Situation Management Systems, Inc. (SMS), filed suit against Malouf, Inc., doing business as LMA, Inc. (LMA), following the dissolution of a seventeen-year business relationship. In response, LMA filed several counterclaims, including a breach of contract claim based on an oral agreement between the parties. The case was tried before a jury, which returned a verdict in favor of LMA and awarded damages of $3.8 million. SMS's motion for judgment notwithstanding the verdict, or, alternatively, a new trial or remittitur, was denied and SMS appealed. We granted SMS's application for direct appellate review. We conclude that there was sufficient evidence from which a jury reasonably could have found the existence of an enforceable agreement between these parties, and accordingly affirm the judgment.
The parties had three agency contracts over the years. The terms of each were substantially the same, except that the duration of the contracts varied between two and three years. The last written contract between the parties was executed in May 1989, and had a two-year initial term beginning January 1, 1989. The contract also had a single two-year option to renew. Before the execution of the 1989 agency agreement, the parties' previous agreement had expired on July 1, 1988. During that time, LMA and SMS continued to do business together. All of the agency contracts provided that the contract would not be renewable unless LMA met a certain sales goal. LMA always met its assigned goals.
In 1989, one of the independent agents selling SMS products, The Kasten Company (Kasten), was for sale. SMS considered buying Kasten in order to retain the clients who bought SMS products, but it did not or could not meet the asking price. Malouf learned of the opportunity to purchase Kasten and had a discussion with Earl Rose, the president of SMS, about the possibility of LMA making the purchase. In early 1990, they had a second discussion about the prospective purchase. Rose encouraged the purchase during these conversations and stated that if anyone was going to buy Kasten, he preferred it to be LMA because of its long-established course of dealing with SMS. Malouf repeatedly told Rose, during their conversations and meetings, that he would need at least a five-year agreement with SMS before LMA could afford to commit to the purchase of Kasten.
On February 20, 1990, there were two meetings between LMA and SMS. In the morning, there was a meeting at LMA's offices where its marketing team discussed LMA's future projections
By June, 1990, LMA had not received a written contract from SMS. Malouf telephoned Rose and told him that the closing date with Kasten was approaching and that he needed confirmation that a five-year agreement was forthcoming. During that conversation, Rose expressed to Malouf his assurance of both a long-term agreement of at least five years and his "enthusiastic support" of LMA's purchase of Kasten. Immediately after the conversation with Rose, Malouf telephoned the owner of Kasten to confirm that a five-year agreement with SMS was in place and that LMA would proceed with the purchase.
In August, 1990, SMS sent a proposed renewal contract to LMA. The proposed contract contained significant changes from past contracts, including a term stating that LMA had to increase its sales of SMS products by twelve per cent every year or face termination. Negotiations regarding the new terms stretched out over many months, and in February, 1991, SMS terminated the negotiations and advised LMA that it would allow the existing contract to expire in December, 1992. Following the expiration of that contract, LMA's sales declined from $2,700,000 in 1992 to $500,000 in 1993.
Subsequent to the expiration of the contract, SMS sued LMA for payment of seminar materials and LMA filed a counterclaim for breach of contract. The parties eventually stipulated to the amount LMA owed SMS on the original claim for payment of seminar materials, and the only issue remaining at trial was LMA's breach of contract counterclaim. At trial, an economist testifying for LMA estimated lost profits over the three-year period, 1993-1995, totaling $3,834,000. The judge instructed the jury, without objection, that in order to prove a contract, LMA had to show that it "was more probable than not" that there was an offer, an acceptance of that offer, and an agreement
1. Existence of an enforceable agreement. SMS argues that the evidence at trial did not warrant a finding that the parties had entered into an enforceable contract because there was no "meeting of the minds" — that is, that significant, material terms were still to be negotiated.
It is axiomatic that to create an enforceable contract, there must be agreement between the parties on the material terms of that contract, and the parties must have a present intention to be bound by that agreement. See McCarthy v. Tobin, 429 Mass. 84, 87 (1999); Rosenfield v. United States Trust Co., 290 Mass. 210, 216 (1935) (failure to agree on material terms may be evidence that parties do not intend to be presently bound); David J. Tierney, Jr., Inc. v. T. Wellington Carpets, Inc., 8 Mass.App.Ct. 237, 241 (1979), and cases cited (party to contract may be found to have entered binding agreement if party intended to be presently bound). It is not required that all terms of the agreement be precisely specified, and the presence of undefined or unspecified terms will not necessarily preclude the formation of a binding contract. See Lafayette Place Assocs. v. Boston Redevelopment Auth., 427 Mass. 509, 517-518 & n.9 (1998), cert. denied, 525 U.S. 1177 (1999). The parties must, however, have progressed beyond the stage of "imperfect negotiation." Id. See Rosenfield v. United States Trust Co., supra at 217.
We conclude that there was evidence introduced at trial from which a jury could reasonably determine that when either Moore or Rose assured Malouf of SMS's commitment to LMA for five
SMS further argues that the oral agreement was not binding because the parties intended to execute a written contract.
2. Measure of damages. SMS also argues that the damage award was improper because (1) it should have been limited to the amount LMA paid for Kasten; and (2) the amount of the award was erroneously based on LMA's gross revenue instead of net revenue.
The usual rule for damages in a breach of contract case is that the injured party should be put in the position they would have been in had the contract been performed. See, e.g., Abrams v. Reynolds Metals Co., 340 Mass. 704, 708 (1960); F.A. Bartlett Tree Expert Co. v. Hartney, 308 Mass. 407, 708 (1941); Restatement (Second) of Contracts § 344 (1979). An award of "expectancy" damages may include lost profits. As such, the jury were warranted in awarding lost profits to LMA. Further, we find nothing in the record to suggest that the damage award
Based on the above considerations, we conclude that there was sufficient evidence presented at trial from which a reasonable inference could be drawn that an enforceable contract between SMS and LMA had been formed, and that the damages awarded were proper.