BMW of North America, LLC v. Mini Works, LLC

District Court, D. Arizona
166 F.Supp.3d 976 (2010)

ELI5:

Rule of Law:

A late acceptance of an offer can be treated as a counteroffer, which the original offeror can accept through conduct. Furthermore, a party that performs its obligations under a purportedly defective agreement is considered to have ratified the contract and is bound by its terms.

Facts:

BMW of North America, LLC (BMW) owns the 'MINI' trademark for its cars, parts, and accessories.
Mini Works, LLC operated a business selling, servicing, and restoring pre-owned cars bearing BMW's MINI trademarks under the name 'Mini Works'.
On June 14, 2007, BMW sent Mini Works a cease and desist letter, which included an offer to settle the dispute if Mini Works agreed to several conditions, including returning a signed acknowledgment by June 21, 2007.
On July 3, 2007, Linda Sharaby, on behalf of Mini Works, signed and returned the acknowledgment, twelve days after the deadline stated in BMW's letter.
On October 24, 2007, Mini Works filed an express abandonment of its trademark application for 'MINI WORKS & Design,' as required by the settlement terms.
On the same day, Mini Works represented to BMW that it was no longer operating under any domain name containing the word 'Mini.'
BMW later alleged that Mini Works, through its manager Victor Barreira, continued to use the 'MINI' name and the miniworks.com domain name, which had been transferred to Barreira's father in Portugal.

Procedural Posture:

BMW filed a complaint against Mini Works, LLC in the U.S. District Court for the District of Arizona, alleging trademark infringement, unfair competition, and breach of contract.
The court permitted BMW to amend its complaint to add a seventh count for breach of the implied covenant of good faith and fair dealing.
BMW filed a Motion for Summary Judgment, asking the court to enforce the trademark settlement agreement.
Mini Works filed a Motion for Partial Summary Judgment, arguing that no enforceable contract existed between the parties.

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Issue:

Does an enforceable settlement agreement exist when an offeree signs and returns the agreement after the specified deadline, but both parties subsequently act in accordance with the agreement's terms?

Opinions:

Majority - McNamee

Yes, an enforceable settlement agreement exists. The court found that a binding contract was formed for three main reasons. First, the language in BMW's offer letter, which 'requests' compliance by a certain date, suggested a time for acceptance rather than imposing a strict, unalterable condition. Second, even if the deadline was a strict condition, Mini Works' late acceptance constituted a counteroffer, which BMW then accepted through its subsequent conduct, such as sending forms for the trademark abandonment and refraining from filing suit until it believed a breach had occurred. Third, Mini Works ratified the contract through its own performance, specifically by abandoning its trademark application and communicating its compliance to BMW. A party cannot perform its obligations under an agreement and then later deny the agreement's existence.

Analysis:

This decision illustrates how courts apply principles of contract formation to favor the enforcement of settlement agreements, even in the face of procedural defects like a late acceptance. It reinforces the Restatement (Second) of Contracts' position that a late acceptance can function as a counteroffer, which can be accepted by conduct rather than express words. The ruling also highlights the significance of ratification by performance, establishing that a party's actions consistent with a contract's terms can bind them to that contract, preventing them from later disavowing it. This creates a strong precedent for looking beyond the initial offer and acceptance to the parties' entire course of conduct to determine if a meeting of the minds occurred.

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