The parties are sisters, Kristi and Elisa, who co-owned two parcels in Missouri. Kristi brought a partition action on the parcels in February 2021. In January 2022, the sisters entered into settlement agreements, one for each parcel. At the time of signing, no specific price for either parcel was listed. Instead, the price would be determined by one party and the other party would choose whether to sell or buy at the determined price. This method for pricing is commonly referred to as a “shotgun clause” in partnerships or closely held corporations. Each sister got to determine the price on one parcel and choose whether to buy or sell on the other parcel. Both sisters listed a price for their assigned property, but Elisa refused to decide whether she would buy or sell at the price Kristi determined. She also refused to close on the other parcel when Kristi decided to buy her out at her listed price.
Kristi sued Elisa for breach of the settlement agreements. Elisa responded by arguing the settlement agreements were not enforceable because they were missing a material term – the purchase price. The district court found the settlement agreements were enforceable and Elisa appealed.
The Missouri Western Court of Appeals affirmed the district court. Missouri law requires an enforceable real estate contract to “stipulate a price, or method of determining it[.]” The court found that the shotgun clause was deliberately chosen because it was “presumably more suited to reaching their settlement goals.” Further, since Elisa listed a price for her assigned property it was clear that she understood the pricing mechanism within the agreements. Finally, the court likened the mechanism to a “first refusal” option clause that leaves price to future agreement, which has been upheld as an enforceable contract in a 1956 Missouri Supreme Court case.
