Alaska Northern Development, Inc. v. Alyeska Pipeline Service Co.

Alaska Northern Development, Inc. (AND) (plaintiff) entered negotiations with Alyeska Pipeline Service Co. (Alyeska) (defendant) to purchase surplus parts. AND submitted a letter of intent to Alyeska on December 10, 1976. AND’s letter left out the price term of the agreement. Alyeska responded with its own letter of intent on December 11, 1976. Alyeska’s letter also left out the price term. Alyeska’s letter of intent stated that the agreement was “subject to the final approval of the owner committee.” The parties later agreed on a price term, and AND’s president signed Alyeska’s December 11th letter of intent. In March 1977, however, Alyeska’s owner committee rejected the proposed agreement described in the December 11th letter of intent. AND brought suit against Alyeska in Alaska state court alleging breach of contract and seeking reformation and punitive damages. AND argued that it interpreted the owner committee clause in the December 11th letter of intent as only providing the owner committee with the right to review the price term for reasonableness. Alyeska replied that it intended the owner committee clause as creating total authority within the owner committee to review and approve or disapprove the entire agreement. The trial denied AND’s request to submit extrinsic evidence to clarify the meaning of the owner committee clause. The trial court granted Alyeska’s motion for summary judgment, and AND appealed.