Empire Machinery Co. v. Litton Business Telephone Systems

In summer 1973, Empire Machinery Co. (Empire) (plaintiff) became interested in acquiring an “interconnect” telephone system from Litton Business Telephone Systems (Litton) (defendant). Murphy, Litton’s National Account Manager, personally contacted Empire and submitted a proposal for the phone system for Empire’s consideration. Empire and Litton entered negotiations. On July 30, 1973, Murphy submitted a letter to Empire stating that “upon receipt of a signed order and deposit” from Empire, Litton would install an interconnect telephone system on Empire’s property. Following receipt of this letter from Murphy, Whitman, Empire’s president, signed an “Equipment Sales Agreement” and delivered to Litton a deposit of $8,546.00 as a down payment. Litton deposited these funds upon receipt. The Equipment Sales Agreement contained a clause stating that the agreement would only become effective and binding after “approval, acceptance, and execution” of the agreement by Litton’s home office. Neither Murphy nor any member of Litton’s home office signed the Equipment Sales Agreement. On August 9, 1973, Empire was instructed by Murphy to send a form letter to Mountain Bell, the telephone service provider, designating Litton as Empire’s representative with authority to act in connection with the installation of the interconnect system on Empire’s property. Empire provided a letter stating that it had formed a “contractual relationship” with Litton. On August 30, 1973, Litton sent a similar letter to Mountain Bell stating that it had formed a “contractual relationship” with Empire. Additionally, Empire, at Litton’s request, purchased approximately $12,000 worth of electrical equipment to support the interconnect system equipment that would be installed by Litton. Finally, on December 3, 1973, Scott, Litton’s service manager, requested a new telephone number for Empire to be put in service as of December 21, 1973. After this date, Litton never shipped nor installed the interconnect system on Empire’s property. Empire brought suit in Arizona state court against Litton alleging breach of contract. The trial court granted summary judgment for Litton on the ground that no binding contract was formed between Litton and Empire. Empire appealed.