ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, April 22, 2008

Handwritten Letter of Intent Worth $10.5 Million

According to, a jury has awarded $10.5 million to internet executive Alfred West in his suit to enforce a handwritten agrement with IDT Corp.  According to the report, West met with IDT founder and chairman Howard S. Jonas on February 3, 2001.  The product of this meeting was two pages handwritten by Jonas which contained the terms of a deal in which West would develop a business within IDT.  The terms of the deal were as follows:

The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million. The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million.

Crucially, the handwritten agreement also contained the following langauge: "The parties will complete formal contracts as soon as possible but this is binding."

West was fired after six months at IDT.  His suit resulted in a 2005 jury verdict in his favor for $1.5 million.  The Third Circuit vacated that verdict and remanded, while reinstating West's breach of contract claim, which had been dismissed by the district court.  The second trial worked out even better for Mr. West, but IDT has promised a second appeal.

[Jeremy Telman]

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If you don't want a document to be binding, it's best not to say "this is binding"! Eric.

Posted by: Eric Goldman | Apr 22, 2008 12:52:44 PM

That is wise counsel, Eric. It is surprising, given that language, that the district court originally dismissed West's breach of contract claim. I belatedly had a look at the Third Circuit's opinion, vacating that dismissal. It is available at:

Apparently the district court applied the Second Circuit test for determining the enforceability of a preliminary agreement, as the Third Circuit noted:

In Adjustrite, the Second Circuit discussed the four factors that should be used to determine whether a preliminary agreement, i.e., an agreement in which the parties contemplate the entering of more formal contracts in the future, is a binding contract or an unenforceable agreement to agree. Adjustrite, 145 F.3d at 547. These factors are: (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing. Id. at 549

The district court found that the first two factors favored West and the last two favored IDT. Agreeing with Eric, the Third Circuit stressed the importance of the first factor. The District Court found, however, that essential terms had been omitted from the writing, rendering it unenforceable despite express language to the contrary. The Third Circuit disagreed, finding that West had established factual disputes sufficient to withstand summary judgment.

In addition, the Third Circuit advised that on remand the district court should apply New Jersey law rather than the Second Circuit test.

Posted by: Jeremy Telman | Apr 22, 2008 4:12:17 PM

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