United House of Prayer for All People v. Therrien Waddell, Inc.

Notice: This opinion is subject to formal revision before publication in the

Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the

Court of any formal errors so that corrections may be made before the bound

volumes go to press.

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 13-CV-912

UNITED HOUSE OF PRAYER FOR ALL PEOPLE, APPELLANT,

V.

THERRIEN WADDELL, INC., APPELLEE.

Appeal from the Superior Court

of the District of Columbia

(CAB-4562-11)

(Hon. Michael L. Rankin, Trial Judge)

(Argued September 18, 2014 Decided March 26, 2015)

Mickie Bailey for appellant.

Leonard A. Sacks, with whom Jesse S. Keene was on the brief, for appellee.

Before FISHER and THOMPSON, Associate Judges, and STEADMAN, Senior

Judge.

THOMPSON, Associate Judge: After a bench trial, the Superior Court (the

Honorable Michael Rankin) entered judgment in favor of appellee Therrien

Waddell, Inc. (―TWI‖), and against appellant United House of Prayer for All

People (―UHP‖), requiring UHP to pay damages for what Judge Rankin found to

be UHP‘s breach of a binding and enforceable oral agreement between the parties,

2

under which TWI was to construct an apartment building (the Bailey Park

Apartments) at 625 Rhode Island Avenue, N.W. (―the apartment building‖), on a

lot owned by UHP. UHP seeks reversal of the judgment, contending that there was

no intent to be bound and no enforceable agreement because the parties never

reached a meeting of the minds on several material terms. Our analysis differs

from the trial court‘s, but we conclude that the evidence and the law support a

conclusion that the parties reached an enforceable oral agreement — specifically, a

binding preliminary commitment to negotiate in good faith toward a written

construction agreement, within the framework the parties had agreed upon during a

meeting between their representatives in December 2010. We find it necessary,

however, to remand the matter to the trial court (1) for an additional finding as to

whether UHP acted in bad faith in declining to negotiate with TWI; and, if so, (2)

for the court also to determine whether, absent UHP‘s bad faith, the parties would

have entered into a final construction agreement; and (3) for recomputation of a

damages award.

I. Background

3

The following factual background is drawn from Judge Rankin‘s July 30,

2013, Memorandum Opinion and from the supporting trial testimony and exhibits.1

In 2009, UHP retained the firm of Suzane Reatig Architecture, PLLC (―SRA‖) to

perform architectural services in connection with the planned apartment building

project (the ―Project‖). SRA principal Suzane Reatig worked with SRA architect

Megan Mitchell to prepare a bid solicitation package. The package included a

manual (the ―Project Manual‖ or the ―Manual‖) containing the specifications for

the building; provided that a standardized contract developed by the American

Institute of Architects (―AIA‖), known as AIA A-101-2007, would be the form of

contract between UHP and the contractor whose bid was selected; and provided

that the general conditions for the contract would be as set forth in Articles 1

through 14 of another standardized agreement known as AIA A-201-2007.

SRA distributed the bid solicitation package in late November 2010, and on

December 20, 2010, TWI Senior Project Manager Richard Whalen sent SRA

1

We treat the trial court‘s factual findings as ―presumptively correct unless

they are clearly erroneous or unsupported by the record.‖ Duffy v. Duffy, 881 A.2d

630, 634 (D.C. 2005) (internal quotes omitted); see also Stanford Hotels Corp. v.

Potomac Creek Assocs., L.P., 18 A.3d 725, 741 (D.C. 2011) (―An appellate court

will not reverse trial court findings unless they are clearly erroneous or

unsupported by the evidence.‖). Judge Rankin specifically noted that ―[c]redibility

of the witnesses was considered in weighing the evidence‖ and arriving at his

factual findings. See infra note 9.

4

TWI‘s bid. TWI‘s bid, the lowest of the four bids SRA received, proposed a total

price of $4,899,000 (including profit of $141,000, representing 3% of the contract

cost excluding the cost of obtaining a performance bond) and ―a duration of 9

months‖ (based on an assumption that the Project would start in January or

February of 2011). The ―Notes & Clarifications‖ attached to TWI‘s bid stated that

―[w]hile the basic contract form has been indicated, [TWI] reserve[s] the right to

negotiate mutually agreeable terms of the construction agreement if selected for the

project.‖

On December 21, 2010, architect Mitchell invited Whalen to a meeting with

SRA and UHP representatives to discuss the Project. The meeting took place on

December 22, 2010, and was attended by Whalen and Dan Coffey, a TWI vice-

president, representing TWI; by Reatig and Mitchell, representing SRA; and by

Apostle Sterling Green, the owner‘s representative for UHP.

At the December 22, 2010, meeting, there was a ―comprehensive‖

discussion of TWI‘s proposal and the Project. This included a discussion of the

―Notes & Clarifications‖ that TWI had attached to its bid. The Notes &

Clarifications reflected TWI‘s proposal to ―use a less expensive satin finish for the

exterior Trespa Meteon façade panels instead of the more expensive metallic finish

5

called for‖ in the Project specifications. SRA ―insisted that the owner wanted the

more expensive metallic finish cost included in the contract[,]‖ which ―meant that

the cost of the project would increase.‖ Another major point of discussion at the

meeting was the need for a supplementary vapor barrier system: ―the architects

directed TWI to use a more expensive E.P. Henry product and to include the costs

of the system in the contract.‖2 The meeting participants also discussed the

importance of obtaining Leadership in Energy and Environmental Design

(―LEED‖) certification for the Project. ―The project manual specified that the

Project should qualify for LEED certification but did not specify which LEED

credits would be pursued‖; during the meeting, the SRA representatives for the

first time ―identified . . . the [specific] LEED credits the Project would try to

meet[.]‖ Coffey informed the meeting participants that Whalen ―did not have . . .

qualifications for the LEED‖ requirements, and that, instead of Whalen, TWI‘s

2

Although the Project Manual sent to bidders called for the Henry product,

the Manual also invited bidders to ―submit additional alternates for consideration

by the Owner, by way of proposal variations or value engineering changes.‖ Thus,

contrary to UHP‘s argument, TWI was not required to base its bid on more

expensive items as to which they had value-engineering suggestions. This

background undercuts UHP‘s contention that the evidence required Judge Rankin

to find that UHP ―refused to pay additional money for those items already required

to be included in the scope of work as dictated by the Project Manual‖ and

undermines UHP‘s contention that Judge Rankin ―erroneously assumed that [UHP]

