Opinion ID: 1604971
Heading Depth: 2
Heading Rank: 2

Heading: Whether the amendment to the Russells' option agreement waived the most-favored-nation clause in the original option agreement.

Text: The Russells and the IDB amended their option agreement in February 2002. The IDB argues that the amendment effectively waived the most-favored-nation clause. The Russells contend that the amendment did not waive the most-favored-nation clause set forth in the original option agreement. According to the Russells, the sole purpose of the amendment to the option agreement was to extend the date of the option another 120 days past the February 2002 expiration date. They maintain that because the amendment to the option agreement did not specifically state that it was deleting or waiving the most-favored-nation clause, the clause remained in effect. The Russells rely on the language in the amended option agreement, which provides that [e]xcept as amended hereby, the Option is in all other respects ratified and confirmed, and the language in the original option agreement, which requires that no waiver of any of [the] terms and conditions [of the option agreement] shall be effective unless made in writing and duly executed by the parties to the option agreement. They reason that because the amendment to the option agreement did not specifically delete or waive the most-favored-nation clause, that clause remains enforceable. The IDB maintains that because the language in the amendment to the option agreement with regard to the purchase price is unambiguous and no longer includes a formula to determine the purchase price, i.e., a most-favored-nation clause, but establishes a definite purchase price of $4,500 per acre, the most-favored-nation clause was eliminated from the option agreement between the Russells and the IDB. In Winkleblack v. Murphy, 811 So.2d 521, 528 (Ala.2001), this Court stated that if a court determines that a contract provision is ambiguous and `there is a choice between a valid construction and an invalid construction the court has a duty to accept the construction that will uphold, rather than destroy, the contract and that will give effect and meaning to all of its terms. Additionally, if there exists inconsistency between two clauses of a contract which cannot be reconciled, the inconsistency must be resolved in favor of the prior clause, unless an intention to thereafter qualify is plainly expressed.' (Quoting Homes of Legend, Inc. v. McCollough, 776 So.2d 741, 746 (Ala.2000).) Parties may modify the terms of their agreement and if the terms of a subsequent agreement contradict the earlier agreement, the terms of the later agreement prevail. Cavalier Mfg., Inc. v. Clarke, 862 So.2d 634, 641 (Ala.2003). It is a general rule that a party claiming that a contract modifies a prior contract must show that the later contract is definite and certain as to the terms of modification, and the modification extends only so far as the terms are definite, certain and intentional. 17 C.J.S. Contracts § 347, p. 424. `[W]hen the terms of the original contract are undisputed and were thereafter altered or changed by the mutual agreement of the parties and the extent of that modification only was in dispute, it is clearly a question for the jury to determine.' Jeff D. Jordan & Co. v. Yancey & Abernathy, 242 Ala. 385, 6 So.2d 473 [(1942)]. Johnson-Rast & Hays, Inc. v. Cole, 294 Ala. 32, 37, 310 So.2d 885, 889 (1975). `[I]t is elementary that it is the terms of the written contract, not the mental operations of one of the parties, that control its interpretation.' Kinmon v. J.P. King Auction Co., 290 Ala. 323, 325, 276 So.2d 569, 570 (1973) (citing Todd v. Devaney, 265 Ala. 486, 92 So.2d 24 (1957)). `Stated another way, the law of contracts is premised upon an objective rather than a subjective manifestation of intent approach.' Lilley v. Gonzales, 417 So.2d 161, 163 (Ala.1982). `[A] court should give the terms of the agreement their clear and plain meaning and should presume that the parties intended what the terms of the agreement clearly state.' Turner v. West Ridge Apartments, Inc., 893 So.2d 332 (Ala.2004)(quoting Ex parte Dan Tucker Auto Sales, Inc., 718 So.2d 33, 36 (Ala. 1998)). Harbison v. Strickland, 900 So.2d 385, 391 (Ala.2004). The original option agreement between the Russells and the IDB provided: 3. If Purchaser elects to exercise this Option, the purchase price for the Property shall be determined as follows: Sellers and Purchaser shall each, at its own cost and expense, secure a current appraisal of the Property. The purchase price shall be the average of the two appraisals provided, however, in no event shall the purchase price be less than $4,500 per acre and further provided that the purchase price shall in no event be less than the price per acre paid to any other landowner included in the project planned for the Property. The acreage shall be determined by a good and accurate survey provided by Purchaser. .... 16. This Option constitutes the entire and complete agreement between the parties hereto and supersedes any prior oral or written agreements between the parties with respect to the Property. It is expressly agreed that there are no verbal understandings or agreements which in any way change the terms, covenants, and conditions herein set forth, and that no modification of this Option and no waiver of any of its terms and conditions shall be effective unless made in writing and duly executed by the parties hereto.  (Emphasis added.) The amendment to the option agreement stated: 1. It is hereby agreed that the purchase price for the Property is Four Thousand Five Hundred and No/100 ($4,500) per acre. The exact number of acres to be determined by the survey provided by Purchaser. .... 3. Except as amended hereby, the Option is in all other respects ratified and confirmed.  (Emphasis added.) We hold that the terms of the amendment to the option agreement are not definite and certain as to waiver of the most-favored-nation clause in the original option agreement. The language of the original option agreement specifically provided that for a waiver of a term of the agreement to be effective, the waiver must be in writing and executed by both parties. Although the language in the amendment to the option agreement sets forth the price per acre at $4,500, we cannot conclude that the language in the amended option as a matter of law modified or waived the most-favored-nation clause in the Russells' original option agreement. Therefore, a question for the jury exists as to whether the amended option agreement modified or waived the most-favored-nation clause in the Russells' original option agreement, and a summary judgment for the IDB and against the Russells on this ground is not proper.