Opinion ID: 160754
Heading Depth: 3
Heading Rank: 2

Heading: Specificity of the Memorandum’s Terms

Text: The Memorandum must be “definite” in its essential terms to be an enforceable contract. See New York Life , 80 F.3d at 409. The Colorado Supreme Court explained: A contract is an agreement ‘to do or not to do a particular thing.’ If essentials are unsettled, and no method of settlement is agreed upon, there is no contract. .... If the writing leaves the agreement of the parties vague and indefinite as to an essential element thereof, it is no contract and cannot be made one by parol. If subject matter and consideration be not clearly defined, a contract is void for indefiniteness .... Greater Serv. Homebuilders’ Inv. Ass’n v. Albright , 293 P. 345, 348-49 (Colo. 1930) (en banc) (quotation marks and citations omitted). 6 Essential terms are 6 These rules are distinguishable from those applicable to contract interpretation cases. See I.M.A., 713 P.2d at 888 & n.6. A contract interpretation case is predicated on the existence of an established contract, and, where a written contract is at issue, focuses on whether there exists any ambiguity in its terms. See Ad Two, Inc. v. City & County of Denver, 9 P.3d 373, 376 (Colo. 2000) (en banc) (“Written contracts that are complete and free from ambiguity will be found to express the intention of the parties and will be enforced according to the their plain language.... Terms used in a contract are ambiguous when they are susceptible to more than one reasonable interpretation.”). The question in -15- “determined from the intention of the parties as disclosed upon consideration of all surrounding facts and circumstances there prevailing.” American Mining Co. v. Himrod-Kimball Mines Co. , 235 P.2d 804, 807 (Colo. 1951) (en banc). In this case, the Memorandum’s nine terms are settled and definite in that none are left open, none are inherently contradictory, and each addresses a unique subject matter. See Greater Serv. Homebuilders’ Inv. , 293 P. at 348-49. Even so, to the extent a dispute arises regarding one of the nine terms, the Memorandum provides a method of settlement in that such disputes will be referred to Messrs. Duncan and Sasabe for resolution. See id. at 348 (stating an unsettled essential term is of itself insufficient to find there is no contract; the writing must also lack a method of settlement). Plaintiffs focus on the district court’s recitation of two different potential meanings to the “[f]uture technology issues” term as proof this term is indefinite. We disagree with this argument and believe plaintiffs are confusing definiteness, a contract formation question, with ambiguity, a contract interpretation question. this case is whether a contract was formed, so any potential ambiguity in one of the Memorandum’s terms is immaterial to our resolution of this appeal. See Greater Serv. Homebuilders’ Inv. Ass’n, 293 P. at 349. Rather, we are concerned with whether any of the Memorandum’s terms are indefinite, and, if so, whether the indefinite term is essential. See id. at 348-49. -16- See supra note 6. The Colorado Supreme Court has drawn a distinction between indefiniteness and ambiguity as to a term, specifically holding parol evidence cannot cure the former but can explain the latter. See Greater Serv. Homebuilders’ Inv. , 293 P. at 348-49. Therefore, a term’s susceptibility to more than one reasonable interpretation simply means it is ambiguous, see Ad Two , 9 P.3d at 376, which does not prevent the formation of an enforceable contract. See Greater Serv. Homebuilders’ Inv. , 293 P. at 348-49. In this case, the parties reached agreement as to “[f]uture technology issues,” and should be required to perform accordingly. 7 7 We note the affidavits of Messrs. Duncan and Sasabe on the meaning of the term and their intent in including it in the Memorandum are not necessarily different or inconsistent. In pertinent part, Mr. Duncan’s affidavit states “[t]he term was intended to address what [plaintiffs’] technology the [defendants] could use, if any, what amount of compensation [defendants] would pay for any future use, and how [defendants’] use or nonuse of [plaintiffs’] technology would be policed.” Mr. Sasabe’s affidavit states defendants were “not intending to use any technology obtained either through the [former] employees [of plaintiffs] or other discovery information. Mr. Duncan suggested that a committee could meet and discuss this issue. I agreed to that suggestion. On the morning of December 11, 1997, we confirmed this agreement. Paragraph 3 of the [Memorandum] is a reference to this agreement. We did not discuss paragraph 3 as a way to calculate future royalties. All payment of money was covered by [two other terms in the Memorandum].” Nonetheless, should either party subsequently question the “[f]uture technology” term’s meaning, we note the issue whether a