GLASSCOCK, Vice Chancellor.
Before me is the Defendants' Motion for Judgment on the Pleadings. Because no answer has been filed, the Motion is premature. In the interest of judicial economy, I will consider the Motion as seeking dismissal under Court of Chancery Rule 12(b)(6).
The Defendant hired Gilbane Building Company ("Gilbane") to serve as construction manager for the construction of a condominium tower at the project site the Defendant owns known as Christina Landing Condo Tower (also known as the "River Lofts" project) in Wilmington, Delaware. GBC Christina Landing, LLC ("GBC"), is an affiliate or subsidiary of Gilbane created to oversee locally the construction of the condominiums, and it is the company with which the Plaintiff originally contracted.
Per another agreement not at issue here, GBC, upon the receipt of invoices from the Plaintiff, was to submit payment applications to the Defendant, who owns the project site. The Defendant would then pay GBC, who would then pay the Plaintiff. The Plaintiff last furnished labor and materials to the construction project on May 23, 2008, and, based on the Plaintiff's reasonable assumptions regarding the payment agreement between the Defendant and GBC, payment on the Plaintiff's final invoices was due on or about July 1, 2008. Although GBC made several payments to the Plaintiff toward the original contract price of $3,769,903.00, it failed to make payments on the Plaintiff's final invoices, allegedly because the Defendant failed to make payments on the applications submitted by GBC regarding the work done by the Plaintiff.
The Defendant and GBC then, with the Plaintiff's written consent, entered into an Assignment and Assumption Agreement, whereby the Defendant agreed to perform GBC's payment obligations in full. The Defendant has nonetheless failed to make full payment of the remaining balance of the contract, $290,444.38.
In its Motion, the Defendant has not disputed the amount owed. Rather, the Defendant contends that the parties entered into a superseding agreement that made the Defendant's payment obligation contingent on the sale of certain condominiums. The Defendant asserts that in the process of negotiating a payment schedule for the amount it owes, it entered into a legally-binding contract with the Plaintiff which satisfied the requirements for contract formation and superseded the previous agreement between the parties upon which the Plaintiff predicates liability. This alleged agreement began with a memorandum sent on November 29, 2010, from the Defendant to the Plaintiff (the "Payment Memo"):
The last clause, argues the Defendant, conditions the Defendant's payment obligation on its selling an unspecified "minimum number of condominiums." The Plaintiff, after contacting the Defendant to ask if the payments could begin earlier and receiving a negative response, then wrote "Accepted" on the Payment Memo, signed it, and returned it by email to the Defendant.
The issue on the Motion before me is whether the Payment Memo constituted a valid contract and thus superseded any previous payment obligations owed to the Plaintiff by the Defendant. The Defendant contends that the Plaintiff, in writing "Accepted" on and signing the Payment Memo, accepted the Defendant's offer and that a valid contract was therefore formed that superseded the previous contract. The Plaintiff argues that the Payment Memo was not a valid contract because, under the pre-existing duty rule, the Defendant provided no consideration for the Plaintiff's forbearance and because, even if a contract was created, the "minimum number of condominiums" term is not sufficiently specific and therefore is unenforceable. For purposes of this Motion to Dismiss, I find the Payment Memo unenforceable.
In considering a defendant's motion to dismiss, this Court accepts as true all well-pled factual allegations in the plaintiff's complaint and draws in the plaintiff's favor all reasonable inferences to be made from those alleged facts.
It is the blackest of black-letter law that an enforceable contract requires an offer, acceptance, and consideration.
The application of the pre-existing duty rule here is clear. Assuming the Plaintiff's allegations to be true, as I must on a motion to dismiss, the Plaintiff has fully performed its contractual obligation, and the Defendant therefore owes the balance of the contract price, $290,444.38. The Defendant cannot use its pre-existing duty to pay the Plaintiff for its work as consideration for the Plaintiff's agreement to accept installment payments (contingent, in the Defendant's view, on a minimum number of condominium sales) rather than seek full and immediate payment, which payment is long past due.
The Defendant alleges that the pre-existing duty rule does not apply because sufficient consideration was furnished to sustain the Payment Memo as a valid contract. The Defendant points out that the Plaintiff had a contractual claim against BPG RPV upon which it could have filed a civil action to collect the amount owed. The Defendant argues that in electing to forgo this civil action and instead negotiating a payment schedule contingent on the sale of a minimum number of condominiums, the Plaintiff gave up a legal right to sue, which is sufficient new consideration to render the Payment Memo an enforceable contract.
This argument is focused on the wrong party. What is the consideration given by the Defendant in return for the Plaintiff's promise? The Plaintiff agreed to accept installment payments over a one-year period for an amount that was already due in full, and the Plaintiff also implicitly promised not to sue the Defendant provided that the Defendant kept up on the installment payments. The Defendant, on the other hand, promised only to pay a debt which it already had a legal obligation to pay. To be clear, that is a pre-existing duty and is not sufficient consideration to support a contract under Delaware law. The Payment Memo is therefore not an enforceable contract, and the Defendant's Motion fails on that ground.
The Defendant also argues that the Plaintiff, by signing the Payment Memo, expressly waived its right to demand any funds owed under the original contract and that such a waiver does not require consideration. According to the Defendant, the Plaintiff knew or should have known it had a right to demand payment of a balance owed under the original agreement, and by signing the agreement it expressly waived that right in favor of the terms of the Payment Memo. "[W]aivers of contractual rights are not lightly found. Under Delaware law, a waiver is `the voluntary and intentional relinquishment of a known right . . . and implies knowledge of all material facts, and intent to waive.'"
The Plaintiff argues, in the alternative, that even assuming sufficient consideration were present to support the enforceability of the Payment Memo as a contract, that document is otherwise unenforceable as interpreted by the Defendant. The Defendant argues that the language providing that its ability to pay is contingent upon the sale of a "minimum" number of condominium units is in fact a contingency clause which releases the Defendant from payment obligations unless it sells a "minimum" number of units. Assuming that the agreement contemplates only contingent payment obligations, the Plaintiff argues, that contingency provision is unenforceable. To be enforceable, a contract must contain "terms . . . [that] are sufficiently definite" to demonstrate the intent of the parties.
Since I have found that the Payment Memo fails as a contract for lack of consideration, I need not decide this issue here. It is apparent, however, that even if consideration were present, the purported contingency in the Payment Memo would be unenforceable as written. The term in question here—the "minimum number of condominium[ ]" sales necessary to trigger a payment obligation—lacks the requisite specificity because it would be impossible to determine when, if ever, the Defendant's payment obligation would be triggered. Does "minimum" mean one condominium or ten? Is it a fluid amount? Or does it mean whatever the Defendant decides it means?
Based upon the allegations of the Complaint, I find that the Payment Memo was not a valid contract as a matter of law. The Defendant thus is not entitled to a dismissal or judgment on the pleadings. For the reasons above, the Defendants' Motion is DENIED.
IT IS SO ORDERED.