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ITEK CORP. v. CHICAGO AERIAL INDUSTRIES, INC. (1968)Facts: After long negotiations, a letter of intent between P. and D. wassigned which stated in part that they would both "make every reasonableeffort to agree upon and have prepared as quickly as possible" acontract for the purchase of P. to buy D.. Soon thereafter, D. wasoffered a higher price by a separate company, and so terminated thecontract based on "unforeseeable circumstances". P. sued, and lost bysummary judgment at trial court, and appealed.Nature of the Risk: When parties enter a contract, they assume the riskthat a better opportunity will present itself, which they cannot takeadvantage of due to the nature of their previous contract.Issue: Was there a binding contract between P. and D.?Holding: "...the fact that some matters are left for future agreementamong the parties does not necessarily preclude the finding that abinding agreement was entered into during the preliminary stages."Reasoning: The court based their holding on Borg, and reasoned that theattempt parties did not try to reach agreement in good faith as they hadpromised. In essence, they had contracted to negotiate further terms.They used the Illinois law focusing on intent of the parties to say thatthere was evidence that would support a finding that both partiesintended to be bound.
Basically this case is saying that there is a duty of good faith and fair dealing in all contracts. Here the seller had the burden of showing it acted in good faith and not jsut because it received a better offer.
I have another question for you. If that is ok. It is about something different.
Debate the correctness of the decision of the court in the case of Davis v. General Foods Corp. (1937)