A contract is an exchange of promises that a court will enforce. In the fast-paced world of construction, disputes often arise over whether the parties actually formed a legally enforceable contract. The general rule is that to form a contract the parties must reach a meeting of the minds on the contract’s essential terms. Whether there is a meeting of the minds is determined not by the parties’ internal or “subjective” belief, but rather by their outward or “objective” words or conduct indicating an intent to enter a contract. Where one party secretly believes it has entered a contract without manifesting that belief, or where the parties do not reach agreement on materials terms like price or quantity, courts may conclude that no contract exists.
Such was the case in a decision released last week by the District of Connecticut in International Building Supply et al v. Hudson Meridian Construction Group, LLC., No. 3:22-cv-01167, 2025 WL 3096605 (D. Conn. Nov. 6, 2025). In that case, the parties negotiated for over two years regarding a contract to supply and install lumber for a 400-unit apartment complex in New Haven. The general contractor had twice issued letters of intent to the subcontractor, however no formal contract was ever executed as contemplated by the LOI. Despite their efforts, the parties disagreed over whether the $6.9 million price tag did or did not include a $150,000 allowance for hardware. The subcontractor eventually brought suit for breach of contract after the general contractor rescinded the LOI and hired another firm to do the work. The 44-page opinion, authored by former Marine and current Federal Judge Thomas O. Farish, focuses largely on the issue of contract formation.
Interestingly, the court’s analysis includes both the UCC and common law of contracts. That’s because the parties were actually negotiating two separate subcontracts: one for supply of lumber/hardware (i.e., goods) and one for the labor to install them. The court recognized that for the sale of goods, contract formation is a more flexible concept as the UCC will supply default terms to fill gaps in the parties’ agreement. Such default terms may come from trade custom, standard usage, and past dealings. They may even include, in the right circumstances, a default price term. The court in International Building Supply nonetheless refused to impose a default price term because the LOI expressly contemplated an additional written agreement, which was never executed. The LOI also did not address several other material terms, including prequalification, insurance, retainage, responsibility for defective materials, the discharge of mechanics’ liens, and indemnification in the event of third-party claims. All of those material terms were left for future negotiations, which never culminated in a meeting of the minds on all essential terms. The court therefore held there was no legally enforceable contract and entered judgment for the general contractor.
A copy of the court’s decision is located here.
