Brown v. Cara
United States Court of Appeals for the Second Circuit
420 F.3d 148 (2d Cir. 2005)
Jeffrey Brown of Jeffrey M. Brown Associates (JMB) (plaintiff) signed a memorandum of understanding (MOU) with Charles Cara (defendant) to jointly develop, build, market, and manage Cara's Brooklyn property, with the MOU contemplating a more formal contract once key details, including a necessary rezoning, were resolved. JMB spent significant time and effort obtaining the rezoning and other approvals; once formal negotiations began, JMB sent Cara a proposed construction management agreement whose terms offended him, and Cara cut off negotiations. JMB later said it had mistakenly sent the wrong agreement, but Cara refused to resume talks. Brown sued for breach of the MOU; the district court dismissed the contract claim, and Brown appealed.
Whether a preliminary agreement binds the parties to negotiate open terms in good faith — but not to their ultimate contract objectives — where market conditions at the time prevent final agreement before certain contingencies are resolved.