. . . assented to some sort of price increase‖ by demanding that ―additional items be

included in the scope of work.‖

6

LEED-accredited project manager Jonathan Fuentes, who had been unable to

attend the meeting, would be the Project Manager because of his LEED

qualifications.3 Coffey also told the group that meeting UHP‘s newly-identified

LEED-credit demands ―could mean additional time and money.‖ The meeting

participants also discussed that ―there were certain things that needed to happen

pretty quickly . . . , mainly . . . some of the long-lead materials that require special

fabrication.‖ The meeting notes reflect that the participants discussed having a

pre-construction meeting with subcontractors in late January. Judge Rankin found

that ―Green told TWI‘s representatives that the owner expected a ‗long-lasting

marriage, not a short honeymoon.‘‖

3

Coffey testified that UHP and SRA ―wanted to make sure [TWI] had

somebody that was able to assist them [with LEED certification] and help them

through that whole process.‖ Per the meeting discussion, TWI ―was to make sure

[the] project team had . . . somebody that was very familiar with the LEED

standards[.]‖ According to Coffey, the architects were ―comforted‖ that Fuentes

would be there to help them through the LEED process. During the discussion of

this topic, Green was listening and made no objection. In particular, Green did not

stress that Whalen should stay as project manager. Indeed, Green testified that

Whalen was introduced to him as ―the estimator that had done all of the cost

analyses and prepar[ation of] the bid,‖ and did not even recall that Whalen had the

title of project manager. He also referred to having been introduced to ―Mr.

Coffey and Mr. Fuentes‖ at the December 22 meeting. As far as the record

reveals, Green made no objection when TWI sent a draft contract on January 17,

2011, that listed Fuentes as the ―Contractor‘s representative.‖

7

Judge Rankin found that ―[a]t the conclusion of the [December 22] meeting,

all parties — Apostle Green, SRA and TWI — had reached a meeting of the minds

on the material terms of the contract‖ and that ―Green directed TWI to prepare a

written contract based on [the parties‘] discussions.‖4 Judge Rankin further found

that ―[o]n leaving the meeting [TWI] understood that it had to modify its proposal

so that the written contract conformed to the specific requirements of the owner as

expressed by Apostle Green and SRA‖ at the meeting.

In preparing the modifications, TWI prepared a schedule of prices that

reflected replacement of the less expensive satin-finished panels with the more

expensive metallic-finished ones, added the considerably more expensive Henry

vapor barrier system,5 added allowances for LEED-credit items that had not been

included in TWI‘s original bid (including LEED-required interior bike racks), and

added temporary utility costs (which, per the discussion at the December 22

meeting, were to be borne by the general contractor rather than by the owner).

These modifications are reflected in the revised ―Notes & Clarifications‖ and

4

In Coffey‘s words, at the end of the meeting, TWI was asked to ―go ahead

and draft the contract for signature [by] the owner‖ using the required AIA forms.

5

Mitchell told Whalen in a post-meeting email on December 30 that Reatig

was ―pretty insistent on Henry‖ even though it was a ―big item‖ and, as Whalen

put it, a different vapor barrier would be ―quite a bit cheaper.‖

8

revised pricing information TWI sent to Mitchell by email on January 13, 2011. 6

The modified price document indicated a total price of $5,043,600 (up from the

original bid price of $4,899,000). The January 13 submission also increased the

time for substantial completion from nine months to 285 days. Gerald Therrien, a

principal of TWI, testified that the additional 15 days was ―because of a change in

one of the LEED provisions that [TWI was] asked to include[.]‖

On January 17, 2011, TWI sent SRA a draft of the AIA A-101-2007

Agreement, with an attached schedule showing, inter alia, TWI‘s revised

anticipated profit of $146,000. On January 19, 2011, Mitchell, referring to

questions from Green that she had discussed with Reatig, forwarded to Whalen a

short list of changes to be made to the Notes & Clarifications. TWI made the

requested changes. It couriered revised contract documents to SRA on January 25,

2011, in response to an email from Mitchell the same day that directed, ―If you can

get the original contract couriered over to us today, [Reatig] may be able to get it

signed tomorrow as the Bishop [UHP‘s CEO, Bishop C.M. Bailey] is in and out of

town and possibly will be in tomorrow.‖

6

Judge Rankin found that Green ―could not have been surprised by the

changes that TWI made following the meeting because he was there participating

and heard the architect directing the changes.‖

9

In the meantime, in late December 2010 and January 2011, TWI issued

letters of intent to subcontractors, and it also exchanged a number of emails with

SRA and Green related to the Project: SRA answered a TWI inquiry about

standpipes; provided information to TWI about the sprinkler room; exchanged

emails with Whalen about the bike racks and the Henry vapor barrier; provided

detailed responses to TWI subcontractor requests for information about stair

fabrication, fire dampers and gas furnaces; sent UHP‘s tax exempt number to TWI;

promised to send new structural plans for use by TWI‘s steel subcontractor and

metal deck supplier; and corresponded with Fuentes about a list of architectural

changes. On January 28, 2011, answering an email from an insurance agent, Green

directed the agent to contact Reatig about putting in place a builders‘ risk policy

naming UHP and TWI as the insureds. On January 31, 2011, an email was sent to

Fuentes and copied to Reatig, inviting Fuentes to join the LEED project at 625

Rhode Island Avenue as a ―Project Team Member‖ and ―Construction Manager.‖

As Judge Rankin found, the emails ―reflect[] that the architect and Jonathan

Fuentes were working together going forward on the Project.‖ Judge Rankin also

found that a series of emails between SRA and TWI ―beginning in the days

following the meeting and continuing through the end of January . . . is

circumstantial evidence showing that all parties, including Apostle Green, were

acting on the understanding that UHP and TWI had a contract.‖

10

Early February 2011 emails were to the same effect: Mitchell and Fuentes

corresponded about uploading design files, changes to structural engineering

drawings, structural steel shop drawings (on which Fuentes said TWI was

―continuing to work hard‖), and the colors for verification samples, and the

structural engineer who was working with SRA pronounced as ―acceptable‖ TWI‘s

steel contractor‘s proposed ―connection methods‖ and directed TWI to submit

related calculations. Reatig and Therrien expressed that they were looking forward

to working together on the Project, and Reatig promised to remind Green to

provide TWI with a confirmation of financing availability. On February 4, Green

emailed Therrien, directing him to see ―the attached Letter of Financial Good

Standing‖ and on February 10, wrote to Therrien and Coffey to say that Bishop

Bailey wanted him to speak with them about their ―followup questions.‖

Handwritten notes from a February 23 coordination meeting between the

architects and TWI representatives (including Fuentes and Therrien) indicate that

the contract was ―being signed.‖ On February 25, Therrien emailed Green to ask

about the status of the construction agreement.7 In a February 28 response to

7

Therrien testified that he had had ―several conversations‖ with Green

about the status of the contract, during which Green told him that it was being

(continued…)

