Originally published on April 23, 2011 on EntertainmentLitigation.com
Even informal comments can be sufficient to form a binding oral contract. Some are more costly than others.
Richard C. Davis is the founder of Trademark Properties, a Charleston-based company that specializes in buying and rehabbing houses, then flipping them for a profit. Davis contacted A&E Television Networks to discuss turning one of his concepts into a reality television series. After negotiations between Davis and Charles Nordlander, one of A&E’s executives, the parties ultimately agreed to jointly develop a show that became the reality television series “Flip This House.” The terms of the deal were, however, never documented in writing.
After filming a pilot and 13 episodes of Flip This House, a dispute developed between Davis and A&E. Davis claimed that he and A&E agreed to split all net revenues generated by the show on a 50/50 basis. A&E told Davis no such deal had been made, so Davis sued A&E for breach of contract. At trial, Charleston jury agreed with Davis and rendered a $4 million verdict in his favor, representing approximately 50% of the net revenue. A&E appealed to the Fourth Circuit Court of Appeals, contending that the evidence was legally insufficient to support a finding of an oral contract.
In an opinion written by Senior Judge Bobby Baldock, the Fourth Circuit recounted the trial testimony:
Plaintiff’s [Davis’] testimony reveals that he and Nordlander extensively negotiated, discussing production costs, production crew, production credits, real estate risk, raising revenue, and splitting revenue, among other things. Nordlander stated his deal-breaker—bearing any risk for the real estate—and the one condition on going forward with production of the series—board approval. And, Plaintiff stated his deal-breaker—splitting all revenue equally—numerous times in various ways, even illustrating this term of his offer with a lengthy recounting of a prior deal. To this, Plaintiff testified Nordlander said “Okay, okay, I get it.” He also testified Nordlander said their making the television series was contingent on board approval. Tellingly, accordingly to Plaintiff, Nordlander did not indicate their deal was contingent on anything else or give any indication that Defendant would not accept a fifty-fifty split of revenue, only that such a split would likely not be a beneficial arrangement for Plaintiff. Furthermore, no evidence suggests Nordlander explained that the board would only approve the series and the money to produce the series without approving the agreement to split net profits equally. And, Defendant eventually notified Plaintiff that “[t]he board approved the money for our series.” Though the board approved the making of the show, it seems undisputed that the board neither considered nor approved any revenue sharing agreement. Nothing in the record suggests that any of Defendant’s representatives conveyed to Plaintiff that the board approved “money for our series,” but did not approve a fifty-fifty agreement. From this evidence, a reasonable jury could conclude a reasonable person in Plaintiff’s position after such extensive bargaining could plausibly interpret “Okay, okay I get it,” in conjunction with the statement that the only condition is board approval, as acceptance.
There was also testimony about the conduct of the parties that indicated the existence of an agrement, leading Davis to ask the trial court to instruct the jury that “a contract is an obligation which arises from actual agreement of the parties, manifested by words, oral or written, or by conduct.” But the district court refused to give the instruction, “concluding the trial had revealed no conduct…that could be interpreted as constituting an acceptance by [A&E] of any offer made by [Davis] so as to make a contract.” That left Davis with having to rely on the “Okay, okay, I get it” language to demonstrate the existence of binding agreement. This, it turns out, was sufficient. As the Fourth Circuit explained:
[O]ur review of the record makes clear that Plaintiff [Davis] was only able to specify one statement of acceptance by Nordlander: “Okay, okay, I get it.” We take Plaintiff’s word for it, as we must, that Nordlander said “Okay, okay, I get it.” We can safely say that statement does not objectively convey unambiguous and unequivocal acceptance of Plaintiff’s offer. We cannot say, however, that such a statement made in a certain tone of voice or in a given context could not plausibly mean “I accept.” As we explained, if Plaintiff reasonably or plausibly understood Nordlander’s equivocal statement as an acceptance, then a contract was formed.