Is an Actual Injury Necessary for Violation of Business and Professions Code section 17200?

A cause of action for violation of B&P Code section 17200 is routinely alleged in complaints against California corporations and limited liability companies, and the recent decision in Lagrisola v. North American Financial Corporation clarified the rules regarding such a claim.

In 2017, Loreto and Mercedes Lagrisola (the Lagrisolas) applied for and obtained a loan from North American Financial Corporation (NAFC), secured by a mortgage on their residence. 

 

In 2021, the Lagrisolas sued NAFC, individually and on behalf of a class of similarly situated persons. 

 

In the operative First Amended Complaint (FAC), the Lagrisolas alleged that NAFC was not licensed to engage in lending in the state of California between 2014 and 2018 and asserted violations of Business and Professions Code section 17200. 

 

The trial court sustained NAFC’s demurrer to the FAC without leave to amend, concluding that the allegations in the FAC were insufficient to establish an actual economic injury, necessary for standing under Business and Professions Code section 17200. 

 

The Lagrisolas asserted on appeal that the trial court erred in reaching each of the foregoing conclusions. 

 

The appellate court agreed with the trial court, and affirmed its ruling.

 

NAFC is a Nevada based business entity with offices in California. In 2017, the Lagrisolas borrowed $550,000 from NAFC, secured by real property in San Diego. 

 

This was one of 319 loans NAFC originated to California consumers between July 1, 2014 and August 27, 2018. NAFC acted as both the loan broker and the lender on the loans, but was licensed in California only as a broker. 

 

NAFC was not licensed to lend money to consumers in California, as required by Financial Code section 22100, during the relevant time period. 

 

The Lagrisolas were unaware that NAFC was not licensed as a finance lender and would never have signed up to a loan with NAFC had they been informed that the company was not legally permitted to make loans to them or to any other California borrower. 

 

In the first cause of action in the FAC, they alleged that NAFC violated Business and Professions Code section 17200 by engaging in unlicensed lending in violation of Financial Code sections 22100 and 22751. 

 

They contend that NAFC earned “illegal interest” by engaging in this unlawful lending, and that the retention of such profits “constitutes a loss of money or property” to them, and other similarly situated plaintiffs. 

 

In the second cause of action, the Lagrisolas asserted violations of Business and Professions Code section 17200 based on the alleged deceptive act of failing to disclose that NAFC was not licensed to make loans in California. 

 

As in the first cause of action, they alleged that NAFC earned illegal interest which it is required to forfeit to the borrowers.

 

NAFC filed a demurrer to the FAC, and the trial court concluded that the allegations in the FAC did not adequately allege an injury in fact and therefore failed to establish standing to bring a claim under Business and Professions Code section 17200. 

 

Business and Professions Code section 17200 (commonly referred to as the Unfair Competition Law, or the “UCL”) defines unfair competition as any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500).

 

Section 17204 further provides, in relevant part, that actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. 

 

The latter statute was amended in 2004 with the passage of Proposition 64. The purpose of Proposition 64 was to materially curtail the universe of those who may enforce the UCL in a private action by confining standing to those actually injured by a defendant’s business practices, and to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution. 

 

To satisfy the narrower standing requirements imposed by Proposition 64, a party must now:

 (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and 

(2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.

 

NAFC contended that the FAC failed to adequately allege that the Lagrisolas suffered an injury in fact or lost money or property as a result of its licensing status. The trial court agreed. 

 

It explained that a loan has no subjective or intangible value, and that the Lagrisolas cannot establish standing (injury in fact) by alleging that they now possess something they would not have similarly valued or selected had they been aware of the unlicensed status of the lender. The loan the Lagrisolas obtained was identical to the terms and characteristics they desired. 

 

The point of the Proposition 64 amendment was to impose additional requirements on plaintiffs beyond merely having suffered an ‘unlawful, unfair or fraudulent business act or practice, namely, having lost money or property as a result of that practice. 

 

The Lagrisolas did not allege that they did not want a loan in the first instance, that they paid any more for their loan than they otherwise would have, or that they could have obtained the loan at the same or lower price from another lender that was licensed. 

 

Nor did they allege that they suffered any particular harm because of NAFC’s unlicensed status. 

 

Rather, they conceded in the FAC that NAFC was licensed as a broker and, although they set forth the additional requirements that NAFC would have had to meet to be licensed as a lender as well, they do not contend that NAFC would not have been able to meet those requirements. 

