The opinion of the court was delivered by: NEAHER
Plaintiff in this action seeks damages for breach of contract. The contract involved a shipment from the United States of certain wire and cable products by the defendant Westinghouse Electric Supply Company (WESCO) to the plaintiff in Japan. The goods were to be used by the plaintiff in connection with a subcontract involving the United States Army Corps of Engineers. Upon rejection of the materials by the Army Engineers for failure to meet specifications, plaintiff instituted this action. The merits of plaintiff's claims are not now before the court. Plaintiff has moved for the entry of judgment pursuant to an alleged settlement agreement. WESCO contests the existence of a binding settlement agreement and consequently the entry of judgment thereon.
A hearing was ordered so that the facts surrounding the formation of the disputed settlement agreement could be more fully explored. After hearing oral argument, it became clear that essentially undisputed facts and the proper inferences to be drawn therefrom will be dispositive of this motion.
The court reserved decision on the matter, however, in order to examine a transcript of that proceeding together with the briefs and affidavits previously submitted by the parties.
What emerges after careful consideration is the following. Plaintiff's position, simply stated, is that on June 12, 1972, WESCO's counsel, Mr. Dean, conveyed to plaintiff's attorney, Mr. Gottesman, an offer of settlement in the amount of $31,500, which offer Mr. Gottesman then accepted. Mr. Gottesman understood this offer to mean that in return for the $31,500, plaintiff would reship the wire and cable products to the United States and also enter into a stipulation of discontinuance.
Defendant, on the other hand, maintains that the negotiations were substantially more complicated than plaintiff's counsel describes. Defendant's attorneys point out that WESCO acted in effect as a middleman in both the sale of the disputed products
and the settlement negotiations, the principal seller being a company named Eastern Wire and Cable Company of New Jersey (Eastern), which is not a party to this action. Defense counsel maintains that WESCO never had any intention of paying most of the cost of settlement, that Eastern was to contribute the major portion thereof, and that Mr. Gottesman was aware of these facts throughout the negotiations. Therefore, defendant's attorneys continue, when a settlement offer of $31,500 was communicated to Mr. Gottesman on June 12, 1972, it was understood that the offer was subject to reducing the terms of the agreement to a writing which would include a provision for payment of an amount by Eastern. The writing was necessary, according to WESCO's counsel, because without it WESCO would have no way of ensuring Eastern's participation in paying the cost of settlement.
Plaintiff's counsel does not dispute that a writing was contemplated but maintains that since all important points had already been agreed to, the writing would be merely a memorial of the agreement and without independent legal consequence.
Williston correctly states the general rule:
"It is . . . everywhere agreed that if the parties contemplate a reduction to writing of their agreement before it can be considered complete, there is no contract until the writing is signed."
Williston on Contracts (3d ed.) § 28 at 66-67; Scheck v. Francis, 26 N.Y.2d 466, 311 N.Y.S.2d 841, 260 N.E.2d 493 (1970). This rule obtains even if the parties have orally agreed upon all the terms of the proposed contract. Schwartz v. Greenberg, 304 N.Y. 250, 107 N.E.2d 65 (1952). Whether the parties intended to be bound without a formal writing is a question of fact. Godfrey v. Heublein, 219 F.2d 654 (2 Cir. 1955).
The court's inquiry must therefore focus on whether either of the parties manifested an intention not to be bound by an oral arrangement despite their apparent understanding of the terms upon which the action was to be settled.
In resolving the factual question concerning the understanding of the parties recourse may be had to the surrounding circumstances. Becker v. Frasse & Co., 255 N.Y. 10, 14, 173 N.E. 905, 906 (1930). In this respect, letters sent by WESCO's counsel to Mr. Gottesman over the course of settlement negotiations are most revealing.
Plaintiff's attorney was apprised of WESCO's position, as concerned Eastern, as the result of eight letters sent to him between January 5, 1970 and December 5, 1970. The subjects of these letters were requests for stipulations extending WESCO's time to answer or move against the complaint. The reason offered for the requested extensions was "to give us [WESCO] further opportunity to ascertain whether we can work out a settlement between plaintiff and defendant's supplier [Eastern]" (emphasis supplied). Additionally, in a letter dated March 16, 1971,
sent to the Honorable John F. Dooling, Jr.,
with a copy to plaintiff's attorney, WESCO's counsel wrote:
"As we have previously indicated, the proposed settlement depends on a substantial contribution ...