Legal Memorandum: Binding Agreements in AL

Issue: In Alabama, What Constitutes a Binding Agreement for the Purchase and Sale of a Company?

Whether the parties have entered into a binding contract is determined by reference to the reasonable meaning of their external and objective actions.  SGB Constr. Servs., Inc. v. Ray Sumlin Constr. Co., 644 So. 2d 892, 894-95 (Ala. 1994).  Questions of intent to enter a binding agreement and mutual assent are for the jury.  Wadsworth House Movers, Inc. v. Salvage One Demolition, Inc., 474 So. 2d 686 (Ala. 1985); Big Thicket Broadcasting Co. v. Santos, 594 So. 2d 1241, 1243 (Ala. Civ. App. 1991).

Binding agreements can consist of communications that are partly oral and partly written.  See Lawler Mobile Homes, Inc., v. Tarver, 492 So. 2d 297, 304 (Ala. 1986).  In such cases, the written communication obviously is not the only evidence of the contract.  Id. at 304.  Moreover, signatures are not required to prove a contract even if a writing is involved.  Id. 

It has long been recognized that parties may choose to memorialize an earlier oral agreement with a later written document and this does not negate the binding effect of the earlier oral contract.  See Smith v. Onyx Oil & Chem. Co., 218 F.2d 104, 108 (3d Cir. 1955).

In Rennick v. O.P.T.I.O.N Care, Inc., 77 F.3d 309 (9th Cir. 1996), the court held that under the circumstances before it the fact finder should not be allowed to find the existence of a […]