In Headquarters Hotel v. LBV Hotel, Judge Davis ruled that Headquarters rejected LBV’s offer to sell a property interest under a right-of-first-offer provision by refusing to execute a confidentiality agreement included with the offer.
Under an agreement between the parties, LBV has an estate for years in the real estate owned by Headquarters at 154 Berkeley Street, Boston, until 2131 (2131 is not a typo). The agreement includes a right-of-first-offer provision. Under that provision, if either party wants to market its interest to third parties, the selling party must first offer the interest to the other party at the same price and on the same terms the selling party would offer to third parties.
Judge Kaplan’s recent ruling in the “Burns Bridge” litigation provides helpful guidance on the interplay between breach of contract and professional negligence claims.
In The Middlesex Corporation, Inc. v. Fay, Spofford, & Thorndike, Inc., plaintiff The Middlesex Corporation, Inc. (Middlesex) alleged that defendant Fay, Spofford, & Thorndike, Inc. (FST) negligently prepared engineering designs and drawings that caused Middlesex to underestimate steel costs by $4 million for the Kenneth F. Burns Memorial Bridge rehabilitation project. In its motion for summary judgment, FST argued in part that Middlesex’s breach of contract claim must be dismissed because the “gist” of the claim is for professional negligence, a claim that Middlesex had also alleged.
In Bay Colony, Judge Salinger denied the defendants’ motion to dismiss a contract claim as time barred even though one defendant (AMB) had sent a letter to the plaintiffs more than six years earlier disputing the existence of a binding agreement between the parties.
Judge Kaplan reported the following question to the Massachusetts Appeals Court: “May a government agency invoke a termination for convenience clause contained in a procurement contract for the purchase of goods for the sole reason that it has learned of an opportunity to purchase the same goods at a lower price from another vendor?”
The question arose in a dispute between A.L. Prime Energy Consultant, Inc. (Prime) and the MBTA. In July 2015, Prime was awarded a two-year supply contract to provide the MBTA with Ultra Low Sulfur Diesel Fuel (ULSDF) after a public bidding process. A year later, the MBTA terminated the contract under the termination-for-convenience clause.
Considering the rights of parties involved in a soured business relationship, Judge Kaplan reiterated that a binding contract requires an agreement on the material terms and an intent to be bound. A term sheet that does not represent an attempt to formalize an already established agreement is not an enforceable contract.
- Senior Editor, Co-Chair, Business Litigation Practice Group