Ellis v. Chambers

The Shelby Baptist Hospital (the hospital) recruited John Chambers (defendant), who would need to relocate from Indiana to Birmingham, Alabama. John signed a letter of intent (LOI), which discussed the basic terms of his employment. Later, John and his wife, Cynthia Chambers (defendant), entered into a sales contract to purchase a house from Sherri Ellis and Scott Peters (the Peterses) (plaintiffs). The contract included a financing contingency that allowed either party to cancel the contract if the Chamberses were unable to obtain financing by the date of closing. A month after signing the sales contract for the property, John received the hospital’s definitive agreement, which included unfavorable terms that were not present in the LOI. Although John understood that the definitive agreement would contain additional terms, he did not expect the substance of the terms to be unfavorable. The Chamberses had applied for a mortgage loan requiring proof that the definitive agreement was signed, but John refused to sign it and thus could not obtain financing. The Peterses brought suit, contending that the Chamberses had breached the contract by failing to close on the sale. Specifically, the Peterses contended that John had knowledge of the definitive agreement prior to signing the home-purchase contract. The district court granted summary judgment in favor of the Chamberses, finding that they made a reasonable, good-faith effort to obtain financing. The Peterses appealed.