 

The Lagrisolas alleged that they would not have agreed to the loan, or perhaps would have obtained a loan from another vendor if they had known that NAFC was not licensed as a lender. 

But the Lagrisolas did not assert that a comparable loan was available from a licensed lender, or that NAFC’s unlicensed status harmed them in any way. Notably, the FAC alleged that NAFC resold the loans, but it does not allege that the purchasers were not licensed. 

 

Thus, at the end of the day, the plaintiffs were left with a loan from a presumably licensed lender, at the bargained for rate. The plaintiffs received the benefit of their bargain, having obtained the bargained for loan at the bargained for price.

 

Further, as the trial court explained loans are not the same as padlocks, for example: Unlike a product or consumable good, a loan has no subjective or intangible value, its value is wholly dependent on its terms, such as the interest rate, principal amount and number of payments.

 

The Lagrisolas ultimately got the loan they bargained for. 

 

The Lagrisolas did not allege that NAFC made an affirmative representation about the product. 

 

The Lagrisolas did not allege that NAFC made an affirmative representation about its licensing status. 

 

They did not allege that NAFC made any affirmative statements about its licensure status or, perhaps more importantly, that the Lagrisolas relied on any statements NAFC made about its licensure status when choosing to enter into the loan transaction with NAFC. 

 

Proposition 64’s requirement that the plaintiff’s economic injury be caused by the unfair competition requires a showing of a causal connection or reliance on the alleged misrepresentation.

 

The Lagrisolas did not allege that any injury to them was caused by a misrepresentation or omission, or that they relied on any such misrepresentation or omission. Put another way, the Lagrisolas could not show that they suffered any economic injury because of, or resulting from, NAFC’s failure to inform them that it did not have a lending license.

 

LESSONS:

 

1.         Business and Professions Code section 17200 defines unfair competition as any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1, commencing with Section 17500.

 

2.         Section 17204 further provides, in relevant part, that actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition. 

 

3.         To satisfy the narrower standing requirements imposed by Proposition 64, a party must now: (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.

Can Reliance on a Quiet Title Judgment Preserve Title Rights in California?

 In the recent case of Ridec, LLC v. Hinkle, the California appellate court considered its prior decision in Tsasu LLC v. U.S. Bank Trust, N.A., where the court construed one section of California’s Quiet Title Act (the Act) (Code Civ. Proc., § 760.010 et seq.).

Specifically, Tsasu confirmed that section 764.060 provides that a party acquiring title to property “in reliance” on a quiet title judgment retains its rights in that property—even if that judgment is subsequently invalidated as void—as long as the party is a “purchaser or encumbrancer for value” who lacked knowledge of any defects or irregularities in the earlier quiet title judgment or the proceedings. 

 

In the Ridec case, the trial court declined to follow the plain text of section 764.060 and Tsasu, and instead followed the pre-Act, common law rule that deems invalid any and all rights deriving from a judgment later invalidated as void. 

 

The appeal presented three questions: Was the trial court’s refusal to apply binding statutory and decisional law warranted by the court’s views that (1) the common law rule better accorded with the trial court’s public policy preferences, (2) the common law rule applicable to non-quiet title actions cannot coexist with the Act’s rule for quiet title judgments, or (3) section 764.060 is unconstitutional? 

 

The answer to all questions was “no.” 

 

A trial court may not disregard the plain text of a statute or binding precedent in favor of its own view of what the law should be.

 

Section 764.060 does not violate due process or deny equal protection of the law.

 

The trial court erred when, in the alternative, it applied section 764.060 to deprive a lender of its rights to property based on a later-invalidated quiet title judgment.

 

The appellate court reversed the trial court’s judgment and ordered that judgment be entered for the lender.

 

In 2010, Ocie Payne Hinkle (Ocie) was an 89-year-old woman who owned several parcels of property in Los Angeles, California. Ocie has an adult son, Ocy. 

 

A few years earlier, Ocie had started a relationship with Roi Wilson (Wilson). In the fall of 2010, Ocie was hospitalized and medicated; while in that state, Wilson prevailed upon Ocie to grant him power of attorney over her affairs. 

 

Wilson then used that power of attorney to deed away much of Ocie’s real property. 

 

As pertinent to this case, while acting as Ocie’s “attorney-in-fact,” Wilson in 2010 signed a grant deed giving Ocie’s property at 1723 Buckingham Road to Edmound Daire. Integral to his frauds, Daire is a professional “document preparer.” 

