Oregon Supreme Court enforces a letter of intent, but limits damages

The Oregon Supreme Court last week held that an "agreement to agree' can be enforceable, at least in part, but limited the damages that can flow from a breach.  In Logan v. D.W. Sivers Co., the parties had entered into a letter of intent for the sale of real property.  The plaintiff-buyer intended to use the property in a section 1031 exchange.  The letter of intent stated that it did not constitute a binding agreement, but provided that the defendant-seller agreed not to enter into an agreement to sell to any other party for a period of 60 days.  Notwithstanding that restriction, the seller accepted another party's offer to purchase the property before the 60th day.

The disappointed buyer sued for breach of contract, and the jury awarded as damages nearly $1 million, representing the additional taxes plaintiff was required to pay because of her inability to satisfy the requirements for a section 1031 exchange.

The Supreme Court agreed with the trial court that the letter of intent did not obligate the parties to reach an agreement to sell the property, but that it did obligate the seller to refrain from selling to another party for 60 days.  While the seller was liable for breach of contract on that basis, the majority of the court reversed as to the measure of damages.  In particular, because there was no binding promise to complete the sale, plaintiff could not recover the amount of tax liability resulting from her inability to purchase the property.  Justice Gillette, writing for the majority, remanded for a new damages calculation. 

Justices Kistler, Durham and Walters dissented on the issue of damages, contending that the jury should be allowed to award damages for the loss of the expected benefits of the transaction.