Opinion
CIVIL ACTION No. 02-2504-CM
March 5, 2004
MEMORANDUM AND ORDER
This action arises out of a construction project performed on plaintiff Foodbrands Supply Chain Services Inc.'s (Foodbrands) property in Olathe, Kansas. As a result of Foodbrands' dissatisfaction with the construction project, Foodbrands brought this action on September 30, 2002, against defendant Terracon Inc. (Terracon) alleging breach of contract, breach of express warranty, negligence, and negligent misrepresentation. This matter comes before the court on Terracon's Motion for Partial Summary Judgment (Doc. 25) and Foodbrands' Motion for Partial Summary Judgment (Doc. 34).
I. Facts
In 1999, Foodbrands began the process of designing and constructing a national food distribution facility in Olathe, Kansas (the project). During the design phase of the project, Foodbrands engaged Terracon to provide professional geotechnical engineering services, including investigating and making recommendations for the design and construction of the concrete pavement portions of the project.
On July 21, 1999, Terracon submitted to Foodbrands a proposal for geotechnical engineering services at the project (the July 1999 proposal). Terracon attached to the July 1999 proposal its standard terms and conditions, which the parties agree were part of the proposal. The standard terms and conditions contain the following provisions:
SECTION 13: LIMITATION OF LIABILITY: The Client agrees to limit TERRACON'S liability to the owner and all construction contractors and subcontractors on the project arising from TERRACON'S professional acts, errors, or omissions or breach of contract or other cause of action, such that the total aggregate liability of TERRACON to all those named shall not exceed $50,000 or TERRACON'S total fee for the services rendered on this project, whichever is greater, and Client hereby releases TERRACON from any liability above such amount. The Client further agrees to require of the contractor and his subcontractors an identical limitation of TERRACON'S liability for all damages suffered by the contractor or the subcontractor arising from TERRACON'S performance of services. Neither the contractor nor any of this subcontractors assumes any liability for damages to others which may arise on account of TERRACON'S professional acts, errors or omissions.
SECTION 14: INSURANCE: TERRACON carries worker's compensation and employer's liability insurance and has coverage under public liability and property damage insurance policies. Certificates for all such policies of insurance will be provided to Client upon request. Within the limits and conditions of such insurance, TERRACON agrees to indemnify and save Client harmless from and against any loss, damage, injury or liability arising from any negligent acts of TERRACON, its employees, agents, subcontractors and their employees and agents. TERRACON shall not be responsible for any loss, damage or liability beyond the amounts, limits and conditions of such insurance. TERRACON shall not be responsible for any loss, damage or liability arising from any acts by a Client, its agent, staff, consultants employed by others or other third parties who are not employees of TERRACON.
The "fee structure and conditions" section of the July 1999 proposal states that the "proposal is valid for 30 days" and "[t]o execute this agreement, please sign and return one copy of this proposal to our office." Joel Mark (Mark) accepted and signed the July 1999 proposal on Foodbrands' behalf. The parties agree that the July 1999 proposal is a contract and that Terracon's terms and conditions are part of the contract. On September 7, 1999, Terracon invoiced Foodbrands for subsurface exploration at the project. The September 1999 invoice specifically identified the invoice as being "Per Proposal of July 21, 1999."
Both parties submitted affidavits in support of their motions for summary judgment. Terracon has attacked the admissibility of Mark's affidavit submitted, claiming that Mark has no personal knowledge of Terracon's performance or the agreement pursuant to which Terracon performed its services. Terracon also claims that Mark's affidavit contains merely conclusory allegations as to the parties' performance. Foodbrands claims that the documents themselves establish Mark's competence as a witness in this case. He was the individual to whom the January 2000 proposal was submitted, and is the individual who signed the July 1999 proposal on Foodbrands' behalf. Foodbrands claims that Mark is competent to testify as to whether he accepted, in writing or otherwise, the terms and conditions of the January 2000 proposal.
It appears Mark has testified as to his personal knowledge of the matters at the heart of the conflict in this case. Terracon has not shown that Mark's affidavit is contrary to any prior testimony or affidavit or that it constitutes an attempt to create a sham fact issue. See Franks v. Nimmo, 796 F.2d 1230, 1237 (10th Cir. 1986). The court thus finds that Mark's affidavit is admissible.
