Michael Finnin, D.J. McPherson and David Wright (“Buyers”) sued Robert Lindsay, Jr. claiming that Lindsay breached a contract to sell his automobile dealership to them. Buyers claimed that in March 2002, Buyers approached Lindsay about selling his dealership. They negotiated for months, and ultimately Buyers made a written offer to purchase. On or about August 13, 2002, the legal assistant for Lindsay’s attorney sent a letter to Buyers’ attorney together with a revised agreement. The revised agreement was signed by Lindsay and contained all the corrections previously discussed by the parties and their attorneys.
Upon receipt of the revised agreement, Buyers’ attorney noticed two errors which did not conform to the parties’ intent. One error related to the $1.1 million purchase price for the stock which was incorrectly reflected as $700,000 on an attached exhibit from a prior draft. The second error made reference to the sale of goodwill between the parties that had since been incorporated elsewhere into the agreement.
The Buyers’ attorney contacted Lindsay’s attorney to discuss the errors. On August 19, 2002, Lindsay’s attorney wrote to Buyers’ attorney and suggested the Buyers send the revised agreement back and he would send then them a corrected version of the agreement. Buyers’ attorney failed to return the revised agreement.
On August 22, Lindsay telephoned Finnin and informed him that he had received an offer from a third party and intended to sell to the third party. During the conversation, Finnin stated that he did not want to “stand in (Lindsay’s) way” but wanted to contact his partners before he made a decision. Finnin telephoned his partners and their attorney. The Buyers decided to correct the two errors and to sign and return the revised agreement to Lindsay. Lindsay, however, refused to sell to them, and Buyers filed a breach of contract complaint against Lindsay.
During his deposition, Lindsay’s attorney admitted the changes to the revised agreement were “minor” and “basically corrected the written agreement to conform with the intent of the parties.” However, when arguing for summary judgment, Lindsay argued that no contract was ever formed between the parties because the Buyers made “material” modifications to the offer. Buyers, on the other hand, argued that the modifications were not significant or material changes to the agreement, but rather corrections of clerical mistakes. Since the changes were consistent with the parties’ intent, Buyers’ attorney argued that a contract had been formed.
The trial court granted summary judgment in Lindsay’s favor, finding that the agreement signed by Lindsay was an offer and that Buyers’ revised agreement constituted a counteroffer. (Summary judgment is granted if there is no genuine issue of fact to be tried, thereby permitting the Court to decide the case as a matter of law without trial.)
The Illinois Appellate Court agreed with the trial court, holding that, under Illinois contract law, an acceptance requiring any modification or change in terms constitutes a rejection of the original offer and becomes a counteroffer that must be accepted by the original offeror before a valid contract is formed. Quoting from an opinion from the Seventh Circuit Court of Appeals, the Appellate Court noted:
Because Illinois law demands that an acceptance comply strictly with the terms of the offer, [Buyers’] modifications of [Seller’s] proposed agreement, however minor, precluded formation of a contract at that point. Indeed, [Buyers’] changes created a counteroffer which [Seller] never accepted.
Even though Buyers made only non-substantive, typographical modifications to the proposed agreement, both Courts held that Illinois case law clearly mandates that any modification, however slight, prevents the creation of a valid contract. While other states’ courts have adopted a less stringent rule and may allow the formation of a binding contract if the proposed modifications to an offer are not “material,” Illinois continues to adhere to the stricter rule. Thus, Buyers’ corrections constituted a rejection of the initial offer and a simultaneous counteroffer. A valid agreement was not created. Therefore, the trial court properly granted summary judgment in favor of Lindsay.
The Courts also rejected Buyers’ claim that Article 2 of the UCC applied. That Article governs the sale of goods between merchants. The application of Article 2 of the UCC is intended to encourage the continuous transaction of goods that occur on a daily basis in the marketplace between merchants. Since neither Buyers nor Lindsay were merchants and the sale of Lindsay’s closely held corporation was a one time, complex transaction, Article 2 of the UCC did not apply.