 

In 2011, after Ocy learned of Wilson’s conduct against his mother, Ocie was placed in a conservatorship. 

 

In 2010, Daire had signed a grant deed giving the property back to Ocie. After Ocie passed away in 2014, Ocy became the administrator of her estate, and, as her sole heir, entitled to title to the Buckingham property. 

 

In 2014, Daire filed a verified complaint to quiet title to the Buckingham property in his name. 

 

As defendants he named (1) Ocie, (2) Wilson, and (3) “All Persons Unknown Claiming Any Legal or Equitable Right, Title, Estate, Lien, or Interest in the Property Described in the Complaint Adverse to Plaintiff’s Title or Any Cloud on Plaintiff’s Title Thereto.” 

 

In his complaint, Daire alleged that he had title pursuant to the October 2010 grant deed and that the subsequent November 2010 grant deed purporting to reverse the transfer was a forgery; thus, he sought to cancel the November 2010 grant deed and quiet title to the Buckingham property in himself. 

 

Daire recorded a lis pendens regarding his pending quiet title lawsuit. Daire’s process server purportedly personally served Ocie with the complaint. 

 

Daire requested—and the court clerk entered—a default against Ocie. 

 

The trial court held a hearing on whether to enter judgment against Ocie in Daire’s quiet title action. 

 

At that hearing, the court heard evidence (chiefly, Daire’s testimony) and took judicial notice of the record chain of title. At the conclusion of the hearing, the court entered judgment quieting title to the Buckingham property in Daire, and expunging the November 2010 grant deed.

 

In its judgment, the court also found that Ocie had been “regularly served with lawful process, via personal service.” 

 

Daire recorded the quiet title judgment in the County Recorder’s Office a week later. 

 

Within a few months of recording the quiet title judgment in his favor, Daire applied for two loans. 

 

Daire applied to Ridec LLC for a $650,000 loan and offered up the Buckingham property as collateral. Ridec retained a title insurer that ran a title report on the Buckingham property and that report reflected the two deeds, the conservatorship action over Ocie, and the quiet title judgment in favor of Daire. 

 

Because the time to appeal the quiet title judgment did not expire for 180 days, Ridec’s title insurer insisted that Ridec wait for the end of that appeal period to ensure that there were no appellate challenges to that judgment. 

 

In 2016, the title insurer ran a second title report on the Buckingham property, which reflected the notice of lis pendens reflecting the commencement of the probate of Ocie’s estate; and a notice of withdrawal of the lis pendens. 

 

In light of the expiration of the time to appeal the quiet title judgment, the withdrawal of the lis pendens filed during that appeal period, and the absence of any other reason to question the validity of Daire’s title, the title insurer informed Ridec that title to the Buckingham property was vested in Daire.

 

Thus, escrow on the loan closed, Ridec recorded a deed of trust on the Buckingham property for $650,000, and Ridec wired $568,711.35 to Daire’s account at Citibank, N.A. 

 

Daire also borrowed $400,000 from lender PSG, which was also secured by a deed of trust on the Buckingham property. 

 

Daire falsely told PSG that PSG had the “first” deed of trust on the property, as Ridec had recorded its deed of trust against the Buckingham property one day earlier. 

 

After recording its deed of trust, PSG subsequently transferred it and its owner became Title Resources Guaranty Company. 

 

Ocy learned that (1) Daire had filed a fraudulent proof of service in conjunction with his quiet title action, which reported that Ocie had been personally served with Daire’s complaint, although she had died nearly a year before; and (2) Daire had filed a fraudulent notice of withdrawal of the lis pendens on which he had forged the signature of Ocy’s lawyer. 

 

Once Daire’s deceptions came to light, the litigation frenzy began. 

 

Ridec’s title insurer sued Daire and Citibank, seeking—and obtaining—court orders freezing the disbursed loan funds still in Daire’s Citibank account. 

 

The first phase of the litigation was meant to answer the question: As between Daire and Ocy (in his capacity as administrator of Ocie’s estate), who had title to the Buckingham property?

 

After a one- day bench trial, the trial court issued an order quieting title to the Buckingham property in Ocy and declaring that Daire had no valid interest in the property.

 

The second phase was meant to answer the question: As between the lenders Ridec and PSG and Ocy (again, in his capacity as administrator of Ocie’s estate), were the lenders’ deeds of trust valid encumbrances on the Buckingham property? 