11

Therrien‘s February 25 email, Green informed Therrien that, ―[p]er the objections

of our Counsel to a number of the terms and conditions you requested be inserted

into the standard AIA Contract . . . [UHP CEO] Bishop C.M. Bailey has declined

to enter into this referenced agreement, and will not proceed any further.‖8

Therrien testified that, immediately upon receipt of Green‘s message, he called

Green, who rebuffed Therrien‘s requests to speak with Bailey or UHP‘s counsel

regarding what ―terms and conditions‖ they had found objectionable. Therrien

then sent a letter later that day to Bailey, in which he wrote that ―[s]ince we were

asked to draft this construction agreement and we used a standard AIA form, we

are most certainly receptive to discuss any issues or concerns that your attorneys

have. . . . The terms of the agreement are open to discussion and any reasonable

negotiation.‖ Therrien noted that ―no one [had] . . . provided any indication of any

significant issue.‖ Bailey declined Therrien‘s invitation to further discussions,

(…continued)

reviewed by UHP‘s attorneys. Therrien further testified that notwithstanding the

lack of an executed contract, ―[b]ecause of all the interactions that we were having

with the architect, . . . the positive feedback I was getting from Apostle Green, . . .

getting the permit, . . . procuring a bond, getting my insurance certificate, . . . and

the extent of the work that we were doing, . . . [he] believe[d] that [the parties]

essentially had a contract,‖ even if there were ―fine . . . legal points‖ still to be

discussed and resolved, ―as [TWI] do[es] frequently with many, many owners.‖

8

Judge Rankin observed that it appeared that Green ―was as surprised as

anyone that Bishop Bailey refused to sign the written contract.‖ The court found

that both Reatig and Green ―expected Bishop Bailey to sign the papers.‖

12

writing in a February 28 letter forwarded by Green to Therrien, ―I stand by my

decision . . . I have declined to enter into this referenced Agreement, and will not

proceed any further.‖

Reatig testified that she changed her mind about recommending TWI for the

job because TWI had changed personnel and because she was hearing things from

subcontractors and anticipating big change orders. Judge Rankin found this

testimony ―incredible and without any support in the record.‖9 There was no

testimony from Bailey or UHP‘s counsel, and Judge Rankin found that ―they are

apparently the only people who know why the owner did not sign the contract.‖10

9

More generally, Judge Rankin found both Reatig and Green to be ―highly

honorable people‖ who demonstrated ―[u]nwavering loyalty to their employer,‖

but not to be credible witnesses. He found that ―[u]nwavering loyalty to their

employer appears to be the basis for the apparent bias . . . in their testimonies.‖

10

What is known is that, on March 4, 2011, just a week after Bailey wrote

that he would not proceed further with TWI, McCullough Construction LLC

(―McCullough‖) signed a contract to construct the Bailey Park Apartments. Bailey

countersigned that agreement on April 7, 2011. The contract price was $5,073,709

(approximately $30,000 more than TWI‘s price), and the contract called for

completion 390 days from the date of commencement (versus 285 days in the TWI

draft contract). McCullough‘s line item for profit, $235,000, also was higher than

TWI‘s ($146,000).

13

After Therrien received the response from Bailey, TWI submitted to UHP a

request for payment for the services it had already rendered, seeking $75,504.70

for time, materials that TWI had already ordered from various subcontractors, shop

drawings and submittals, and related expenses. UHP denied the request.11 On

June 9, 2011, TWI filed a complaint seeking damages for breach of contract or, in

the alternative, $75,504.70 under a quantum meruit theory.

After a three-day bench trial, Judge Rankin ruled in favor of TWI. He found

that the December 22 meeting ―result[ed] in the formation of a binding contract . . .

that was subsequently reduced to writing and fully enforceable‖; that the general

terms of the contract were found in the documents included in the Project Manual;

that ―the nature of the discussion at the meeting and the behavior of the parties

afterwards leads to the ineluctable conclusion that the parties understood and

agreed to the material terms of price, time, materials and mutual responsibilities

and intended to be bound by the agreement‖; that the credible evidence ―does not

support‖ UHP‘s claim that the parties ―did not intend to be bound until a document

was signed‖; that TWI did not materially breach the contract ―by any changes [it

made] . . . between the time it submitted its bid and the submission to UHP of the

11

Green wrote in an email to Therrien that ―in the absence of a written and

executed construction contract . . . no performance by [TWI], nor any payment to

[TWI] in the above matter has been, nor will be, authorized by [UHP].‖

14

draft written contract‖; that ―[t]he only evidence of changes to the material terms

of price, time and cost is the evidence that the owner‘s team told TWI that the

owner wanted additional items in the contract[,]‖ which ―resulted in driving up

costs and increasing the time to complete the job‖; that there was ―no proof of a

change to any material term that the owner‘s representative did not demand‖; and

that in the draft contract drawn up by TWI at Green‘s direction, there were ―neither

significant changes . . . nor . . . material terms still to be negotiated.‖ Judge Rankin

found UHP liable for damages based on TWI‘s anticipated profit ($146,000) and

the cost of work that had already been performed (―because time was of the

essence‖) before UHP‘s repudiation of the contract ($75,504.70), for a total of

$221,504.70, plus costs and interest. This appeal by UHP followed.

UHP argues that there was no enforceable agreement because the material

terms of ―price and duration were never fixed or agreed upon during the December

22nd meeting.‖12 It argues that this omission of material terms rendered any

agreement too ―vague and ambiguous‖ to be enforceable. It asserts that these

material terms were made known to UHP only when TWI submitted the draft

written contract, to which, UHP argues, it never assented. UHP also argues that

12

At oral argument, UHP‘s counsel also argued that it was not established

who the project manager would be, another term UHP contends was material.

15

the trial court erred in finding a clear intent to be bound by an oral agreement or

written draft contract since the evidence showed that UHP insisted that there be a

written contract signed by both parties before the commencement of work and that

the terms of any written draft contract be reviewed and approved by its legal

counsel prior to its execution of a contact. UHP contends further that it had no

reason to know that TWI had commenced any work, ―as such was in direct

contradiction to the terms of the oral agreement reached by the parties.‖ In the

alternative, UHP argues that TWI is not entitled to quantum meruit damages

because the parties agreed that certain conditions would be met before the

commencement of work on the project, a material term that TWI disregarded and

that excuses any obligation UHP had to perform under the alleged contract.13

II. Standard of Review and Applicable Law

13

UHP also argues that the trial court premised its decision on a number of

trial exhibits that were not admitted into evidence. However, UHP has not

adequately explained how, if at all, anything in the non-admitted exhibits impacted

the court‘s ruling, and it acknowledges that some of the non-admitted exhibits

contained information cumulative of information in admitted exhibits.