On January 31, 2000, Terracon submitted to Foodbrands a second written proposal for testing and observation services in conjunction with the construction at the project (the January 2000 proposal). Terracon attached to the January 2000 proposal its standard terms and conditions (including Sections 13 and 14 as set forth above) and a fee schedule, which the parties agree were part of the proposal. The last two paragraphs of the January 2000 proposal state in pertinent part "[t]his proposal is prepared for the exclusive use of Foodbrands America and is valid for a period of 90 days" and "[p]lease acknowledge acceptance of this proposal by signing and returning one copy to our office." Foodbrands never signed or returned the January 2000 proposal.
Shortly after Terracon submitted the January 2000 proposal, Foodbrands' contractors began coordinating Terracon's inspection and observation work at the project. Terracon began performing construction testing and observation services at the project on February 21, 2000. On March 22, 2000, Terracon attended a preconstruction meeting, along with Foodbrands' representatives and other contractors, regarding the scope and timing of work at the project. During the period of February 2000 through April 2001, Terracon performed construction testing, inspection, and observation services at the project. Terracon issued verbal and written reports to Foodbrands and invoiced Foodbrands for its services during that period.
Foodbrands accepted Terracon's reports for work at the project during 2000 and 2001 and paid Terracon for all of the services performed and invoiced. None of the invoices for Terracon's services between February 2000 and April 2001 mentioned the January 2000 proposal. Some of the rates for the fees charged on the invoices deviated from the rate schedule contained in the January 2000 proposal. The invoices contained the language: "For services in conjunction with field evaluation and consulting" or "For services in conjunction with construction observation testing."
At no time during the period of February 2000 through March 2001 did any representative of Terracon ask Mark why he had not executed the January 2000 proposal. No Terracon representative informed Mark that the construction testing and observation services being provided were subject to or being provided pursuant to the provisions of the January 2000 proposal.
Terracon claims that, even though Foodbrands did not sign the January 2000 proposal, its work was performed in accordance with the January 2000 proposal. Terracon claims that Foodbrands directly requested the January 2000 proposal and that Foodbrands accepted the terms and conditions of the January 2000 proposal by its own performance of the January 2000 proposal. Terracon further claims that the January 2000 proposal constitutes a contract and controls the terms and conditions of the parties' agreement with regard to the testing and observation services Terracon performed at the project. Terracon contends that Foodbrands never objected, either orally or in writing, to the January 2000 proposal or to the terms and conditions incorporated therein, never asked that the proposal be modified, and never negotiated to add, delete, or modify any of its terms. Terracon contends that Foodbrands never discussed with Terracon, or entered into negotiations with Terracon, concerning any contracts, agreements or understandings other than the July 1999 proposal and the January 2000 proposal.
Foodbrands claims that it did not request that Terracon submit a written proposal with respect to the testing and observation services. Foodbrands specifically denies that it requested that Terracon submit the January 2000 proposal. Foodbrands also claims it never orally or in writing accepted the terms of the January 2000 proposal. Rather, Foodbrands claims Mark orally authorized Terracon to perform testing and observation services at the project on an "as requested," hourly-rate basis. Foodbrands further claims that Mark did not sign and return to Terracon the January 2000 proposal because Foodbrands did not agree to be bound by the terms of the January 2000 proposal, or by the additional terms and conditions. Foodbrands contends that its failure to sign and return the January 2000 proposal was not a mistake, but was an intentional decision based upon what Mark viewed as the undesirable terms of the January 2000 proposal. Neither Mark nor any other Foodbrands representative ever participated in any negotiations or discussions with any Terracon representative regarding the content of the January 2000 proposal or of the additional terms and conditions incorporated into the January 2000 proposal.
Foodbrands does not dispute that the geotechnical services Terracon performed in 1999 were pursuant to the July 1999 proposal. However, Foodbrands claims that the construction testing, inspection and observation services Terracon performed at the project in 2000 and 2001 were conducted pursuant to an oral agreement between the parties for services on an hourly-rate basis as they were requested.
The concrete paving at the project failed within one year of its placement. Foodbrands claims that, as a result, it incurred the loss of use of driving and parking areas and has had to engage in costly repairs. Foodbrands has sued Terracon for breach of warranty, breach of express warranty, negligence, and negligent misrepresentation based on Terracon's work at the project. Foodbrands seeks over $100,000 in damages from Terracon.
Terracon has moved for partial summary judgment requesting that the court find that, pursuant to Section 13 of both the July 1999 and the January 2000 proposals, Terracon's liability for all damages Foodbrands has claimed is limited to the greater of either $50,000 or Terracon's fees for the services.
Foodbrands has also moved for partial summary judgment. Foodbrands seeks an order from the court finding that: 1) Section 14 of the executed July 1999 proposal obligates Terracon to save Foodbrands harmless from property damage resulting from Terracon's negligent acts; and 2) the parties did not execute the January 2000 proposal, and thus Foodbrands did not agree to limit Terracon's liability under Section 13 for performance of the testing and observation work.