 

The trial court concluded that the lenders’ deeds of trust were invalid and did not encumber Ocy’s title to the Buckingham property.

 

However, the trial court concluded that the lenders were entitled to recover the amounts of their loans, plus interest.

 

Ridec timely appealed the judgment and the denial of its posttrial motion to set aside that judgment.

 

Enacted in 1980, the Act creates a special mechanism for obtaining quiet title judgments that operate in rem—and hence are binding not only against the parties to the quiet title proceeding, but also against all the world.

 

Mindful of the need to provide due process protections for those persons who would be bound by the in rem quiet title judgment even though they did not participate in the litigation producing it, the Act’s requirements for obtaining an in rem (i.e., real property) quiet title judgment are more stringent than the requirements for obtaining judgments resolving adverse claims to property under other in personam causes of action.

 

To obtain a quiet title judgment under the Act, the plaintiff must (1) file a verified complaint that names, as defendants, (a) “[all] persons having adverse claims” to the plaintiff’s title, and that includes persons whose claims are “of record,” whose claims are “known to the plaintiff,” or whose claims are “reasonably apparent from an inspection of the property,” and (b) “‘all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff’s title, or any cloud upon plaintiff’s title thereto’”; (2) record a lis pendens regarding the pendency of the quiet title action in the county recorder’s office where the property is located; and (3) establish entitlement to a quiet title judgment with “evidence of [the] plaintiff’s title” rather than “by default”.

 

The courts are split as to whether this requires an evidentiary hearing at which a defaulted defendant may participate or merely a prove-up hearing at which a higher quantum of evidence must be produced.

 

Once the Act’s more stringent requirements are met, the resulting quiet title judgment is more resilient to subsequent challenges. 

 

The appellate court concluded that the trial court erred when it invalidated Ridec’s deed of trust in the Buckingham property and thereby impaired Ridec’s rights in that property. 

 

Because Ridec acquired its rights in that property after the quiet title judgment, and did so in reliance on that judgment, section 764.060 supplies the pertinent rule, and Ridec’s rights in the property may not be impaired as long as Ridec (1) was a purchaser or encumbrancer for value, and (2) acted without knowledge of any defects or irregularities in the judgment or the proceedings.

 

It is undisputed that Ridec was an encumbrancer for value because its deed of trust was in exchange for loaning Daire $650,000. 

 

The record also compelled a finding, as a matter of law, that Ridec acted without knowledge of any defects or irregularities in the quiet title judgment or the proceedings that produced it. 

 

There is no evidence that Ridec (and, necessarily, its officers or employees) had any actual, subjective knowledge regarding the two chief defects with the quiet title judgment or the validity of Daire’s title at the time of its loan.

 

Thus, under section 764.060, as construed in Tsasu, Ridec was an encumbrancer for value who acted without knowledge of any defects or irregularities with the quiet title judgment; as a result, its “rights” could not be impaired and its deed of trust remained valid.

 

Because none of the trial court’s reasons for disregarding section 764.060 and Tsasu were valid, the court erred in refusing to apply the governing statute and binding precedent interpreting that statute. 

 

The judgment was reversed and remanded with directions to enter a judgment finding that Ridec’s deed of trust was valid. 

 

LESSONS:

 

1.         A party acquiring title to property “in reliance” on a quiet title judgment retains its rights in that property—even if that judgment is subsequently invalidated as void—as long as the party is a “purchaser or encumbrancer for value” who lacked knowledge of any defects or irregularities in the earlier quiet title judgment or the proceedings. 

 

2.         A trial court may not disregard the plain text of a statute or binding precedent in favor of its own view of what the law should be.

 

3.         The Act’s requirements for obtaining an in rem quiet title judgment are more stringent than the requirements for obtaining judgments resolving adverse claims to property under other in personam causes of action.

 

4.         Because Ridec acquired its rights in that property after the quiet title judgment, and did so in reliance on that judgment, section 764.060 supplies the pertinent rule, and Ridec’s rights in the property may not be impaired as long as Ridec (1) was a purchaser or encumbrancer for value, and (2) acted without knowledge of any defects or irregularities in the judgment or the proceedings.

Why Written Agreements Without Legal Advice Can Cause Disputes in California?

