AROK Constr. Co. v. Indian Constr. Servs
In AROK Constr. Co. v. Indian Constr. Servs., 174 Ariz. 291, 848 P.2d 870 (App. 1993), Indian Construction Services ("ICS") submitted a bid to serve as general contractor for a construction project. Id. at 293, 848 P.2d at 872.
ICS's bid was based in part on a telephonic bid by AROK Construction Company, a subcontractor who had worked with ICS previously, to perform drywall and stucco work on the project for $ 1.549 million. Id.
Prior to the bid closing for selection of the general contractor, AROK agreed to reduce its bid to $ 1.4 million if ICS agreed to award the drywall and stucco work to AROK if ICS was the successful bidder. Id. ICS responded that if it got the job AROK would get the job. Id.
ICS was later awarded the general contractor job, but a dispute arose between it and AROK regarding the agreed-upon subcontract price. Id.
ICS maintained that AROK had agreed to further reduce its price to $ 1.3 million while AROK maintained its price at $ 1.4 million. Id.
The parties failed to resolve the dispute, and ICS subcontracted with other parties to perform the drywall and stucco work. Id.
AROK sued ICS asserting multiple causes of action, including breach of contract. Id. at 294, 848 P.2d at 873. The trial court granted summary judgment for ICS, ruling as a matter of law that no contract existed between the parties because essential terms, such as manner and time of payments, time for completion, penalty provisions, and bonding, were omitted from the agreement. Id. at 293, 296, 848 P.2d at 872, 875.
The Court reversed, holding that a triable issue of fact existed regarding the parties' intent to contract. Id. at 295, 848 P.2d at 874.
The Court reasoned that "absent or uncertain terms are not fatal to the enforceability of an otherwise binding contract." Id. at 297, 848 P.2d at 876.
Instead, extrinsic evidence can be used to establish the meaning of the parties' agreement and supply omitted terms. Id. at 298, 848 P.2d at 877.
The court explained:
The fact that the parties have left some matters to be determined in the future should not prevent enforcement, if some method of determination independent of a party's mere 'wish, will, and desire' exists, either by virtue of the agreement itself or by commercial practice or other usage or custom. Id. at 297, 848 P.2d at 876.
The court concluded that whether an agreement resolves every matter is not the touchstone for enforceability. Id.
Rather, the terms of an agreement are sufficiently certain to enforce "if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." Id. (quoting Restatement (Second) of Contracts 33(2) (1981) hereinafter "Restatement").
The court then determined that the agreement between ICS and AROK was sufficiently certain because:
(1) the agreement provided the court with a basis for determining ICS's breach (scope of work) and provided a remedy (agreed-upon price), and;
(2) the parties' prior course of dealing involved use of a standard form contract that could be used to supply missing terms. Id. at 298, 848 P.2d at 877.