II. Summary Judgment Standard
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). An issue of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Id. (citing Anderson, 477 U.S. at 248).
The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Id. at 670-71. In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. Id. at 671 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).
Once the movant has met this initial burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256; see Adler, 144 F.3d at 671 n. 1 (concerning shifting burdens on summary judgment). The nonmoving party may not simply rest upon its pleadings to satisfy its burden. Anderson, 477 U.S. at 256. Rather, the nonmoving party must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant." Adler, 144 F.3d at 671. "To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein." Id.
Finally, the court notes that summary judgment is not a "disfavored procedural shortcut," rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327 (quoting Fed.R.Civ.P. 1).
Both parties have moved for summary judgment. This fact does not permit entry of summary judgment if disputes remain as to material facts. Harrison W. Corp. v. Gulf Oil Corp., 662 F.2d 690, 692 (10th Cir. 1981). Rather, factual inferences tending to show triable issues must be considered in the light most favorable to the existence of those issues. Mustang Fuel Corp. v. Youngstown Sheet Tube Co., 516 F.2d 33, 36 (10th Cir. 1975).
III. Analysis
Both parties have requested that the court interpret the alleged contract(s) between them and make judgments as a matter of law. The construction of a written contract is a matter of law for the court. Wagnon v. Slawson Exploration Co., 255 Kan. 500, 511, 874 P.2d 659, 666 (1994). The "cardinal rule of contract interpretation is that the court must ascertain the parties' intention and give effect to that intention when legal principles so allow." Ryco Packaging Corp. v. Chapelle Int'l, Ltd., 23 Kan. App. 2d 30, 36, 926 P.2d 669, 674 (1996) (citing Hollenbeck v. Household Bank, 250 Kan. 747, 751, 829 P.2d 903, 906 (1992)). Where a contract is complete and unambiguous on its face, the court must determine the parties' intent from the four corners of the document, without regard to extrinsic or parol evidence. Simon v. Nat'l Farmers Org., Inc., 250 Kan. 676, 679-80, 829 P.2d 884, 887 (1992).
However, in this case, one of the primary issues before the court is whether Foodbrands and Terracon had a contract beyond the July 1999 proposal, and, if they did, whether the contract was evidenced in the January 2000 proposal or in an oral agreement with different terms than the January 2000 proposal. Therefore, the court must first analyze whether the parties had a contract beyond the July 1999 proposal before attempting to address the liability issues set forth by the parties.
"The existence or non-existence of an agreement or contract is in its very nature a question of fact." Steele v. Harrison, 220 Kan. 422, 428, 552 P.2d 957 (1976). The basic principles of contract formation are well established. "In order to form a binding contract, there must be a meeting of the minds on all of the essential terms." Albers v. Nelson, 248 Kan. 575, 580, 809 P.2d 1194 (1991); see also Sidwell Oil Gas Co. Inc. v. Loyd, 230 Kan. 77, 79, 630 P.2d 1107 (1981). "To constitute a meeting of the minds there must be a fair understanding between the parties which normally accompanies mutual consent and the evidence must show with reasonable definiteness that the minds of the parties met upon the same matter and agreed upon the terms of the contract." Steele, 220 Kan. at 428, 552 P.2d 957.
Central to determining whether Foodbrands and Terracon had a meeting of the minds with regard to the January 2000 proposal, and thus whether Foodbrands accepted the January 2000 proposal and agreed to be bound to its terms, is whether Foodbrands' silence in response to the proposal constituted acceptance. The Restatement (Second) of Contracts §§ 19 and 69 discuss manifestation of mutual assent and acceptance by silence. According to § 19:
(1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
Restatement (Second) of Contracts §§ 19(1) and 19(2). Section 69 specifically addresses acceptance by silence:
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is unreasonable that the offeree should notify the offeror if he does not intend to accept.
Restatement (Second) of Contracts §§ 69(1)(a)-(c).
These provisions are consistent with Kansas law and with generally recognized principles of contract law. See Caterpillar Tractor Co. v Sickler, 149 Kan. 457, 460, 87 P.2d 503 (1939) (holding that mere silence when an offer is made does not constitute an acceptance of an offer; something more than silence is required); E. Allan Farnsworth, Contracts § 3.15 at 155 (2d ed. 1990) (citing general rule that a promise will not be inferred from the offeree's mere inaction). The drafters of the Restatement (Second) of Contracts have noted that "acceptance by silence is exceptional." Restatement (Second) of Contracts § 69 cmt. a.
