You Shook Hands – But Do You Have a Deal?

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Courts have held that, in business negotiations, “Handshakes are significant. When people shake hands, it means something.”  Unfortunately, they have also held that when people shake hands, “several meanings are possible.”

In Rennick v. O.P.T.I.O.N. Care, the Ninth Circuit Court of Appeal considered a party’s contention that a deal was struck when, after months of discussion and a 4-hour negotiating session, the parties “got up and circulated around the room and shook hands with each other on having made the deal.”  The Rennick case observed that a jury could reasonably find that “the handshake was confirmation of a contract, or that it was an expression of friendship and the absence of ill will after a day of hard bargaining.”  So, given the uncertainty of its meaning, should we stop shaking hands when discussing business?  Of course not.  Indeed, the Court noted that, “By custom, it is a rude insult to reject an outstretched hand in most circumstances, and to do so at the end of a long business meeting would likely prevent a future deal.”

The issue of the parties’ intent upon shaking hands is not a small one.  In August 2014, Charles Wang, the owner of the New York Islanders was sued by a hedge fund manager who claimed that the parties had shaken hands on a deal to buy the NHA hockey team for $420 million, and that Wang had breached their agreement by demanding more money.  The frustrated purchaser sued to either enforce an apparently unsigned 70-page agreement to conclude the sale of the team, or recover a $10 million break up fee that he claims was among the terms agreed upon with a handshake.

Courts struggle with this kind of issue, with or without handshakes.  In contract disputes, courts try to enforce the parties’ expressed intentions. For example, where the parties clearly express that they do not intend to be bound until they sign a formal written contract, courts will try to honor that intention by finding that no contract exists unless a written agreement was fully signed.  Indeed, negotiating parties usually can express almost any manner of requirement before an agreement becomes enforceable.  Quentin Tarantino’s civil war era film Django Unchained featured a climactic scene in which the odious character Calvin Candie extorted Dr. King Schultz into signing an outrageous contract, and then insisted that the signed contract was meaningless unless Dr. Schultz also shook his hand.  As a general point of law that was a doubtful proposition even in Mississippi in 1858, but if the parties had been careful to express that intention in their written agreement it probably would have been an enforceable prerequisite to the validity of the contract.

In reality, too often there is no such clear delineation.  If the parties do not eliminate such possibilities by an express statement of their intentions, oral expressions or an exchange of emails or text messages might create an enforceable agreement.  That is because, when the parties aren’t careful about expressing their intentions, courts are left to divine whether the parties intended an agreement with or without signatures on paper.  Courts consider testimony about what was said and evidence of what was written and the activities that took place before, during and after the time of the purported agreement to draw conclusions about what the parties’ intentions really were. Often, the parties’ contemporaneous correspondence is the most important evidence of whether the parties intended to have a binding agreement immediately, or whether the parties intended only to express their good will or intention to negotiate further.

To avoid unnecessary disputes, a cautious businessperson should make a point to express clearly his or her intentions.  The best approach is to plan ahead and be as clear as possible in a written expression as to when the deal is considered enforceable.  The Conkle law firm counsels and represents businesses in negotiations to achieve those ends, or in disputes that can arise when the businesses handled negotiations themselves and come to Conkle, Kremer & Engel attorneys only after things did not turn out as intended.

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Keeping "Competition" in California’s Unfair Competition Law

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California’s Unfair Competition Law (UCL) provides broad protections to both consumers and businesses, prohibiting any form of conduct that can be found to be an “unlawful, unfair or fraudulent business act or practice.”  (California Business & Professions Code § 17200)  The UCL is particularly powerful because it can reach conduct that is not specifically illegal under any other law, and can also provide a remedy for any acts or omissions that are prohibited under other state or federal laws even if those laws do not allow private citizens to sue when they are violated.  A recent example is the case of Law Offices of Mathew Higbee v. Expungement Assistance Services, in which a lawyer used the UCL to sue a credit repair service that was not licensed to practice law. The lawyer alleged that he too was in the credit repair business and, as a result of the defendant’s violations of California’s attorney licensing requirements,  the competing lawyer was required to lower his prices and spend more money on advertising, lost clients and revenue, and the value of his law firm had diminished. Ordinarily, the statutes requiring a license to practice law cannot be enforced by private citizens. But here, the UCL was held to “borrow” the statutory violation to show an “unlawful business act or practice” that gave the plaintiff a claim.

Those already familiar with UCL know that it was modified by Proposition 64 in 2004, tightening the standing requirements so that an action could only be brought by a “person who has suffered injury in fact and has lost money or property” as a result of the alleged unfair competition. (B&PC section 17204)  Some courts had struggled with this new requirement, at times suggesting that the plaintiff would have to show that the defendant had directly taken money from the plaintiff as a result of the unfair competition.  Such a requirement would effectively eliminate “competition” out of the Unfair Competition Law:  It is rare that a business competitor could show that it gave money or property directly to a competitor as a result of unfair competition – and if it did happen, the plaintiff would probably have a breach of contract or fraud claim and probably would not need to use the UCL.

But over time it has become clear that Prop 64 did not not eliminate unfair competition claims between competitors.  In the Law Offices of Mathew Higbee case, the Court of Appeal in Orange County held that the UCL does not require that the parties have had direct dealings with each other in order to succeed “in alleging at least an identifiable trifle of injury as necessary for standing under UCL.”  The Court surveyed the law before and after Prop 64, and found the cases supportive of a rule that permitted business competitors to make unfair competition claims.  The standing requirement does not require in every instance that the parties have had direct dealings with each other. The Court emphasized that, provided that the “identifiable trifle of injury” resulting from the acts of unfair competition can be shown, “the UCL does not leave the court hamstrung, unable to even consider an action seeking injunctive relief just because the defendant engages in its purportedly unlawful activity via the Internet and has not had any direct business dealings with the plaintiff.”

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