Continental Laboratories v Scott Paper Co.
U.S. Distr. Ct. Iowa, 1990
Author:- Sam Biers

Facts: Continental and Scott entered into negotiations for a potential supply and distribution of hotel amenities agreement where Scott would distribute the products nationally. Beginning in May Scott prepared and submitted five drafts of a written S & D agreement to Continental.  July Scott announced, Mr. Smith ( Director of Development), internally that an agreement in principle had been reached.  Continental believed that an oral contract was reached during a telephone call in August.  Scott never intended to be bound by an oral agreement but only a written agreement executed by both parties.  On the Sept document Scott v.p signature but no officer of Continental signed that document.  Then Scott, Smith, informed Continental that Scott was no longer interested in the venture and he terminated the meeting.

Issue: Whether the parties had entered into a final and binding oral contract during the August telephone conference, and whether the parties intended to be bound prior to the execution of the written document?

Holding: No, and No.

Procedure: Continental filed suit for breach.  Scott removed to Fed. Ct on diversity and filed summary judgment, Continental objected.  Def. Motion for Summary Judgment granted.

Rule: Binding oral contracts may exist even though the parties intend to execute those agreements in written form.  Parties can make execution of a written document a condition precedent to the birth of a binding contract. Intent is determined at the time of formation.

Ct. Rationale: The record lacks sufficient evidence to support the parties were bound absent a written agreement.  The matter was a large and complex commercial undertaking, which is usually put into written form.  Both parties were represented by counsel, negotiated for several months and numerous written drafts were exchanged.  The intent by custom and practice in this case shows that Scott’s significant business agreements were in writing.  The written agreement does not mention the telephone conference.  The internal announcement that an agreement had been reached in principle stated that many details were still unresolved.

PL A: Scott intended to be bound by the oral agreement as shown by V.P. affidavit concerning the telephone conference.

Def A: Scott never intended to consider that there was a final and binding oral agreement.