Citation Edit

Bustamante v. Intuit, Inc., 141 Cal.App.4th 199, 45 Cal.Rptr.3d 692 (6th Dist. 2006) (full-text).

Factual Background Edit

Plaintiff Bustamante attempted to create a joint venture with Defendant Intuit. Inc. in which they would market Intuit software adapted for users in Mexico. Intuit made it clear in negotiations that expanding into Mexico was not a priority and that a third-party investor would be necessary. The parties set out a phased approach to the joint venture. Bustamante believed a contract had been formed once Intuit decided to “move forward” with Phase 2 which included investigating the Mexican market and negotiating specific terms and responsibilities for the parties. The parties discussed terms and Intuit sent an e-mail summarizing the parties agreement, if it were to go forward.

Some of the terms stated were that Intuit would work with Bustamante on a deal for Mexico, that Bustamante would get at least 25% equity and a management position, and also outlined a plan to visit Mexico. Intuit representatives argue that this was just an [[agreement] about what the parties had discussed “they wanted.” Intuit insisted it was just doing its homework first before committing to the investment.

Bustamante had difficulty finding an outside investor and offered various alternatives to find funding but they either failed or were rejected by Intuit. After their attempt to secure outside funding for the enterprise failed, Intuit stopped working with Bustamante toward their objective. Bustamante then brought this action for breach of contract and wrongful dissociation.

Trial Court Proceedings Edit

Bustamante argued that both parties understood and agreed to launch a company in Mexico to sell Intuit software. He claimed Intuit agreed to help “form and launch” the company and had set out specifics as to each parties role in the venture. Intuit argued there could be no contract because (1)there was no meeting of the minds on the material terms of the alleged agreement and (2) if there was a contract, it was unenforceable because it was not in writing. As to the claim of wrongful dissociation, Intuit similarly asserted that the material terms for creating a joint venture were unsettled. It further argued that wrongful dissociation was impossible because the planned venture was never launched. The trial court used the objective theory of contract formation and granted summary judgement for Intuit.

Appellate Court Proceedings Edit

Bustamante maintained that summary judgment was erroneously reached because the court did not focus on the agreement between Bustamante and Intuit but on the failed agreements with third party investors. He claims the relevant agreement was the oral agreement which was later set out in the terms of the e-mail sent by Intuit. These terms in summary stated that the parties would pursue the venture with their best efforts, that Intuit would not circumvent Bustamante or deal with anyone else, and included some contemplated figures for the venture. Bustamante basically argues Intuit was “obligated to find a way to make it work.” The appellate court disagreed with Bustamante.

In essence the conditions for performance were far to uncertain. The promise to “work together on a deal for Mexico” permitted no reasonable inference of any mutual binding terms. At the least it was very clear from the parties conversations that a venture could not be considered without first securing third party funding. Furthermore, the terms that were agreed upon such as Intuit’s royalties and Bustamante’s future salary, were still unsettled far after the e-mail was sent because there was no discussion of how these terms would actually be implemented and the parties stated they were “very flexible” and “open to all possibilities.”

Lastly the terms Bustamante contends were part of a contract all relied on the existence of a third party that did not exist. Without this third party the details were nothing more than hypotheticals. The court found the parties both understood there would be no binding negotiations until funding had first been found and that the aforementioned were merely preliminary negotiations. “[T]he failure to reach a meeting of the minds on all material points prevents the formation of a contract even though the parties have orally agreed upon some of the terms, or have taken some action related to the contract.”[1]

References Edit

  1. Banner Entertainment, Inc. v Superior Court, 62 Cal.App.4th 348, 72 Cal.Rptr.2d 598 (1998)(full-text).

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