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Monday, January 3, 2005

Cases—Formation—Lawyer’s suggested changes constituted counteroffer

New_york_flag_4 A would-be joint venturer whose lawyer responded to a written offer letter by sending back suggested changes could not later claim a contract based on the original offer, because it had been terminated by a counter-offer, according to a federal court in New York City.

Greico Bros. was a struggling clothing manufacturer.  It was approached by another manufacturer, GFT, which suggested a joint venture.  After a few rounds of negotiation, GFT sent a letter agreement to Greico.  After talking with his clients, Greico’s lawyer sent a "fine tuned" and "redlined" version back to GFT, incorporating "some changes."  The client, however, later testified that he had never authorized the lawyer to suggest substantive changes.  When GFT backed away from the deal, Greico sued.

There was no contract here, wrote Judge George B. Daniels. "A counteroffer which modifies the offer constitutes an absolute rejection of that offer. . . . If the acceptance is even slightly at variance with the terms of the offer, it constitutes a rejection and termination of the initially offered terms."  Here, despite claims that the lawyer was never authorized to offer substantive changes, the court found that he had authority to negotiate and therefore to make a counter-offer.  The counter-offer made the original letter of intent "a nullity."  Summary judgment was appropriate for GFT. Southwick Clothing LLC v. GFT (USA) Corp., 2004 U.S. Dist. LEXIS 25336 (S.D.N.Y. Dec. 15, 2004).

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