Case Brief Wiki
Advertisement

Facts[]

At a meeting in April 1984 the parties agreed orally to amend Kernels' standard 50-page franchise agreement to change several provisions along specific lines to Bawitko's advantage. They also agreed that time would be of the essence. Bawitko subsequently was consulted as to store layout while construction was underway. He began making payments according to Kernels' schedule and invested $10,000 in a similar franchise in another city. Two months later, Kernels wrote Bawitko advising they wanted to execute his franchise agreement as soon as possible, as the store opening was about a month away. Bawitko did not reply. About two weeks later, having again fruitlessly sought execution, Kernels informed Bawitko that as the store was to open in eight days, he had four days to sign. One day before the deadline, Bawitko sought relevant documents from Kernels' solicitor, who forwarded the franchise agreement, application for trademark use, sublease, shareholders' covenants, etc. The agreement was in the form offered to the second franchise, but not in the form the parties had agreed upon at the April meeting. On the deadline day, Bawitko asked for an extension of time, remarking he was willing to execute whatever agreement the second franchise executed. Kernels refused and returned his deposit, and Bawitko sought damages for breach. He was successful at trial, which Kernels appealed.

Issue[]

  1. Is an oral agreement in contemplation of a formal contract enforceable?

Decision[]

Appeal allowed.

Reasons[]

Robins, writing for the court, held there was no oral contract, or if there was, Bawitko had not been ready and willing to sign the documents contemplated by the contract. On the evidence, it could not be said the parties had agreed in April as to the final form of the franchise agreement; terms other than those specifically agreed to had yet to be settled and thus there was no meeting of the minds. The unsettled details of the complex agreement were not mere formalities. Even if the oral contract had been binding, Bawitko had been willing to complete the transaction only pursuant to an agreement that formed no part of the alleged agreement.

Ratio[]

An oral agreement in contemplation of a formal written agreement, when lacking essential terms, is not enforceable due to lack of certainty; it is a contract to form a contract.

Advertisement