agree with the court of appeals that the record contains sufficient evidence to generate a jury issue. Ordinarily, we make every effort to avoid holding as a matter of law that an agreement is too uncertain or incomplete to constitute a contract. See Palmer v. Albert, 310 N.W.2d 169, 172 (Iowa 1981). We briefly address a subsumed issue for the guidance of trial court on remand. We find the evidence in the record now before us was sufficient to submit to the jury the issue of the buyer's lost profits as the result of the alleged breach of contract. Although the lost profits claimed here are more difficult to project than those generated by an ongoing business, several Iowa decisions are instructive. See Page County Appliance Center v. Honeywell, Inc., 347 N.W.2d 171, 178 (Iowa 1984); Harsha v. State Savings Bank, 346 N.W.2d 791, 798-99 (Iowa 1984); Holcomb v. Hoffschneider, 297 N.W.2d 210, 213 (Iowa 1980).