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Contract Negotiations

The following excerpts are from Dahl v. Messmer, 2006 ND 166. One of the issues in this case addresses the legal implications of respresentations made during contract negotiations.

Robert Dahl and Mark Wiegand ("Dahl and Wiegand") appeal from a partial summary judgment on their claims brought against Victor and Clara Messmer ("Messmer") regarding the Management Contract ... We affirm.

This action is the result of the sale and purchase of the Tailfeather Inn, a Mott, North Dakota convent converted into a home and hunting lodge Dahl and Wiegand purchased from Messmer. Messmer owned the former convent located in Mott. Messmer was using the convent as his residence and also renting it out as a hunting lodge. Messmer was managing the business and living in the building at the same time.

Dahl and Wiegand were interested in purchasing the building as a place to stay on their hunting trips to Mott and to rent it out as a hunting lodge when they were not there. Dahl and Wiegand maintain they were not interested in running the hunting lodge operation themselves because they lived in Arizona. Dahl and Wiegand allege Messmer told them he would be willing to continue managing the hunting lodge business for them if they bought it. Dahl and Wiegand also allege Messmer represented to them that the hunting lodge made around $51,000 per hunting season, the building's furnaces were in good shape, the roof was still under warranty, and it cost around $500 per year to insure the building.

Dahl and Wiegand allege they agreed to purchase the hunting lodge based on Messmer's representations regarding profitability, the building's condition and cost of insurance, and his intention to continue to manage the business. The parties entered into a Management Contract which provided that Messmer would continue to stay at the property and manage the hunting lodge business. The contract provided the agreement could be terminated by either party upon 90 days notice. The parties closed the sale in March of 2003. Three days after the sale occurred, Messmer sent Dahl and Wiegand a letter terminating his management responsibilities. Dahl and Wiegand sued Messmer alleging he breached the contract requiring him to manage the hunting lodge and that he fraudulently misrepresented the profitability of the business and other facts about the business.

Dahl and Wiegand contend they had to hire a new manager, they had to put the whole building on electric heat shortly after the sale because two furnaces were defective, and it cost around $3,000 per year to insure the building. Dahl and Wiegand also contend the Tailfeather Inn made only $15,000. They allege losses of $61,000 the first year they operated the business. They allege the business lost $45,000 the second year and is expected to lose $40,000 to $45,000 every year.

...

"In the absence of an ambiguity, a written contract supersedes any prior oral agreement or negotiations between the parties." Heart River Partners v. Goetzfried, 2005 ND 149, ¶ 11, 703 N.W.2d 330; see N.D.C.C. § 9-06-07 (providing "[t]he execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument"). "Parol evidence is admissible, however, in an action to reform a written contract on the grounds of fraud or mutual mistake to establish the alleged fraud or mistake and to correct the instrument to conform to the agreement or intention of the parties." Heart River Partners, at ¶ 12. However, "[t]his Court has said a party who seeks reformation has the burden to prove by clear and convincing evidence that a written agreement does not fully or truly state the agreement the parties intended to make." Id. at ¶ 14.

Although there was a written Management Contract in this case, Dahl and Wiegand argued Messmer represented he would stay and manage the hunting lodge business for a period longer than the period contained in the Management Contract. In granting partial summary judgment, the district court ruled no parol evidence would be allowed regarding the validity of the Management Contract and no claims for damages arising out of the Management Contract would be allowed at trial.

...

Dahl and Wiegand contend ... Messmer misrepresented the profitability and condition of the Tailfeather Inn. It is unclear whether Dahl and Wiegand are pursuing damages under a theory of fraud or deceit. The parties and the court below drew no distinction between fraud and deceit in the pleadings, arguments, or judgment and, for purposes of this appeal, neither will we.

...

"Generally, statements of value and predictions of future earnings or profits fall within the class of statements whose truth or falsity cannot be precisely determined and which are not, therefore, actionable as misrepresentations of fact." ... "Whether there were fraudulent representations or not in a given case must depend upon the facts in each case." ... "General expressions of opinion by a seller, commendatory of the thing he is selling, are not actionable even though not entirely true." ... "Hence, statements of opinion, as, for example, expressions by the seller commending the thing he is selling, have been held not actionable even though they are false." ... "These expressions come within the term generally referred to as 'puffing' and are considered mere dealer's talk."

Dahl and Wiegand purchased the Tailfeather Inn "as is" and contracted not to hold Messmer liable for any non-disclosed or latent defects. Dahl and Wiegand presented testimony of Messmer's alleged fraudulent statements but presented no evidence showing Messmer's statements amounted to either fraud or deceit under N.D.C.C. §§ 9-03-08 or 9-10-02. The evidence presented at trial leads to the conclusion that Messmer's statements did not rise to the level of fraud or deceit and the district court properly granted judgment as a matter of law...

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