term is ambiguous is a question of law, while the interpretation of an ambiguous term is a question of fact to be resolved by the district court after an evidentiary hearing. See Republic Res. Corp. v. ISI Petroleum West Caddo Drilling Program 1981, 836 F.2d 462, 465-66 (10th Cir. 1987) (holding the issue whether a contract term is ambiguous is a question of law, but the interpretation of an ambiguous contract is a question of fact); Chicano Police Officer’s Ass’n v. Stover, 624 F.2d 127, 131-32 (10th Cir. 1980) (requiring the district court to conduct an evidentiary hearing to address the ambiguity concerning the intended scope of a payment term in an established settlement agreement); Pepcol Mfg. Co. v. Denver -17- Plaintiffs also argue this court should impose a “no reasonable doubt” from the face of the Memorandum standard, as identified in Mestas v. Martini, 155 P.2d 161, 166-67 (Colo. 1944) (en banc), to determine whether the “[f]uture technology issues” term is indefinite. Although Mestas is factually distinguishable in that it addressed the rules surrounding an action for “the specific performance of a parol contract for the sale of land,” Mestas, 155 P.2d at 164, application of this standard would not change the result in this case. Even assuming for purposes of argument the “[f]uture technology issues” term is indefinite under this standard, we hold the district court did not abuse its discretion in concluding this term is not essential. We have already upheld the district court’s conclusion the Memorandum was intended by the parties to be a binding agreement to settle this case. The essential elements of an agreement to settle a case are a manifestation of agreement (an offer and acceptance) on payment, release, and case dismissal terms (the consideration) between parties who have the capacity and authority to agree. See Worthy v. McKesson Corp. , 756 F.2d 1370, 1373 (8th Cir. 1985) (holding the parties’ agreement on defendant’s payment of a sum certain in Union Corp., 687 P.2d 1310, 1314 (Colo. 1984) (en banc) (“Whether an ambiguity exists is also a question of law.... Once a contract is determined to be ambiguous, the meaning of its terms is generally an issue of fact to be determined in the same manner as other disputed factual issues.”) (quotation marks and citation omitted). -18- exchange for plaintiff’s general release of all claims and dismissal of the lawsuit constituted an enforceable settlement contract); Citywide Bank of Denver v. Herman , 978 F. Supp. 966, 977 (D. Colo. 1997) (“The essential elements of a settlement agreement are a definitive offer and acceptance, consideration and parties who have the capacity and authority to agree.”) (quotation marks and citation omitted). Upon consideration of the surrounding facts and circumstances, the district court concluded seven of the Memorandum’s terms – not including the “[f]uture technologies” term – met these essential elements. See supra Part II. There is a rational basis in the evidence for this ruling. First, the Memorandum and the parties’ signatures reflects their manifestation of agreement to settle this case. Second, regarding consideration, the seven terms identified by the district court provide for the payment of money in exchange for the execution of mutual, general releases and dismissal of the case, including all counterclaims. Third, in the Memorandum, Messrs. Duncan and Sasabe state they have the authority to sign for the plaintiffs and defendants, respectively, they reached agreement on the terms listed, and they intended it to be a binding, legally enforceable agreement. We simply will not derail a settlement agreement expressly resolving payment, release, and dismissal terms because of alleged disputes over additional terms. -19- See Sheng v. Starkey Lab., Inc. , 117 F.3d 1081, 1083 (8th Cir. 1997) (“The fact that the parties left some details for counsel to work out during later negotiations cannot be used to abrogate an otherwise valid agreement.”). Finally, we note some language in plaintiffs’ briefs indicating their belief the district court’s ruling means defendants need only perform the essential terms of the Memorandum. This is incorrect. “Parties to a contract ... may agree on whatever terms they see fit so long as such terms do not violate statutory prohibitions or public policy.” Fox v. I-10, Ltd. , 957 P.2d 1018, 1022 (Colo. 1998) (en banc). Neither party claims the Memorandum’s nine specifically enumerated terms violate any Colorado statute or public policy, which means courts must respect their decision to settle on these terms. See id. Accordingly, the parties must perform each of the Memorandum’s nine terms. See generally St. Vrain Valley Sch. Dist. RE-1J , 981 P.2d at 603-607 (enforcing the confidentiality provisions of a settlement agreement after holding they did not violate the First Amendment or Colorado public policy).