SW Legal studies in Business

Negotiations Do Not Form a Contract Absent a Meeting of the Minds
Description Appeals court affirmed that no contract was created, and therefore no damages were due, in a dispute where one party asserted that a verbal agreement had been reached but the other party asserted that there were only negotiations and no meeting of the minds. Since major terms were not settled, there could be no contract.
Topic Contracts
Key Words Oral Agreement; Negotiations; Meeting of the Minds; Quantum Meruit
C A S E   S U M M A R Y
Facts Smith sued Hammons for breach of a verbal contract in which Hammons agreed to hire Smith for a minimum of two years for $150,000 per year, plus living quarters, offices, and an assistant to develop and run a magic show for Hammons. The transaction did not occur and Smith sued to recover in quantum meruit for providing valuable expertise in the entertainment business to Hammons. Hammons contended there were only negotiations, not a contract. The jury found for the defendant; Smith appealed.

Affirmed. "It is hornbook law that the existence of an enforceable contact is dependent upon agreement of the parties, or meeting of the minds, upon the terms of that contract." It was clear from the evidence that there were material terms to the agreement that were not settled, so there was no meeting of the minds. Smith asserted he was due $500,000 as a share of the profits of Hammons' enterprise, yet admitted that they had not agreed upon the share of profits Smith would receive. That is a material term that had to be agreed upon for there to be a contract. There were negotiations over specific terms, but no final agreement, so there can be no breach of contract or recovery.

Citation Smith v. Hammons, S.W.3d (2002 WL 5694, Ct. App., Missouri, 2002)

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