Contract Still Enforceable Even Though Signed by Only One Party
In a recent breach of contract case, In re Estate of John E. Mayfield, the Court of Appeals of Tennessee reversed the decision of the trial court, which had held that a contract for the sale of a storage facility was unenforceable because there was no mutual assent of the parties.
This opinion is a very helpful reminder to practitioners of how fundamental contract law principles can determine the outcome of a substantial transaction, and of how easy it can be to lose sight of the importance of paying attention to basic contract law principles, as the trial court did.
Here are the key facts:
Clayton worked for Mr. Mayfield as a housekeeper and manager of his rental storage facility.
At some point, she heard Mr. Mayfield say that someone had offered him $1 million for the facility.
Realizing that Mr. Mayfield might be interested in selling the facility, Ms. Clayton contacted Mr. Saltsman, whom she thought might be interested in purchasing it.
Saltsman was interested in the facility and wanted to see it.
The day that Mr. Saltsman was scheduled to visit the facility, Mr. Mayfield could not make it because he had been moved to Alive Hospice, so Ms. Clayton met Mr. Saltsman at the facility.
On the day of the visit, Mr. Saltsman told Ms. Clayton that he would like to buy the property and that he would start with an offer “around” $900,000.
Clayton did not make an offer of $900,000 to Mr. Mayfield on behalf of Mr. Saltsman, but instead, she made an offer of $950,000.
Clayton explained that she made the offer of $950,000, instead of $900,000, because she knew that Mr. Mayfield had already received an offer of $1 million. She decided to make an offer in the middle.
When Ms. Clayton informed Mr. Mayfield that Mr. Saltsman would buy the property for $950,000, he said: “I’ll take it.”
Saltsman testified that, when Ms. Clayton came back and told him that Mr. Mayfield was willing to sell the property for $950,000, he said: “Sounds good to me. Send me a contract.”
Mayfield asked Ms. Clayton to go to his lawyer’s office to have a contract prepared.
Clayton testified that, before those instructions, Mr. Mayfield had accepted Mr. Saltsman’s offer.
Once Ms. Clayton had the written contract from Mr. Mayfield’s lawyer, she went to Alive Hospice where Mr. Mayfield was.
Mayfield signed the contract.
Since Mr. Saltsman was traveling, he told Ms. Clayton to take the signed contract to his house and that he would sign it when he returned.
After Ms. Clayton dropped off the signed contract at Mr. Saltsman’s house, Mr. Mayfield’s lawyer’s assistant called and told her that it was the “wrong” contract, was “invalid,” and would need to be re-written.
Clayton informed Mr. Saltsman of this conversation. Mr. Saltsman said “okay” and that the name of the buyer would need to be changed to another entity.
Before a new contract could be drawn up, Mr. Mayfield died.
Saltsman did not return to town and see the contract Mr. Mayfield had signed until after Mr. Mayfield had died.
Mr. Saltsman filed a claim with the estate of Mr. Mayfield. To support the claim, he attached the contract signed by Mr. Mayfield, but it was not signed by Mr. Saltsman. Several months later, he signed the contract and filed an amended claim with a copy of the contract bearing both signatures.
Mr. Mayfield’s estate took the position that no enforceable contract existed. The trial court agreed, holding that no mutual assent existed.
The trial court found no mutual assent for two reasons:
(1) Ms. Clayton testified that someone from Mr. Mayfield’s lawyer’s office had said the contract was invalid and would have to be redrafted
(2) Mr. Saltsman had not signed the contract until seven months after Mr. Mayfield had signed it.
The Court of Appeals reversed. It held that, once Mr. Mayfield signed the contract, there was mutual assent. At that point, Mr. Mayfield knew that Mr. Saltsman was offering $950,000, and he accepted that offer by signing the contract and communicating his acceptance to Mr. Saltsman by having the signed contract delivered.
Thus, it was irrelevant that Ms. Clayton later said the contract was invalid and needed to be rewritten. It was also irrelevant that Mr. Saltsman had said he wanted the buyer’s name changed once a new contract was drafted.
The Court of Appeals also pointed out that the fact that Mr. Saltsman never signed the contract was irrelevant because there was already mutual assent through his $950,000 offer and Mr. Mayfield’s acceptance. The statute of frauds only required that the “party to be charged,” which was Mr. Mayfield, had signed a writing memorializing the agreement.
Had this case not involved a contract for the sale of real property, which implicated the Tennessee statute of frauds, Mr. Saltsman could have prevailed even if neither party had signed a written agreement. This is because testimony established that both Mr. Mayfield and Mr. Saltsman had mutually, albeit orally, assented to the sale of the storage facility for $950,000.
For Tennessee breach of contract attorneys, this case is an excellent refresher. For non-lawyers with potential breach of contract cases, it is a reason to consult with a lawyer rather than assuming that, since neither party signed the contract at issue, there is no enforceable contract.