Accordingly, we reach no conclusion on this issue and decline to address it further.

16

―For an enforceable contract to exist, there must be both (1) agreement as to

all material terms; and (2) intention of the parties to be bound.‖ Georgetown

Entm’t Corp. v. District of Columbia, 496 A.2d 587, 590 (D.C. 1985). ―[T]he

determination of what the parties consider to be the material terms of their

agreement is a question of fact.‖ Strauss v. NewMarket Global Consulting Grp.,

LLC, 5 A.3d 1027, 1033 (D.C. 2010). We may reject that determination and any of

the trial court‘s other findings of fact only if they are ―clearly and manifestly

wrong‖ or ―without evidence to support them.‖ Id. By contrast, ―[t]he

determination whether an enforceable contract exists . . . is a question of law[,]‖

Rosenthal v. National Produce Co., Inc., 573 A.2d 365, 369 n.9 (D.C. 1990),

which this court reviews de novo. Dyer v. Bilaal, 983 A.2d 349, 355 (D.C. 2009).

While agreement as to material terms ―is most clearly evidenced by the

terms of a signed written agreement . . . such a signed writing is not essential to the

formation of a contract.‖ Kramer Assocs., Inc. v. Ikam, Ltd., 888 A.2d 247, 252

(D.C. 2005) (internal quotation marks omitted). Rather, ―[t]he parties‘ acts at the

time of the making of the contract are also indicative of a meeting of the minds.‖

Id. (internal quotation marks omitted). That can be so ―[e]ven if the parties intend

to subsequently enter into a written contract,‖ because ―it does not necessarily

follow that they have not made any contract until the writing is completed and

17

signed.‖ Jack Baker, Inc. v. Office Space Dev. Corp., 664 A.2d 1236, 1238 (D.C.

1995). ―The parties may be bound by their oral agreement if it meets the dual

requirements of intent and completeness.‖ Id. ―Regardless of the parties‘ actual,

subjective intentions, the ultimate issue is whether . . . they objectively manifested

a mutual intent to be bound[.]‖ Dyer, 983 A.2d at 357 (internal quotation marks

omitted) (emphasis omitted).

―Where the parties have intended to conclude a bargain, uncertainty as to

incidental or collateral matters is seldom fatal to the existence of the contract.‖

Restatement (Second) of Contracts, § 33 cmt. a (1981) (stating also that ―the

actions of the parties may show conclusively that they have intended to conclude a

binding agreement, even though one or more terms are missing or are left to be

agreed upon‖). It is also ―plain that all the terms contemplated by [an] agreement

need not be fixed with complete and perfect certainty for a contract to have legal

efficacy.‖ V’Soske v. Barwick, 404 F.2d 495, 500 (2d Cir. 1968). However, an

enforceable contract ―must be sufficiently definite as to its material terms . . . that

the promises and performance to be rendered by each party are reasonably

certain[,]‖ such that ―the contract provides a sufficient basis for determining

whether a breach has occurred and for identifying an appropriate remedy.‖

Rosenthal, 573 A.2d at 370; accord, Auger v. Tasea Inv. Co., 676 A.2d 18, 23 n.6

18

(D.C. 1996) (―A contract will be unenforceable if its terms are so uncertain that a

court cannot accurately assess damages.‖).

This court has long recognized the principle that if a ―document or contract

that the parties agree to make is to contain any material term that is not already

agreed on, no contract has yet been made[, because] the so-called ‗contract‘ to

make a contract is not a contract at all.‖ Jack Baker, 664 A.2d at 1239 (quoting

Corbin, Contracts § 29 (1963)). More recently, however, we have embraced ―the

well-known formulation‖ that establishes that there are ―two distinct types‖ of

preliminary agreements that can have ―binding force‖ and that ―classifies

preliminary agreements as ‗Type I‘ or ‗Type II‘‖:

[A ―Type I‖ agreement] occurs when the parties have

reached complete agreement (including the agreement to

be bound) on all the issues perceived to require

negotiation. Such an agreement is preliminary only in

form — only in the sense that the parties desire a more

elaborate formalization of the agreement. The second

stage is not necessary; it is merely considered desirable.

...

The second and different sort of preliminary binding

agreement is one that expresses mutual commitment to a

contract on agreed major terms, while recognizing the

existence of open terms that remain to be negotiated.

Although the existence of open terms generally suggests

that binding agreement has not been reached, that is not

19

necessarily so. For the parties can bind themselves to a

concededly incomplete agreement in the sense that they

accept a mutual commitment to negotiate together in

good faith in an effort to reach final agreement within the

scope that has been settled in the preliminary agreement.

To differentiate this sort of preliminary agreement from

the first, it might be referred to as a binding preliminary

commitment. Its binding obligations are of a different

order than those which arise out of the first type

discussed above. The first type binds both sides to their

ultimate contractual objective in recognition that that

contract has been reached, despite the anticipation of

further formalities. The second type — the binding

preliminary commitment — does not commit the parties

to their ultimate contractual objective but rather to the

obligation to negotiate the open issues in good faith in an

attempt to reach the alternate [i.e., ultimate] objective

within the agreed framework. In the first type, a party

may lawfully demand performance of the transaction

even if no further steps have been taken following the

making of the ―preliminary‖ agreement. In the second

type, he may not. What he may demand, however, is that

his counter-party negotiate the open terms in good faith

toward a final contract incorporating the agreed terms.

This obligation does not guarantee that the final contract

will be concluded if both parties comport with their

obligation, as good faith differences in the negotiation of

the open issues may prevent a reaching of final contract.

It is also possible that the parties will lose interest as

circumstances change and will mutually abandon the

negotiation. The obligation does, however, bar a party

from renouncing the deal, abandoning the negotiations,

or insisting on conditions that do not conform to the

preliminary agreement.

Stanford Hotels, 18 A.3d at 735-36 (quoting Teachers Ins. & Annuity Ass’n v.

Tribune Co., 670 F. Supp. 491, 498 (S.D.N.Y. 1987)) (footnote and citation

20

omitted); see also Jack Baker, 664 A.2d at 1239 (―[P]arties will not be bound to a

preliminary agreement unless the evidence presented clearly indicates that they

intended to be bound at that point.‖); Fairbrook Leasing, Inc. v. Mesaba Aviation,

Inc., 519 F.3d 421, 425-26 (8th Cir. 2008) (explaining that while New York courts

will not enforce ―‗a mere agreement to agree,‘ . . . a New York court may conclude

that [the parties] entered into an enforceable ‗good-faith contractual obligation to

cooperate‘ in the negotiation of a final agreement‖); Venture Assocs. Corp. v.

