Sixth Circuit Court of Appeals, Applying Ohio Law, Finds No Contract and No Partnership

Sixth Circuit Court of Appeals, Applying Ohio Law, Finds No Contract and No Partnership

      In a recent decision from the Sixth Circuit Court of Appeals, it applying Ohio law, it found that a letter of intent was so indefinite as to material terms that no enforceable contract arose. In addition, the Court found that an alleged partnership between the contract parties likewise did not exist. Capital Equity Group v. Ripken Sports Inc., No. 17-4006, 2018 WL 3620739 (6^th Cir. July 30, 2018).

      Capital Equity Group and Ripken Sports entered into a pair of letters of intent indicating that they “intend[ed] to work together to help develop a sports complex in Erie County, OH.” Although the LOI stated it shall be “treated as a binding contract,” it was also described as being “open-ended”. As noted by the Court, it did not specify how any profits would be distributed or how to measure any parties performance. After the involvement of Cedar Point Park in Erie County were accomplished, the defendant ceased communicating with Capital Equity. In turn, Capital Equity filed suit alleging various claim for damages. The defendants moved to dismiss on the basis that there was no enforceable contract. The trial court dismissed the complaint, and this appeal was taken to the Sixth Circuit.

      Applying Ohio law to the effect that in order to be binding “a contract must be definite and certain,” and that they must agree as to the contract’s “essential terms,” the Sixth Circuit found that the LOI here at question was insufficient to create an enforceable agreement.  Rather,

“nowhere within the agreement does it contemplate how any party would be compensated or how they would deal with a breach. Without any guidance on the parties’ understanding of the value of plaintiff’s services, this Court is wholly unable to craft a remedy for plaintiff’s breach of contract claim. Therefore, the district court correctly determined that the 2014 LOI did not constitute a valid contract under Ohio law.”

      As to the assertion that, consequent to the letter of intent, the parties had entered into a partnership, the court found that numerous of the elements of a partnership were here missing. It further found that the use of the term “partnership” twice in the LOI did not give rise to a partnership.

      There being no enforceable contract, the court as well set aside a claim for violation of the implied covenant of good faith and fair dealing.