CACI No. 306. Unformalized Agreement

Judicial Council of California Civil Jury Instructions (2023 edition)

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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
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, May 2020
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 the 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.)
“[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].)
“Thus, where it is part of the understanding between the parties that the terms of
their contract are to be reduced to writing and signed by the parties, the assent to
its terms must be evidenced in the manner agreed upon or it does not become a
binding or completed contract.” (Beck v. American Health Group Internat., 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.)
“[W]hen parties agree on the material terms of a contract with the intention to
later reduce it to a formal writing, failure to complete the formal writing does
not negate the existence of the initial contract. If the parties do not agree on the
content of the formal writing (for example because one party wants to include
something not agreed on in the first place, as [defendant] says happened here),
the proposed writing is not a counteroffer; rather, the initial agreement remains
binding and a rejected writing is a nullity.” (CSAA Ins. Exchange v. Hodroj
(2021) 72 Cal.App.5th 272, 276 [287 Cal.Rptr.3d 264].)
Secondary Sources
1 Witkin, Summary of California Law (11th ed. 2017) 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, § 50.50 (Matthew Bender)
1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 13, Attacking
or Defending Existence of Contract - Absence of Essential Element, 13.07[3]

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