Zenith Data Sys. Corp., 96 F.3d 275, 277 (7th Cir. 1996) (―[A]greements to

negotiate toward the formation of a contract are themselves enforceable as

contracts if the parties intended to be legally bound.‖).

In cases where the parties have an enforceable agreement to perform under

the terms of a contract (such as a Type I agreement), if a breach of contract

―consists in preventing performance of the contract, without fault of the other

party, who is willing to perform it, the loss of the latter will consist of two distinct

elements or grounds of damage, namely: First, what he has already expended

toward performance, less the value of materials on hand; secondly, the profits that

he would have realized by performing the whole contract.‖ Purcell Envelope Co.

v. United States, 51 Ct. Cl. 211, 220 (Ct. Cl. 1916), aff’d, 249 U.S. 313 (1919); see

also District of Columbia v. Cranford Paving Co., 271 F. 374 (D.C. Cir. 1921)

21

(affirming award of lost profits to the company where the District, over the

company‘s objection, decided to do a portion of the contracted-for work itself).

The rule may be different, however, where there is a Type II agreement and

the breach is a failure to negotiate in good faith. Some courts have held in such

cases that ―lost profits are not available,‖ but that ―out-of-pocket costs incurred in

the course of good faith partial performance are appropriate[.]‖ L-7 Designs, Inc.

v. Old Navy, LLC, 647 F.3d 419, 431 (2d Cir. 2011) (citing Goodstein Constr.

Corp. v. City of New York, 604 N.E.2d 1356, 1361 (N.Y. 1992) (reasoning that ―‗if

no agreement was reached and … it cannot even be known what agreement would

have been reached, there is no way to measure the lost expectation‘‖)). Other

courts have emphasized, however, that expectancy damages may be allowed ―if it

can be discerned what agreement would have been reached[.]‖ Fairbrook Leasing,

519 F.3d at 429.14 Adopting that approach, this court held in Stanford Hotels that

14

The Fairbrook Leasing court was ―not . . . confident . . . that Goodstein

. . . should be read as categorically precluding benefit-of-the-bargain damages for

all breaches of binding preliminary agreements to negotiate a final agreement in

good faith‖ and observed that ―[t]his is a difficult, largely unsettled question of

remedies.‖ 519 F.3d at 429. However, on the record before it, the court had ―no

difficulty affirming the district court‘s decision that expectancy damages may not

be recovered in this case . . . because The Term Sheet was silent on significant

issues such as the allocation of maintenance costs and the condition of returned

aircraft[,]‖ and thus the amount of profit that could have been expected was not

knowable. Id. at 430.

22

the trial court ―correctly noted that even though the parties had entered into a

preliminary Type II agreement, this may be the rare case in which a remedy based

on the anticipated contract [including ―expectation damages‖] may be appropriate

because all the terms of the deal had been agreed upon.‖ 18 A.3d at 739 (internal

quotation marks omitted); see also SIGA Techs., Inc. v. Pharmathene, Inc., 67

A.3d 330, 350-51 (Del. 2013) (―We now hold that where the parties have a Type II

preliminary agreement to negotiate in good faith, and the trial judge makes a

factual finding, supported by the record, that the parties would have reached an

agreement but for the defendant‘s bad faith negotiations, the plaintiff is entitled to

recover contract expectation damages.‖); Venture Assocs., 96 F.3d at 278

(―Damages for breach of an agreement to negotiate may be, although they are

unlikely to be, the same as the damages for breach of the final contract that the

parties would have signed had it not been for the defendant‘s bad faith . . . if the

plaintiff can prove that had it not been for the defendant‘s bad faith the parties

would have made a final contract[.]‖); JamSports & Entm’t, LLC v. Paradama

Prods., 336 F. Supp. 2d 824, 849 (N.D. Ill. 2004) (citing Venture Assocs. for the

proposition that ―lost profits may, in appropriate circumstances, be recovered

based on a party‘s breach of a contractual obligation to negotiate in good faith‖).

23

III. Analysis

UHP contends that the trial court erred in concluding that there was an

enforceable construction agreement when the parties had not agreed on several

material terms (including, UHP asserts, scope of work, price, duration, and

personnel). However, Judge Rankin found that the parties reached agreement on

those material terms, and we cannot say that he clearly erred in so finding. To be

sure, it was undisputed that, by the end of the December 22 meeting, the scope of

work had changed from the work assumed in TWI‘s initial bid. But the evidence

supports Judge Rankin‘s finding that the parties‘ representatives left the meeting

understanding that TWI was to draft a written contract and accompanying

schedules that added the metallic-finished panels, the Henry vapor barriers, and

additional LEED items needed to achieve the certification level that SRA

prescribed, and that they also understood that Fuentes would be project manager.

And, although TWI‘s overall price changed from the original bid price, the record

supports Judge Rankin‘s finding that the parties understood that the price would

increase to cover the cost of the more expensive and additional items that they

agreed were to be included in the scope of work. While the parties‘ understanding

that agreed-upon changes would ―increase the price and duration‖ of the contract

was not translated into precise figures by the end of the meeting, the costs of the

24

additional items, the impact of the additional costs on TWI‘s anticipated profit (3%

of costs other than bond costs), the additional time required for the LEED-related

work, and the additional temporary utility costs associated with that additional

time, were all reasonably ascertainable.15

However, we agree with UHP that the parties did not reach an agreement

that was sufficiently complete that a final written construction agreement was a

mere formality. As described above, in its original bid, TWI ―reserve[d] the right

to negotiate mutually agreeable terms of the construction agreement if selected for

the project.‖ The record supports Judge Rankin‘s finding that the parties reached

agreement as to the ―material terms of price, time, materials and mutual

responsibilities,‖ but TWI‘s reservation of the right to negotiate additional

unspecified terms meant that there might be additional terms that one or both

parties would deem material and as to which no agreement had been reached. As

UHP points out, when TWI forwarded the AIA A-201-2007 contract, it added

15

Cf. Camrex Contractors (Marine), Ltd. v. Reliance Marine Applicators,

Inc., 579 F. Supp. 1420, 1428-29 (E.D.N.Y. 1984) (reasoning that there was a

contract despite open terms because ―extrinsic evidence was available to render the

new work price reasonably definite‖ and because the court could ―fill the

contractual gap by utilizing the factual predicate in the record and by receiving

expert testimony on industry price standards‖ and could ―summon[] an expert to

fix the industrial standard for comparable work‖) (internal quotation marks

omitted).

