Court Finds No Meeting of the Minds in Breach of Contract Case

On January 21, 2020, the Iowa Court of Appeals issued an opinion interpreting an alleged oral agreement between two cattle producers. The court affirmed that because the plaintiff did not present evidence that both parties agreed to the terms of a repurchase option contract, no contract existed. Additionally, the court affirmed that the plaintiff contracted with the defendant’s LLC rather than the defendant as an individual. Therefore, the defendant was not personally liable for damages.

Background

The plaintiff and the defendant both own cattle operations in the same area. After the plaintiff was injured, he hired the defendant to care for his farmland and cattle. The defendant worked for the plaintiff from March 2012 until February 2013. The plaintiff paid the defendant for his work. The two parties then entered into two new oral agreements. First, the parties agreed that the defendant would cash rent the plaintiff’s farmland. Second, the parties agreed that the plaintiff would sell a one-half interest in his cattle herd for a set price to the defendant, which the defendant paid. Additionally, in exchange for continuing to care for the plaintiff’s farm and herd, the defendant would receive 5/6 of the calves born in the joint herd.

In the lawsuit, the plaintiff claimed that the parties also agreed that he had an option to repurchase some or all of the interest in the herd he sold to the defendant at the same price within the next five years. The plaintiff stated that he chose the five-year option because it would give him sufficient time to know whether he had recovered from his injuries and would be able to take over his operation again.

The only written contract between the two parties was created 15 months after the agreement began. It did not contain a provision regarding an option to repurchase the plaintiff’s cattle. In August 2015, the plaintiff sent a written notice terminating the farm lease and cattle sharing arrangement on March 1, 2016. In April 2016, the defendant comingled both herds. Soon after, the plaintiff wrote to the defendant that he would like to exercise his option to repurchase his cattle. The defendant did not sell and deliver the requested one-half of the herd to the plaintiff.

The plaintiff filed this lawsuit, alleging claims for breach of contract and property damage. The trial court dismissed the plaintiff’s breach of contract claim because there was no “meeting of the minds” as to what the plaintiff would have the right to repurchase. Specifically, there was conflicting evidence as to whether the plaintiff had the right (1) to repurchase particular animals at the plaintiff’s election or (2) repurchase the defendant’s entire half-interest in the joint herd.  The district court did award $16,640 against the defendant’s LLC for property damage, but dismissed all claims against the defendant personally. The district court found that the plaintiff’s agreements were with the defendant’s LLC rather than the defendant as an individual. The plaintiff appealed.

Oral Repurchase Option Contract

On review, the appellate court stated that to show breach of an oral contract, the proponent must show:

• the contract existed;
• the terms and conditions of the contract;
• the proponent performed what the contract required of him;
• the opposing party breached the contract; and
• the proponent suffered damage because of the breach.

Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110-11 (Iowa 2013). If both parties do not mutually agree to the essential terms, there is no contract. Here the court found no reason to reverse the district court’s finding that the plaintiff failed to prove the alleged contract—or, put differently, the terms of the contract—because there was no meeting of the minds as to what the plaintiff had the right to repurchase.

The plaintiff argued that because the sale of cattle was governed under Article 2 of the Uniform Commercial Code, Article 2 could supply the “missing terms” of the agreement. The court, however, noted that the plaintiff did not point to any provision of Article 2 that could specify what cattle must be sold—the very heart of the alleged contract of sale—if there was no agreement on that issue. The court thus ruled that because the plaintiff failed to prove an agreement as to what cattle he could repurchase, he failed to prove an enforceable contract. As such, the court affirmed the dismissal of the breach of contract claim.

Personal Liability

The plaintiff also claimed on appeal that the district court erred in finding that the plaintiff entered into agreements with the defendant’s LLC rather than the defendant himself. The only written contract between the parties included the name “Maeder MGT,” but it did not include the initials “LLC.” Viewing the evidence in the light most favorable to sustaining the trial court’s judgment (as it must on review), the court noted that the evidence supported a finding that the plaintiff contracted with an entity separate from the defendant individually.