The recent California case of Tiffany Builders v. Delrahim concerned an agreement at a coffee shop in Calabasas when David Delrahim made Edwart Der Rostamian a business proposal. Rostamian got his notebook, asked a server for a pen, and worked with Delrahim to compose two pages of text. 

When they were done, each man signed the paper. Rostamian later sued Delrahim on contract claims. 

 

The trial court granted Delrahim’s motion for summary judgment, ruling the Calabasas writing was too indefinite to be a contract. 

 

The appellate court reversed that point, but affirmed the ruling against Rostamian’s claims for tortious interference with a contract. 

 

According to Rostamian, the Calabasas discussion concerned the purchase of 13 gas stations. He argued that, if considered in the context of his and Delrahim’s ongoing negotiations, their signed writing was a binding contract. 

 

This account was one-sided because Delrahim chose not to offer declarations giving his version of the facts. This one-sided account was the record in the trial court. 

 

The gas stations in question belonged to seller Ibrihim Mekhail, operating through a family trust. Mekhail was not at the coffee shop and is not a party to this case. 

 

Mekhail was selling the 13 stations as a block. He was offering nine of the 13 with their attached land and the other four without the land: only the businesses were for sale. The parties called the four the “dealer sites.” 

 

Rostamian had been seeking to complete a deal with Mekhail through Rostamian’s company Tiffany Builders LLC, but the deal bogged down. Tiffany had signed a purchase agreement with Mekhail for the 13 stations. Rostamian assembled a group of other investors, including one Carol International, Inc., willing to buy Mekhail’s stations for about $12.8 million. 

 

Rostamian opened an escrow to which Carol had contributed about $250,000, but the escrow did not close for various reasons. Rostamian eventually would assign Tiffany’s rights in the deal to Carol International, although it is not clear exactly when this happened.

 

In any event, Rostamian kept searching for a way to consummate the transaction and to profit from his efforts. 

 

A mutual acquaintance introduced Rostamian to Delrahim, who expressed interest in the stations. Delrahim owned a company named Blue Vista Partners. Over an interval of some nine months, Rostamian and Delrahim met twice in Studio City and then continued to discuss, via email and text, ways to make a deal. 

 

Then in November 2015, Delrahim said he had a proposal to discuss in person with Rostamian. The two met at the Calabasas coffee shop. 

 

Delrahim proposed Rostamian should back his company out of the pending escrow so Delrahim could buy the stations from Mekhail for $12.4 million, or less if Delrahim and Rostamian could negotiate a lower price. Delrahim would pay Rostamian $500,000 to do this. 

 

Delrahim also proposed Rostamian would own the four dealer sites. Delrahim would charge Rostamian a monthly fee to run these dealer sites, and Rostamian would reap their profit. 

Delrahim and Rostamian worked together to word their deal. This two-page hand-written document is central to this appeal, and was termed the Writing.

 

Delrahim would take the lead in the stations deal in return for guaranteeing benefits for Rostamian. Delrahim would rescue Rostamian’s foundering escrow for Delrahim’s own benefit: Delrahim would buy the 13 stations at a price the two hoped they could negotiate down from the $12.4 million figure. 

 

Delrahim would own nine stations that were not dealer sites, and would gain a $4,000 a month fee for operating the four dealer sites. Delrahim would pay Rostamian $500,000 and would give Rostamian ownership of, and profits from, the dealer sites. 

 

None of that happened. To Rostamian’s dismay, Delrahim decided to deal directly with Mekhail and to cut Rostamian out of the picture. Delrahim bought the 13 stations for about $11 million. Rostamian got nothing. 

 

Rostamian and Tiffany sued Delrahim and Blue Vista for breach of contract, specific performance, intentional and negligent interference with prospective economic advantage, and unfair business practices. Delrahim and Blue Vista moved for summary judgment. 

 

The trial judge granted Delrahim’s summary judgment motion. The court reasoned the Writing was too indefinite to be a contract. 

 

The court considered the parol evidence from Rostamian’s declaration but concluded this evidence failed to clarify the terms to a legally acceptable degree. The court ruled the most critical omission was who would own the 13 gas stations upon completion of the deal. Delrahim had argued Rostamian’s declaration was a sham because it contradicted Rostamian’s deposition testimony. 

 

Rostamian and Tiffany appeal the judgment against them. 

 

As supplemented by parol evidence, the Writing was definite enough to be an enforceable contract. The grant of summary judgment was error. 

Three streams of law converge to control this case. 