25

―more than two dozen other provisions to its draft contracts which were never

discussed during the December 22nd meeting,‖ which did not appear in the

standard form document, and which UHP had apparently not seen before.16 Judge

Rankin did not specifically consider whether any of these additional terms was

material,17 and we cannot say as a matter of law that they were not.18 We conclude

that there was no enforceable oral construction agreement; we cannot agree with

Judge Rankin‘s legal conclusion that the parties ―behaved as though they intended

to be bound by [all] the terms written in the January Draft contract.‖ See Jack

Baker, 664 A.2d at 1241 (holding that there was no binding oral construction

contract where ―[t]he form contract sent to [plaintiff by defendant] was a complex

16

As UHP explains in its brief, the AIA forms ―are templates wherein the

parties are able to insert or change language to reflect the negotiated terms of their

specific agreement.‖ Areas where changes or additions have been made are

indicated by vertical lines in the left margin of the document.

17

These included provisions pertaining to the date of commencement,

liquidated or consequential damages, progress payments, retainage, the date of

final payment, dispute resolution by arbitration, interest on late payments, time for

release of liens, provisions related to any ―Change in the Work‖ or suspension of

work, liability insurance, Code interpretation, work delays due to adverse weather,

and provisions relating to LEED certification. Thus, the record does not fully

support Judge Rankin‘s finding that there was ―no proof of a change to any

material term that the owner‘s representative did not demand.‖

18

We note, for example, that TWI added a provision that ―[n]o actual

liquidated or consequential damages shall apply‖ for failure to achieve substantial

completion on time. A provision relating to liquidated damages has been held to

constitute a ―material term[].‖ See, e.g., Lumbermens Mut. Cas .Co. v. United

States, 654 F.3d 1305, 1318 (Fed. Cir. 2011).

26

document [that] included sixteen articles and was ten pages long‖ and where

―some few articles contained typed-in provisions especially relating to this project,

and the scope of work and payment schedule were separate attachments, drafted

especially for this project‖).

Nevertheless, on the facts found by the trial court, we conclude that the

parties did enter into an enforceable agreement by which they intended to be

bound: specifically, a ―‗binding preliminary commitment,‘‖ Stanford Hotels, 18

A.3d at 735, that obligated both sides to seek to reach a final construction

agreement upon the agreed terms by negotiating in good faith to resolve additional

terms. The agreement was preliminary because it ―contemplate[d] the preparation

and execution of additional documentation,‖ Vacold LLC v. Cerami, 545 F.3d 114,

123 (2d Cir. 2008); it was not the case that the parties had ―agree[d] on all the

points [that] require[d] negotiation[,]‖ Id. at 131, were merely awaiting

―memorializ[ation of] their agreement in a more formal document[,]‖ and were

―‗fully bound to carry out the terms of the agreement even if the formal instrument

[was] never executed.‘‖ Id. at 124. Rather, ―‗the parties agree[d] on certain major

terms, . . . [left] other terms open for further negotiation[,]‘‖ and, we conclude,

―‗b[ou]nd themselves to negotiate in good faith to work out the terms remaining

open.‘‖ Id.

27

UHP asserts that it had no intention to be bound, but Green acknowledged in

his testimony (and, as Judge Rankin noted, UHP acknowledged in its Post-Hearing

Closing Argument and Legal Memorandum) that UHP ―awarded TWI the Project

based upon TWI‘s December 22nd bid.‖19 TWI submitted its original bid on

December 20, 2010. If there was a ―December 22 bid,‖ it was the original bid plus

the costs of the additional items that SRA, by the end of the December 22 meeting,

instructed TWI to add.

If the award of the Project to TWI is not a sufficient objective indication of

UHP‘s intent to be bound, ―there is no surer way to find out what parties meant,

than to see what they have done.‖ Vacold, 545 F.3d at 123 (internal quotation

marks and alterations omitted). They did a great deal that evinced their mutual

intent to be bound. As described above, Green made repeated efforts to provide

TWI with assurance of its UHP‘s good financial standing and also put UHP‘s

insurance agent in touch with the architects so that the agent could put in place a

builder‘s risk policy that named TWI as one of the insureds for the Project. TWI

19

Green testified that, as the owner‘s representative, he was allowed ―to

speak for the owner, to make commitments for the owner, [and] to bind the

owner.‖

28

pressed UHP for financial responsibility and tax exempt information, pursued a

bond, and issued letters of intent to its subcontractors and transmitted to SRA their

requests for information needed for shop drawings and requests for approval of

construction methods and product samples. In the weeks following the

December 22 meeting, SRA — which Judge Rankin found was responsible for

―awarding the contract to the low bidder‖ — corresponded with TWI, including

both Whalen and Fuentes, about a number of matters that were necessary to move

the project forward, and it provided UHP‘s tax-exempt number20 and other

information that TWI needed only if it was to be the construction contractor for the

Project.21 SRA‘s structural engineer was ―working like crazy‖ to get to TWI new

structural plans that TWI said it needed to deliver to its steel subcontractor and

metal deck supplier, and, on January 14, 2011, Mitchell promised to expedite the

delivery to TWI because, she said, she knew TWI was ―anxious to get the steel

going.‖ No evidence was presented about UHP or SRA providing such

information or materials to any other prospective contractor.

20

Mitchell testified that she did not provide the tax-exempt number to any

other bidder in connection with this Project.

21

As Judge Rankin found, ―[p]ursuant to the A201 General Conditions, the

contractor and UHP were required to communicate with each other through SRA

on all matters arising out of or relating to the contract and the Project.‖ It appears

that Reatig had a particularly close working relationship with UHP, having

―worked with UHP on between forty and fifty projects.‖

29

At the same time, the parties exchanged drafts of the construction

agreement, comments on the drafts, and inquiries or reminders about the status of

the contract and suggestions about moving it forward for signature. Mitchell

testified that ―we were all working towards making this thing happen[.]‖ As Judge

Rankin found, the evidence showed that UHP, the architects and TWI ―were all

working harmoniously to get the project underway.‖ We discern no basis for

disturbing his finding that ―[t]he credible evidence does not support [the] view‖

that the parties did not intend to be bound in any way until a document was signed.

