Hyman Freightways v. Carolina Freight Carriers Corp. Case Brief Analysis

January 15, 2012

Hyman Freightways v. Carolina Freight Carriers Corp.

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT (1991)

FACTS:  Hyman Freightways (Hyman) and Carolina Freight Carriers Corp. (Carolina) both leased space at the same trucking terminal – Bellemeade Development Corporation, Hillside, Illinois (Bellemeade). Hyman lease was to expire on October 31, 1989. But Hyman had already made arrangements to move to another facility about a year prior to the lease contract expiration date and signed a lease for a new facility on or before August 1, 1988. Therefore Hyman needed to find an assignee to assume its contractual lease obligations with Bellemeade for the balance of the original contract. Carolina was a suitable candidate for this contract assumption because it was considering purchasing in the future the whole Bellemeade facility including the space originally leased by Hyman.

Through the services of a real estate agent, Phyllis Sutker, both companies communicated about the assumption of Hyman’s lease by Carolina. Though there is a record of ongoing communication between the parties on their intention to make an agreement about assumption of the lease from Hyman by Carolina, the actual agreement has never been entered in by both parties. For Carolina the assumption of the lease from Hyman was contingent on its intent to buy the whole facility from Bellemeade. In August 5 fax to Hyman Carolina confirmed its intent to assume the Lease between Hyman and Bellemeade. However it was mentioned that “The effective date of the Lease Assignment will be approximately September 15, 1988, the actual date to be determined by mutual consent once Hyman has totally vacated the leased premises.”

While Hyman eventually vacated the facility on October 15-17, Carolina rescinded its offer to buy the Hillside facility from Bellemeade on October 31, 1988. In a separate letter on the same date Carolina advised Hyman that it was withdrawing its Offer to Assume the Lease between Bellemeade and Hyman. Hyman was not able to locate another sublessee and remained responsible for the balance term of its lease at Bellemeade. Hyman sued Carolina for breach of contract.

ISSUE: Was there in fact a contract between Hyman and Carolina on the Lease Assumption and what document would evidence the existence of such contract?

OUTCOME: The court of appeals ruled that the decision by the lower court was correct and there had been no contract established by the parties which would allow Hyman to hold Carolina responsible for a breach of contract.

REASONING: The court’s decision is based on the significant distinction between the intent to enter into the contract and the actual binding contract. The court admits that though it must draw reasonable inferences in Hyman’s favor, the very first question to consider in the case is if such an actual contract exists. An assignment of the Hyman’s lease is qualified as an interest in land according to Illinois statute of fraud and therefore requires to be evidenced in writing. The only document that Hyman is using in its support of the existence of contractual agreement is the August 5 fax from Carolina. Since this is the only document controlling the case, the court ruled that this fax does not evidence a contract, because it does not have the date-of-assignment term, required by Illinois law. And the fax explicitly states that the date of assignment would be negotiated at a later date, which makes the agreement unenforceable.

COMMENTS: The case offers a remarkable example of the intricacies of the contractual law and its implications for businesses. Admittedly, the main concern of the contractual law is to see if the parties have upheld their obligations according to the agreement they had. This case however tackles on more subjective matter if the contract was even evidenced by the indirect documents presented in the case. The eagerness of Hyman to present the case as if there had been contractual agreement is quite understandable – a whole year of lease pay is a considerable amount of money for most businesses. In its pursuit of getting Carolina to pay for a breach of contract Hyman even misrepresented such fact that they could have subleased to Con-Way but for Carolina’s interest. In spite of these financially excruciating circumstances for Hyman I would agree with the court’s decision that “The law requires a writing evidencing a contract, not a writing evidencing intent to enter into a contract.” And in this case the evidence is clear that the intent has never matured to the contract.