Judith L. Maute
Volume 69, Issue 1, 119-178
Quake Construction v. American Airlines, Inc. is featured in some prominent American casebooks on contract formation or precontractual liability, where scholars and authorities debate when liability should properly attach. The case is widely cited by courts and secondary authorities, both on precontractual liability based on a letter of intent and the more unwieldy doctrine of promissory estoppel.
Quake is a 1990 Illinois Supreme Court decision which, on its face, appears to present the garden variety contracts issue of what to do when parties have reached a written preliminary agreement anticipating a formal writing that never occurs. Besides the fascinating doctrinal issues presented, the backstory reveals sensitive racial issues in Chicago’s political context at the time.
The dispute arose shortly after Mayor Washington was elected the City’s first black mayor and he sought to open up public projects to minority groups that had been previously excluded from the public trough. Much pressure was exerted upon American Airlines and Jones Brothers, its construction management company, which awarded the small,
$1 million project to Quake as part of the larger O’Hare Airport expansion. This Minority Business Set Aside (“MBE”) award was done without the due diligence prudent for major jobs. Eight days later, when Quake’s president appeared at a preconstruction meeting as the only person of color, without any of the named MBE’s listed on its bid, American’s representatives summarily terminated the relationship.
Nearly nine years of litigation focused only on whether the trial court correctly granted defense motions to dismiss. The Illinois Supreme Court reversed and remanded, finding the letter sufficiently ambiguous that plaintiff should have an opportunity to present parol evidence on the parties’ intent on the contract claim. In four short paragraphs the majority opinion recognized the possibility of plaintiff recovering under a standalone claim for promissory estoppel, based on claimed reliance occurring during the short time between the notice of award and termination for this small construction contract.
The lack of clarity in drafting and implementation of the letter of intent should give pause to commercial actors about the risks of sloppiness in the bargaining process, especially when dealing with parties who may be perceived as somewhat unsophisticated. This Article’s doctrinal treatment and backstory are a cautionary tale to lawyers embarking on commercial relations using letters of intent.