The time, effort, and resources that UHP and its architects and TWI devoted

to these various pre-construction matters evidence that each side understood itself

to be bound to go forward toward a construction agreement that would enable TWI

to commence the work onsite. Cf. Channel Home Ctrs., Div. of Grace Retail Corp.

v. Grossman, 795 F.2d 291, 294, 299-300 (3d Cir. 1986) (holding that there was

sufficient evidence to support a finding that the parties intended to be bound by

their letter of intent to enter into a lease where, after the letter was executed, both

parties ―initiated procedures directed toward satisfaction of lease contingencies,‖

plaintiff ―directed its parent corporation to prepare a draft lease[,]‖ and plaintiff‘s

representatives took steps to ―obtain measurements for architectural alterations,

30

renovations, and related construction‖); Greene v. Rumsfeld, 266 F. Supp. 2d 125,

137 (D.D.C. 2003) (―the parties clearly evinced an intent to be bound by the

agreement. The parties‘ counsel described themselves as excited and relieved to

have reached agreement‖). The time, effort, and resources amounted to ―partial

performance, [which] cuts strongly in favor of finding‖ a binding preliminary

commitment. Brown v. Cara, 420 F.3d 148, 158 (2d Cir. 2005).

Judge Rankin found that ―all parties, including Apostle Green, were acting

on the understanding that UHP and TWI had a contract.‖ We conclude, more

specifically and as a matter of law, that they had an enforceable Type II agreement,

and the record supports Judge Rankin‘s finding that TWI (which, as we have

noted, had specifically reserved the right to negotiate mutually agreeable additional

terms) did nothing to breach that agreement.22 On the record that was before him,

22

Judge Rankin found that Green made clear at the December 22 meeting

that Bailey ―did not want changes in price and did not want the contractor to

change the personnel on the contract.‖ UHP argues that the increase from TWI‘s

original bid price and the transition to Fuentes as project manager violated those

parameters. However, Judge Rankin credited the evidence that by the end of the

December 22 meeting, all participants understood and agreed that the contract

price would increase to cover the LEED and other more expensive UHP-demanded

items, and also that Fuentes would work on the Project because of his LEED

qualifications. Therrien testified that he had three or four conversations with

Green after Fuentes was on board, and Green expressed no objection to Fuentes‘s

role.

(continued…)

31

Judge Rankin could also readily conclude that UHP breached the binding

preliminary commitment when it terminated discussions with TWI without

offering any explanation of what terms its lawyer purportedly found unacceptable

and by declining to negotiate with TWI, or even to discuss the matter with

Therrien, even after Therrien indicated to Bailey TWI‘s receptivity ―to discuss any

issues or concerns‖ and told him that the terms of the agreement were open to

discussion. Cf. Brown, 430 F.3d at 152, 159 (holding that it was error to dismiss

suit based on breach of Type II agreement where allegation was that the defendant,

―not pleased with the terms described in‖ plaintiff‘s proposed construction

management agreement, ―refused to continue with negotiations and ceased all

communication and collaboration with [the plaintiff]‖). There was no credited

evidence that UHP repudiated the parties‘ agreement on any basis other than the

purported ―objections of our Counsel to a number of the terms and conditions you

(…continued)

Moreover, while Whalen transferred project management responsibilities to

Fuentes, the undisputed evidence was that Whalen was not removed from the

Project team. Thus, Green‘s insistence that ―the TWI people who started the job

would not change‖ was satisfied. It is also noteworthy that, as far as the record

reveals, when architect Mitchell invited Whalen to a meeting with SRA and UHP

representatives to discuss the Project, TWI was not asked or instructed to bring to

the meeting everyone who would work on the Project if awarded. Further,

following the December 22 meeting, SRA‘s Mitchell expressed that it was ―nice to

meet‖ Fuentes and told him that she ―look[ed] forward to getting this project

going[.]‖ We follow the trial court in rejecting UHP‘s argument that TWI altered

the terms of the December 22 agreement by changing its personnel.

32

requested be inserted into the standard AIA Contract,‖ and, at the same time, no

evidence that TWI insisted unalterably on any of the terms it had added in the draft

written construction agreement. UHP simply refused to proceed further — and,

within a week after announcing its position, had in hand McCullough‘s signature

on a construction agreement. Cf. Stanford Hotels, 18 A.3d at 734-35 (observing

that the hotel seller ―‗broke faith‘‖ with its preliminary-agreement obligation ―to

negotiate exclusively and in good faith with Stanford and to sign a Definitive

Agreement if they were able to agree on terms‖ when it ―‗abandoned‘ the

negotiations, . . . deceived Stanford as to its real intentions, [and] led Stanford to

believe that [it] intended to sell the Hotel when it had already agreed to include the

Hotel in a refinancing with a third party‖).

Had Judge Rankin found that UHP breached the parties‘ preliminary

agreement through bad-faith refusal to negotiate, and had the matter been before

him for a decision before the Project had been completed, TWI might have been

entitled only to specific performance: an order that UHP negotiate in good faith.

See Stanford Hotels, 18 A.3d at 739 (―[T]he trial court had authority to grant

specific performance of the Preliminary Agreement[.]‖); Brown, 420 F.3d at 151

(―[W]hile the preliminary agreement is not enforceable as to the ultimate

contractual goal contemplated in the document, it is enforceable as an obligation

33

between the parties to negotiate in good faith within the framework of the

agreement.‖). But since specific performance was no longer an available remedy at

the time of trial and decision in 2013, we agree that TWI‘s remedy for breach

would be an award of damages. See Stanford Hotels, 18 A.3d at 740 (recognizing

that money expectation damages may be an adequate remedy).

Had Judge Rankin found both that UHP breached the parties‘ preliminary

agreement by refusing to negotiate in good faith and that, absent UHP‘s bad faith,

the parties would have entered into a final construction agreement, the record

would have permitted the court to award damages based in part on TWI‘s

expectation of earning $146,000 in profit from performing under an executed

contract.23 The parties did not reach agreement on all the terms of a written

23

It is worth observing that the AIA-A-201-2007 General Conditions that

were part of UHP‘s bid solicitation package provided that the contract would be

terminable by UHP for its own convenience, and that upon such a termination, the

contractor would be ―entitled to receive payment for Work executed, and costs

incurred by reason of such termination, along with reasonable overhead and profit

on the Work not executed‖ (italics added). ―It would be a paradox to place a lower

ceiling on damages for bad faith [refusal to negotiate] than on damages for a

perfectly innocent breach[.]‖ Venture Assocs. Corp., 96 F.3d at 279.

