In Jordan Panel Sys., Corp. v Turner Constr. Co. , Turner Construction Co. solicited bids from a number of subcontractors, including Jordan Panel Systems Corp. , to build a steel hangar and technical operations facility for Jet Blue Airways at JFK International Airport.
During negotiations, Turner sent Jordan a "term sheet," which included the requirement that a written contract be executed before the parties would be legally bound and that there would be no liability for any work commenced prior to the contract's execution if Turner ultimately elected to proceed with a different subcontractor. Over the course of two subsequent meetings, an agreement was reached on all terms and Turner's representative verbally awarded the subcontract to Jordon and advised the latter that the project was on a fast track schedule and that work needed to begin immediately.
Relying on Turner's assurances that in about two weeks the term sheet would be reduced to a formal writing and mutually executed, Jordan commenced work and even attended a subsequent kickoff meeting at which a "substantial amount of design and coordination was accomplished."
Two days later, Jordan learned that its involvement in the project had been terminated and its work product had been turned over to another subcontractor.
Jordan filed a lawsuit in the New York County Supreme Court claiming breach of contract, promissory estoppel and seeking damages in quasi contract. Turner moved to dismiss the case based on documentary evidence and for the complaint's failure to state a cause of action, pointing to the term sheet as an unequivocal manifestation of the parties' intention not to be bound without a written agreement. Jordan conceded the interpretation given to the term sheet by Turner, but argued that it had been superseded by the parties subsequent oral understanding and conduct.
When the Supreme Court agreed with Turner and dismissed Jordan's complaint in its entirety, Jordan appealed to the Appellate Division, First Department, which affirmed over the dissent of Justice McGuire.
In reaching its decision, the AD1 relied heavily on the term sheet, whose interpretation was never in dispute. The appellate court found that Turner was not liable for any work commenced prior to the consummation of a written agreement and that Jordan, as a "sophisticated party not in need of judicial tutelage," commenced the work at its own peril. While it also chastised Turner for business practices which left "much to be desired," the AD1 believed that it could not create "by judicial fiat," "an agreement which the parties never made for themselves."
Justice McGuire disagreed with the majority's deference to the term sheet and felt that the parties' conduct suggested that they intended to dispense with formalities.
Far from upholding the freedom of contract principles propounded by the majority, the dissent argued that the panel "so assiduously" hedged its position in this case "that it is far from clear whether even the parties [were] empowered … to rewrite [the term sheet]."
Did Turner turn on its subcontractor?
To download a copy of the Appellate Division's decision, please use this link: Jordan Panel Sys., Corp. v Turner Constr. Co.