QUESTION
Does the concept of good faith apply prior to the signing of a contract?
Asked on Sep 02nd, 2012 on Contracts - Illinois
More details to this question:
My church has a current contract with a non profit (NP)where they pay $800/month primarily for the use of classrooms. The rep from the NP asked for addtional rooms and stated all requirements needed to be ready in about a 3 week timeframe.My church just purchased an add'l bldg and in good faith, began to remodel to accommodate. We offered a new price of $2000/month. Reps from the NP viewed the progress of remodeling and inquired about additional space. Four days prior to the target date of completion, the rep from the NP said they only have $800/month to pay. Bottom Line: We began remodeling in good faith since there was no rejection of the $2000/month offerred (granted, there was not an acceptance either). Do we have any legal basis to recoup expenses?
1 ANSWER
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Yes, there may be a legal basis for a claim against the NP, though additional information may be needed. When did you communicate the additional rent amount? Did you inform the NP that you would have acquire the additional building to accommodate the request? Depending on the answers, you may have a claim based on promissory estoppel (or similar theory). Oral agreements are sometimes enforceable, but not when it comes to real estate. Without an agreement in writing, you really have no contract. Promissory estoppel is an alternate theory of recovery and is based on the premise that you were induced to make changes to your detriment based on the request by the NP and promise to pay additional rent. Even if the NP never really promised to pay rent, if they knew you intended to charge additional rent and knew that you were going to incur an expense (purchase of the building and cost of build out), and if they stood by and watched you buy the building and build out the space,it would be unfair for the NP to refuse to take the space and pay the additional rent.
This response is not intended to create an attorney/client relationship and is not meant to be relied on in your specific situation because based on the limited facts stated in the question. These situations are highly fact dependent so I encourage you to see an attorney and get some specific advice based on all of the facts and circumstances.
Answered on Sep 21st, 2012 at 12:42 PM