LOS ANGELES (Legal Newsline) - A two-page, handwritten document drafted in a coffee shop is a valid contract between men who discussed buying a collection of gas stations for more than $12 million, a California appeals court ruled, reversing a trial court that found the document was too imprecise to enforce.
In a decision filled with references to black-letter contract law, California’s Second Appellate District Court said Edwart Der Rostamian can sue David Delrahim for breaking a contract to form some kind of partnership to buy 13 gas stations from another man for $12.4 million. Instead of following through on the deal, Delrahim negotiated directly with the seller and bought them for $11 million instead.
The broken contract was born in a Calabasas coffee shop in 2015, where Rostamian and Delrahim met to discuss a purchase agreement Rastamian had with Ibrihim Mekhail to buy the 13 stations for $12.8 million. Rastamian was trying to consummate the purchase through his company Tiffany Builders LLC but had gotten bogged down even after attracting capital from another investor and putting $250,000 in escrow.
Rostamian and Delrahim asked a server for a pen and wrote a two-page agreement to try and buy the stations for $12.4 million or less, with “X” signifying the potential lower price. Delrahim would pay Rostamian a $500,000 finders fee in exchange for backing out of his own purchase agreement and Rostamian would buy four “dealer sites” that didn’t include the land underneath them and pay Delrahim $4,000 a month in fees.
In the end, Delrahim dealt directly with Mekhail and Rostamian sued for breach of contract and tortious interference. A trial court dismissed the case, citing indefinite language in the contract between the men as well as contradictions between Rostamian’s deposition testimony and a written declaration he submitted to the court.
The appeals court reversed in a Nov. 28 decision.
“When people pen their names to a document they have drafted together, the law accords their act a potent meaning,” the court said. “Delrahim and Rostamian signed their joint creation, thereby enacting a ritual signifying commitment: an exchange of promises.”
Delrahim argued the agreement wasn’t enforceable because it didn’t specify where the gas stations were and used “X” instead of exact dollar amounts. But well-established principles of contract law allow courts to fill in the gaps in such agreements in order to make them effective instead of void, the appeals court said.
“A contract need not specify price if price can be objectively determined,” the court ruled.
The court also credited parol, or extrinsic, evidence supporting the idea the two men had a binding agreement, including Rostamian’s declaration. The court rejected the tortious interference claim, however, since it was brought in the name of Tiffany Builders and Rostamian testified the agreement between Tiffany and Mekhail had ended by the time Delrahim negotiated his own deal with the seller.