SW Legal studies in Business

No Written Contract Evidenced from Minutes of Board Meeting
Description Appeals court held that the minutes of a board of directors meeting, in which the board voted to do business with another company, did not meet the standards of proving that a contract came into existence. If there was a contract, it was oral, not written, making it subject to a different statute of limitation than if it has been written.
Topic Contracts
Key Words Oral Contract; Written Contract; Statute of Limitations
C A S E   S U M M A R Y
Facts Gateway leased grain bins from Fobian Farms from 1979 to 1989. As the lease was expiring, Gateway offered to extend it for $20,000 a year, but Fobian demanded $24,000 a year. Gateway allowed the lease to expire but bought the bins in 1995, at which time the rent issue was not mentioned. Fobian then sued Gateway for breach of the lease, contending that a new rental contract had been formed for $24,000 a year and that Gateway had breached the lease. The trial court dismissed the suit; Fobian appealed.

Affirmed. If a lease was formed by an oral contract in 1989, a five-year statute of limitations applies, in which case there can be no cause of action. If a lease was formed by written contract in 1989, then a ten-year statute of limitations applies and the suit may proceed. Fobian relies on written minutes from a 1989 meeting of Gateway's board of directors. The minutes state that the board voted to offer to pay $24,000 a year for the bins. Fobian contends the written minutes contain the essential elements of a contract. That is not so because the minutes are not a written contract with Fobian and, in any case, are unclear if the proposal was a plan of action for a clear offer to be extended or an offer from Fobian to be accepted. Hence, the contract was oral, so the five-year statute of limitations apply.

Citation Fobian Farms, Inc. v. Gateway Cooperative, 2002 WL 21796 (Ct. App., Iowa, 2002)

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