July 31, 2008

Breach of construction contract fails because signature was induced for discussion purposes only

THOMAS BUILDERS, INC. v. SHAILESH PATEL, ET AL. (Tenn.Ct.App. July 31, 2008).

Thomas Builders, Inc. sued Shailesh Patel and his LLC, alleging that Mr. Patel breached a construction contract. The parties had been in negotiations to build a hotel in downtown Knoxville. Thomas Builders' president, Darrell Thomas, claims that he and Mr. Patel agreed to a binding contract; Mr. Patel claims that no contract was ever made. At a bench trial, Mr. Patel testified that Mr. Thomas asked him to sign the purported contract as an "indication that I am really serious to continue discussions." This testimony was not directly rebutted. At the conclusion of the trial, the trial court stated that it believed Mr. Patel's testimony, and held that there was no breach. We affirm.

Opinion may be found at TBA website:

"If, as the court declared in its primary holding, Mr. Thomas induced Mr. Patel’s signature by telling him that the signature would only indicate that Mr. Patel was serious about continuing discussions, then it follows necessarily that Mr. Patel’s signature was not an acceptance of an offer by Thomas Builders. Indeed, on these facts, Mr. Thomas was not even making an offer; asking someone to sign a "proposal” in order to prove his "seriousness" is not the same thing as making a contractual offer to build a hotel. And if Mr. Patel’s signature was not given in response to an offer, it cannot have been an acceptance, nor a counter-offer, nor an acceptance in escrow." Id. (quotations omitted).

"The dispute in this case is not over the terms of the contract, but over whether a contract was formed at all, and we do not believe Mr. Patel’s scribbling of the word “accepted” necessarily speaks for itself in that regard. ... [W]e hold that the evidence does not preponderate against the trial court’s factual finding that Mr. Thomas induced Mr. Patel to sign the proposal “for discussion purposes only.” Based on these facts, we find that no contract was formed. Thomas Builders’ breach of contract claim therefore must fail." Id. (quotations omitted).