Turner Broadcasting System, Inc. v. McDavid
693 S.E.2d 873 (2010)
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Rule of Law:
An enforceable oral contract may exist, even for a complex, high-value transaction, if the parties' objective words and actions demonstrate mutual assent to all material terms, despite the contemplation of a subsequent written agreement. When evidence regarding the parties' intent to be bound is disputed, the question of contract formation is a matter of fact for the jury to decide.
Facts:
- In October 2002, Turner Broadcasting System, Inc. ('Turner') announced its intent to sell the Atlanta Hawks, Atlanta Thrashers, and the operating rights to Philips Arena (the 'assets').
- David McDavid expressed interest, and on April 30, 2003, the parties executed a Letter of Intent (LOI) which stipulated that no party would be bound until a definitive written agreement was signed.
- The LOI expired on June 14, 2003. When McDavid inquired about an extension, Turner's negotiator told him not to worry, stating, 'We're very, very close to a deal. You're our guy.'
- On July 30, 2003, during a conference call to resolve a final tax issue, McDavid's advisors agreed to Turner's proposal on the condition that it finalized the deal, to which Turner's CEO, Phil Kent, replied, 'we have a deal.'
- In August 2003, Turner consulted with McDavid on team management decisions, including hiring a general manager and coach. Turner's parent company, Time Warner, approved the sale to McDavid.
- While continuing to exchange draft agreements with McDavid, Turner began parallel negotiations with another entity, Atlanta Spirit, LLC.
- On September 12, 2003, Turner's negotiator told McDavid's team, 'The deal is done. Let’s get documents we can sign.' Later that same day, Turner executed a sale agreement for the assets with Atlanta Spirit.
- On September 15, 2003, as McDavid prepared to travel to Atlanta for the closing, Turner informed him by phone that it had sold the assets to Atlanta Spirit.
Procedural Posture:
- David McDavid sued Turner Broadcasting System, Inc. in a Georgia trial court, alleging breach of an oral contract, promissory estoppel, and fraud.
- After an eight-week trial, a jury returned a verdict in favor of McDavid on the breach of oral contract claim, awarding him $281 million.
- The trial court entered judgment on the jury's verdict.
- Turner filed a motion for judgment notwithstanding the verdict (j.n.o.v.) or, in the alternative, for a new trial.
- The trial court denied Turner's post-trial motions.
- Turner, as appellant, appealed the denial to the Court of Appeals of Georgia, with McDavid as the appellee.
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Issue:
Does an enforceable oral contract for the sale of corporate assets exist when the parties initially contemplated a written agreement, but their subsequent words and conduct, although disputed, provide evidence of mutual assent to all material terms after a written-agreement requirement had expired?
Opinions:
Majority - Bernes, Judge
Yes. An enforceable oral contract exists because the existence of a binding agreement is a question of fact for the jury when evidence of the parties' intent to be bound is in dispute. The court reasoned that under Georgia law, assent to a contract is judged by an objective standard based on the parties' words and actions. Here, there was sufficient evidence for the jury to find mutual assent, including Turner's executives repeatedly stating 'we have a deal' and 'the deal is done.' Furthermore, the jury was authorized to find that the requirement for a written agreement, contained in the initial Letter of Intent, expired when the letter itself expired. The court also held that the parties' contemplation of memorializing their agreement in writing does not preclude the existence of a binding oral contract if they have already agreed to all essential terms. Finally, the court classified the required league approvals as a condition of performance (a condition subsequent), not a prerequisite for contract formation, and noted that Turner could not rely on the failure of this condition since its own breach prevented McDavid from seeking approval.
Analysis:
This case strongly affirms the principle that objective manifestations of intent are paramount in contract formation, even in complex, high-value corporate transactions. The decision serves as a significant cautionary tale for negotiators, demonstrating that definitive statements like 'we have a deal' can create a binding oral contract if prior stipulations for a written agreement have lapsed. It solidifies the jury's role as the ultimate arbiter of fact in determining intent when testimony and evidence are conflicting. The ruling reinforces that a party cannot use the non-occurrence of a condition subsequent (like third-party approval) as a defense when its own breach of contract prevented that condition from being met.
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