... and so is a deal. That old saw was taught to me by a client years ago. I haven't forgotten it, but sometimes businesspersons do. If you ever have a client that feels he or she has been slighted by another party when the apparent "gentlemen's agreement" turns to nothing does your client have legal recourse? In Iowa, maybe not. But in Maryland, yes.
Take the case of Giant Food, Inc. v. Ice King,Inc., 536 A. 2d 1182 (Md. App. 1988). The court held that despite the lack of a contract between the parties Ice King could recover damages for negligent misrepresentation by Giant Food. For several months Ice King and Giant Food discussed the possibility of Ice King supplying ice to Giant Food. All along, unbeknownst to Ice King, Giant Food was planning to build its own ice plant. Ice Food believed it had a commitment to supply ice based on 30 or 40 communications between the parties, including authorization by Giant for Ice King to inform its bank of their "deal."
The court concluded that in light of the more than casual response of Giant Food "a businessman in [the Ice King representative's] shoes might have reasonably relied on the informal 'deal or gentlemen's agreement.'" In fact, Ice King had "the right to rely upon Giant, and Giant owed a duty to give the correct information." When Ice King learned about the possibility of a new Giant ice plant and attempted to learn the truth the court held that it was incumbent on Giant to provide the "true facts." When instead the Giant representative said "everything was all right" the assurance "was, at the very minimum, negligent."
So the next time a client believes he had a deal and was double-crossed, remember this case and supporting cases from New York and Prosser and Keeton on the Law of Torts, Section 107 (1984) and the Restatement (Second) of Torts, Section 552 (1977).*
*The research of Allison Miller, a second year law student at the University of Iowa and Dickinson summer associate, is the source of this case and analysis.