The first rule concerns parol evidence, also called extrinsic evidence. 

 

The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. 

 

Rostamian’s declaration satisfied this test. It was relevant to prove a meaning to which the Writing was reasonably susceptible. The trial court did not rule to the contrary. It properly accepted Rostamian’s explanation of the Writing. 

 

Delrahim incorrectly argues that Rostamian’s assertion that the contract is unambiguous estops him from arguing extrinsic evidence provides clarity. Briefing commonly, and acceptably, argues in the alternative. 

 

The Writing, as explicated by Rostamian, was not too indefinite to enforce. 

 

It was not an illusory contract. When people pen their names to a document they have drafted together, the law accords their act a potent meaning. Delrahim and Rostamian signed their joint creation, thereby enacting a ritual signifying commitment: an exchange of promises. Courts strive to effectuate designs like that. Powerful authority proves it. 

 

The courts construe instruments to make them effective rather than void. This rule is of cardinal importance. 

 

The law leans against destroying contracts because of uncertainty. If feasible, courts construe agreements to carry out the reasonable intention of the parties. 

 

“An interpretation which gives effect is preferred to one which makes void.” (Civ. Code, § 3541.) 

 

“A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code, § 1643.) 

 

Courts will imply stipulations necessary to make a contract reasonable regarding matters to which the contract manifests no contrary intention. (Civ. Code, § 1655.) 

 

Indefiniteness as to an essential term may prevent the creation of an enforceable contract, but indefiniteness is a matter of degree. All agreements have some degree of indefiniteness. People must be held to their promises. 

 

If the parties have concluded a transaction in which it appears they intend to make a contract, courts should not frustrate their intention if it is possible to reach a just result, even though this requires a choice among conflicting meanings and the filling of gaps the parties have left. This rule comes nearer to attaining the purpose of the contracting parties than any other. 

 

There are two reasons not to enforce an indefinite agreement. First, the agreement may be too indefinite for the court to administer—no remedy can be properly framed. Second, the indefiniteness of the agreement may show a lack of contractual intent. Courts should be slow to come to this conclusion. Many a gap in terms can be filled, and should be, with a result that is consistent with what the parties said and that is more just to both than would be a refusal of enforcement. 

 

The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.

 

When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.

 

Rostamian’s explanation of the Writing made it definite enough for judicial enforcement. His version, which was binding on the trial court at the summary judgment stage, was a series of clear promises. 

 

First, he would withdraw from the escrow to give Delrahim pride of place, allowing Delrahim to profit from Rostamian’s effort in finding and trying to exploit this business opportunity. 

 

Second, Rostamian would cooperate with Delrahim’s effort to negotiate from Mekhail a price lower than $12.4 million. 

 

Third, Rostamian would pay Delrahim $4,000 a month to operate the four gas stations referred to as dealer sites. In return, Delrahim made three clear promises of his own: to pay Rostamian $500,000; to grant Rostamian ownership of, and profits from, the four dealer sites; and to operate the four dealer sites for Rostamian. 

 

This exchange of promises was an enforceable contract. 

 

A contract need not specify price if price can be objectively determined. The absence of a price provision does not render an otherwise valid contract void. 

 

In the process of negotiating an agreement, price is a term frequently left indefinite and to be settled by future agreement. If the parties provide a practical method for determining this price, there is no indefiniteness that prevents the agreement from being an enforceable contract. 

 

Although the necessity for definiteness may compel the court to find that the language used is too uncertain to be given any reasonable effect, when the parties’ language and conduct evidences an intent to contract, and there is some reasonable means for giving an appropriate remedy, the court will strain to implement their intent. 

For example, a bank signature card is a contract authorizing charges for processing checks drawn on accounts with insufficient funds and was not illusory, even though it did not specify the amount of the charges.

 

The Writing was definite enough to enforce contractually. 

 

LESSONS:

 

1.         A written agreement prepared without legal assistance can include ambiguities and inconsistencies that may cause disputes.

 

2.         The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. 

 

3.         The law leans against destroying contracts because of uncertainty. If feasible, courts construe agreements to carry out the reasonable intention of the parties. 

 

4.         “An interpretation which gives effect is preferred to one which makes void.” (Civ. Code, § 3541.) 

 

5.         “A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code, § 1643.) 

 

6.         Courts will imply stipulations necessary to make a contract reasonable regarding matters to which the contract manifests no contrary intention. (Civ. Code, § 1655.)