UHP points out that the construction agreement it eventually signed with

McCullough ―deleted the contractor‘s right to demand anticipated profits in the

event the Owner elects to terminate the agreement for its own convenience.‖ It

also sought to introduce exhibits showing that its regular practice was to modify

the General Conditions to delete recovery of lost profits upon its election to

(continued…)

34

construction agreement, but none of the terms that TWI added (to what Judge

Rankin aptly referred to as UHP‘s ―own agreement‖) appear to be ones that would

have impacted the cost of performance or TWI‘s entitlement to its anticipated

$146,000 base profit amount (which, as we have explained, was calculated as 3%

of the contract amount excluding bond costs). See supra, note 17. For that reason,

this is a case in which lost profit may be an appropriate element of any damages

remedy. See Fairbrook Leasing, 519 F.3d at 429 (explaining that expectancy

damages may be allowed ―if it can be discerned what agreement would have been

reached‖). But, importantly, Judge Rankin did not make an explicit finding as to

bad faith, and thus necessarily, did not find that the parties would have entered into

a final construction agreement but for UHP‘s bad faith. Because we are unable to

(…continued)

terminate for convenience. But notwithstanding the particular terms of the

McCullough contract (and perhaps others), the fact remains that UHP awarded the

Project to TWI subject to the standard AIA A201-2007 provision, and, when, SRA

relayed Green‘s comments on the January 17, 2011, draft contract, it did not

request any change in the AIA A-201-2007 General Conditions. UHP argues that

TWI ―cannot now disavow‖ provisions of the General Conditions document that

were incorporated by reference, but attempts to do that itself by distancing itself

from the termination-for-convenience provision.

In any event, upon the remand that we conclude is necessary, Judge Rankin

will be free to revisit his ruling that the McCullough contract did not ―have

probative value on what might have been negotiated if there had been further

negotiations with these parties [i.e., between UHP and TWI]‖ (a ruling that UHP

asserts was erroneous).

35

say that the evidence compelled him to so find, we conclude that a remand is

necessary to permit the trial court to make findings on these points.

Even without a finding that the parties would have entered into a final

construction agreement absent bad faith, upon a finding that UHP‘s refusal to

negotiate was in bad faith, an appropriate measure of damages would also include

the out-of-pocket costs TWI incurred in doing preparatory work.24 The evidence

(including testimony by Coffey) was that ―the ability to be able to start very

quickly was important‖ to UHP, that the parties discussed that ―certain things

[needed] to happen pretty quickly,‖ and that the steel fabrication required for the

Project required a lead time of eight to ten weeks. Thus, the record permitted

Judge Rankin to find that here, as in Brown, one party (TWI, through its own

efforts and those of its subcontractors) ―provided extensive and valuable

performance within the framework‖ to which the parties had agreed at the

December 22 meeting.25 Id. at 158.

24

UHP argues that TWI did not prove its bond costs, but the record

indicates that no bond expense was included in TWI‘s claim on which the

compensatory award of $75,504.70 was premised. We also see no basis for UHP‘s

claim that TWI improperly included in its claim for compensatory damages the

costs of ―Computer-Aided Design & Drafting‖ files.

25

This is so even though SRA‘s structural engineer testified that he threw

away TWI‘s shop drawings after he was told to stop working with TWI. It appears

(continued…)

36

We have not overlooked UHP‘s argument that TWI cannot be entitled to

reimbursement of the costs it incurred in preparing to perform under the

contemplated contract because, UHP claims, the parties agreed at the December 22

meeting that TWI would not commence any work on the Project until there was a

fully executed contract, until UHP gave TWI receipt of written notice to proceed,

and until required permits were in place and demolition (by UHP) was completed.

UHP contends that any performance of work by TWI thus ―was in breach of its

agreement‖ with UHP. However, Judge Rankin found that there was no breach by

TWI and, on the subject of when work could commence, found that UHP was

required to demolish existing structures ―[b]efore construction could begin at the

site‖ (italics added). That finding is not clearly erroneous. Further, Coffey, whose

testimony Judge Rankin appears to have credited, testified that the parties

expressed that a building permit ―need[ed] to be in place before [TWI] could . . .

start work onsite,‖ and that TWI was given authorization at the December 22

(…continued)

to us, however, that the award of costs incurred by TWI in preparing to perform

includes an allocated portion of TWI‘s anticipated profit (specifically, $2,190),

which would be duplicative of a portion of any award of lost profits. On remand,

any compensatory damages award should be reconsidered and re-computed as

appropriate.

37

meeting to ―start . . . preparations,‖ i.e., ―to fabricate things, prepare shop

drawings, submittals, [and] get those approved in order to do those fabrications.‖

UHP also notes that the AIA A-201-2007 General Conditions provide that

―Work‖ refers to ―the construction and services required by the Contract

Documents‖ and includes ―all . . . labor, materials, equipment and services

provided or to be provided by the Contractor,‖ making no distinction for

preparatory work. UHP then asserts that § 3.1 of the AIA A-101-2007 form

contract specifies that ―[t]he date of commencement of the Work shall be the date

of this [written] Agreement[,]‖ and it emphasizes that no signed written agreement

ever followed. What UHP fails to mention is the clause that follows: ―unless a

different date is stated below or provision is made for the date to be fixed in a

notice to proceed issued by the Owner.‖ The standard form instructs, ―Insert the

date of commencement if it differs from the date of this Agreement‖; thus, it left

the ―date of commencement of the Work‖ an open term. TWI inserted, ―The date

of commencement shall be the five (5) full Work Days (Monday through Friday –

excluding holidays) after receipt of this fully executed agreement, written notice to

proceed, all required permits, and completion of demolition scope performed by

others.‖ Notably, TWI‘s insertion did not refer to the date of commencement of

the (defined term) ―Work,‖ and, as noted above, Coffey testified that the parties

38

agreed that it was onsite work that was not to commence until these conditions

were satisfied. Thus, the documentary evidence did not compel Judge Rankin to

find that the parties agreed that TWI would do no ―Work‖ of any sort before the

date of a fully executed contract. Also, while Green and Reatig testified that they

did not know that TWI was incurring costs prior to contract execution, Judge

Rankin did not credit their testimony. He did credit Coffey‘s testimony that UHP

wanted to commence quickly, that the structural steel requirements necessitated

lead time, and that time was of the essence. For all these reasons, we reject UHP‘s

argument that TWI should not in any event be permitted to recover its out-of-

pocket costs for preparatory work on the Project.

IV. Conclusion

For the foregoing reasons, we conclude that the parties were bound by an

enforceable agreement to negotiate in good faith toward the signing of a written

construction agreement within the framework agreed to at the parties‘ December

22, 2010, meeting. We remand the matter for additional findings as to whether

UHP breached that agreement by refusing to negotiate in good faith and, if so,

whether the parties would have reached an agreement but for UHP‘s bad faith. See

Ross v. Hacienda Coop., 686 A.2d 186, 187, 192 (D.C. 1996). The trial court may,

39

in its discretion, reopen the record for additional evidence. See id. at 192. Any

award of damages should be determined in a manner consistent with this opinion.

So ordered.