California Civil Jury Instructions (CACI)
306. Unformalized Agreement
[Name of defendant] contends that the parties did not enter into a contract because they had not signed a final written agreement. To prove that a contract was created, [name of plaintiff] must prove both of the following:
1. That the parties understood and agreed to the terms of the agreement; and
2. That the parties agreed to be bound before a written agreement was completed and signed.
New September 2003; Revised December 2012
Directions for Use
Give this instruction if the parties agreed to contract terms with the intention of reducing their agreement to a written and signed contract, but an alleged breach occurred before the written contract was completed and signed. For other situations involving the lack of a final written contract, see CACI No. 304, Oral or Written Contract Terms, and CACI No. 305, Implied-in-Fact Contract.
Do not give this instruction unless the defendant has testified or offered other evidence in support of his or her contention.
Sources and Authority
- “Where the writing at issue shows ‘no more than an intent to further reduce the informal writing to a more formal one’ the failure to follow it with a more formal writing does not negate the existence of the prior contract. However, where the writing shows it was not intended to be binding until a formal written contract is executed, there is no contract.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307 [87 Cal.Rptr.2d 822], internal citations omitted.)
- The execution of a formalized written agreement is not necessarily essential to the formation of a contract that is made orally: “[I]f the respective parties orally agreed upon all of the terms and conditions of a proposed written agreement with the mutual intention that the oral agreement should thereupon become binding, the mere fact that a formal written agreement to the same effect has not yet been signed does not alter the binding validity of the oral agreement. [Citation.]” (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 358 [72 Cal.Rptr.2d 598].)
- If the parties have agreed not to be bound until the agreement is reduced to writing and signed by the parties, then the contract will not be effective until the formal agreement is signed. (Beck v. American Health Group International, Inc. (1989) 211 Cal.App.3d 1555, 1562 [260 Cal.Rptr. 237].)
- “Whether it was the parties’ mutual intention that their oral agreement to the terms contained in a proposed written agreement should be binding immediately is to be determined from the surrounding facts and circumstances of a particular case and is a question of fact for the trial court.” (Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 358.)
1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 133, 134
13 California Forms of Pleading and Practice, Ch. 140, Contracts, § 140.22 (Matthew Bender)
5 California Points and Authorities, Ch. 50, Contracts, § 50.350 (Matthew Bender)
1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 13, Attacking or Defending Existence of Contract—Absence of Essential Element, 13.07