Chase v. Consolidated Foods Corp.

David Chase (plaintiff), who was an experienced investor, wanted to buy a division of Consolidated Foods Corporation (Consolidated) (defendant). In June 1975, Newman, who was Consolidated’s vice president, secretary, and general counsel, prepared a letter of intent regarding the purchase, which expressly conditioned the sale on the parties reaching a definitive agreement and on the board of directors’ approval. In November 1975, Newman prepared another letter, which confirmed Consolidated’s understanding of the major terms of Chase’s offer and was signed by the parties. Chase sought to borrow the funds to pay the purchase price but thought that obtaining a loan would be difficult without documentation of the board of directors’ approval. Accordingly, at the request of Chase’s associate, Newman issued a telegram to Chase stating that Consolidated’s board of directors had approved of the sale along the terms outlined in the November 1975 letter. However, the board had not approved of the sale. Rather, the board approved the November 1975 letter merely as a basis for continued negotiations. Negotiations subsequently fell through. Thereafter, Chase sued Consolidated for breach of contract and argued that the November 1975 letter became a binding contract after Chase received the telegram indicating board approval. At trial, Chase offered a jury instruction regarding apparent authority suggesting that an agent’s actions bind the principal if the third party could have reasonably believed that the agent acted with the principal’s authority. Instead, the trial judge read an instruction designed for cases in which the principal was a human being, as opposed to a corporation, which instructed the jury that an agent’s apparent authority must be based on the words or acts of the principal rather than the agent. The jury returned a verdict in Consolidated’s favor. Chase appealed and argued that the judge’s jury instruction constituted reversible error.