Summary
Phytelligence, Inc. v. Washington State University (Fed. Cir. 2020) holds that a contract option clause requiring the parties to "sign a separate contract" with terms not yet determined is an unenforceable "agreement to agree" under Washington law. The Federal Circuit affirmed summary judgment, finding that Section 4 of the propagation agreement lacked definite material terms and that extrinsic evidence did not create a genuine dispute as to mutual intent. The case addresses contract formation, indefiniteness, and the distinction between an unenforceable agreement to agree and an enforceable agreement with open terms.
Topics
Practice areas
Questions Presented
- Whether Section 4 of the Propagation Agreement is an enforceable agreement with open terms or an unenforceable agreement to agree on its face.
- Whether extrinsic evidence creates a material factual dispute precluding summary judgment as to the enforceability of Section 4.
Holdings
- Section 4 of the Propagation Agreement is an unenforceable agreement to agree because it requires a further meeting of the minds and does not contain definite terms. The option turned on a future separate contract, the terms of which were not yet determined by the parties.
- No reasonable fact finder could conclude that the parties agreed that the separate contract under Section 4 would contain the terms of the Form License. The extrinsic evidence, including pre-execution emails and deposition testimony, demonstrates that the parties did not mutually agree on any definite terms for the future license. Therefore, Section 4 remains an unenforceable agreement to agree.
Key quotations
“An agreement to agree is an agreement to do something which requires a further meeting of the minds of the parties and without which it would not be complete. Agreements to agree are unenforceable in Washington.” (at 8-9)
“Thus, the plain terms of the agreement provide that Phytelligence’s option turns on a future contract between the parties, and thus 'a further meeting of the minds of the parties' is required before Phytelligence can commercialize WA 38. This renders Section 4 an unenforceable agreement to agree.” (at 10)
“Courts are not in the business of making contracts.” (at 16)
Factual background
Phytelligence, an agricultural biotechnology company, and Washington State University (WSU) entered into a Propagation Agreement for WA 38 apple trees. Section 4 of the agreement granted Phytelligence an option to participate as a provider/seller of WA 38, but required a separate contract to exercise the option. Before execution, WSU communicated that it had no idea how WA 38 would be licensed and that there could be no guarantees. Phytelligence acknowledged the uncertainty but executed the agreement anyway. Later, WSU granted an exclusive license to PVM, which required subcontracting with NNII. When Phytelligence attempted to exercise its option, WSU directed it to PVM, which required NNII membership. Phytelligence refused, and WSU terminated the agreement. The district court granted summary judgment to WSU, holding Section 4 was an unenforceable agreement to agree.
Procedural history
Phytelligence sued WSU in Washington state court for breach of contract. WSU removed to federal court, asserted counterclaims, and moved for summary judgment. The district court granted summary judgment in favor of WSU, finding Section 4 of the Propagation Agreement was an unenforceable agreement to agree. Phytelligence moved for reconsideration, which was denied. WSU waived damages on counterclaims, and the parties entered a stipulated injunction. Phytelligence appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).