In the summary judgment record, Terracon has argued that Foodbrands' silence with regard to the January 2000 proposal and Foodbrands' subsequent acceptance of Terracon's performance constituted acceptance of the January 2000 proposal. On the other hand, Foodbrands contends that its silence was a rejection of the January 2000 proposal, and that the parties had an oral agreement regarding Terracon's construction testing, inspection and observation services. There is no issue over payment to Terracon for its construction testing, inspection and observation services in 2000 and 2001. Foodbrands paid all of Terracon's invoice for its services. The dispute rests on the other duties and liabilities of the parties, which hinges on what agreement formed the foundation of their relationship.
"Where the evidence pertaining to the existence of a contract is conflicting a question is presented for the trier of fact. The controlling question as to whether a binding contract was entered into depends on the intentions of the parties and is a question of fact." Augusta Bank Trust v. Broomfield, 231 Kan. 52, 60, 643 P.2d 100 (1982). The court finds that genuine issues of material fact exist with regard to 1) whether Foodbrands accepted the January 2000 proposal, making it an enforceable contract; or 2) whether the parties entered into an oral agreement for the construction testing, inspection and observation services Terracon performed at the project in 2000 and 2001; or 3) whether the parties had any contract beyond the July 1999 proposal. Therefore, the court cannot determine as a matter of law either that the January 2000 proposal constituted a contract between the parties or that the parties had an oral agreement regarding the testing and observation services performed in 2000 and 2001. Instead, such determinations are left to the trier of fact.
A. Terracon's Motion for Partial Summary Judgment
Terracon has requested that the court find that, pursuant to Section 13 of both the July 1999 and the January 2000 proposals, Terracon's liability for all damages Foodbrands has claimed is limited to the greater of either $50,000 or Terracon's fees for the services. Because the court finds that genuine issues of material fact exist with regard to whether the January 2000 proposal was ever accepted by Foodbrands, and thus whether it ever became an enforceable contract, the court denies Terracon's motion for partial summary judgment. The court concludes that it is more appropriate for a trier of fact to determine what agreements govern Foodbrands and Terracon's relationship with regard to the project. Such a determination will necessarily involve a determination of whether Section 13 applies to all of Foodbrands' alleged damages or just to the damages attributable to services Terracon provided pursuant to the July 1999 proposal.
B. Foodbrands' Motion for Partial Summary Judgment
Similarly, Foodbrands has requested that the court find that: 1) Section 14 of the July 1999 contract obligates Terracon to indemnify Foodbrands for property damage resulting from Terracon's negligent acts; and 2) the parties did not agree to limit Terracon's liability under Section 13 for performance of the testing and observation work. Again, the court finds that because genuine issues of material fact exist with regard to whether the January 2000 proposal was ever accepted by Foodbrands, and thus whether it ever became an enforceable contract, the court must deny Foodbrands' motion for partial summary judgment. The court believes it is more appropriate for a trier of fact to determine the terms and conditions governing the parties' relationship, which would necessarily involve a determination of whether Sections 13 and 14 apply to all of Foodbrands' alleged damages or just to the damages attributable to services Terracon provided pursuant to the July 1999 proposal.
However, in light of the fact that the parties agree that the July 1999 proposal was a contract, and that its terms and conditions governs the parties' duties and liabilities with regard to Terracon's geotechnical engineering services performed at the project, the court finds that both Sections 13 and 14 are applicable to any determination of Foodbrands' claimed damages as a result of the geotechnical engineering services and Terracon's liability for those alleged damages. That being said, the court notes that the parties have not clearly set out an allocation of damages attributable separately to 1) Terracon's geotechnical engineering services performed pursuant to the July 1999 proposal, and 2) Terracon's testing and observation services performed in 2000 and 2001. Such a distinction may be impossible to make due to both the nature of the services Terracon provided at the project and the nature of Foodbrands' claims. Therefore, should the trier of fact determine that Sections 13 and 14 apply to only the geotechnical engineering services performed pursuant to the July 1999 proposal, such a determination would create additional questions of fact regarding allocation of the alleged damages as a whole. Again, such issues of fact would be more appropriately determined by the trier of fact, not the court. The court is reluctant to make a premature ruling as to the interpretation and applicability of Sections 13 and 14 and their affect on Foodbrands' damages without those fact determinations.
IT IS THEREFORE ORDERED that Terracon's Motion for Partial Summary Judgment (Doc. 25) is denied.
IT IS FURTHER ORDERED that Foodbrands' Motion for Partial Summary Judgment (Doc. 34) is denied.