Itek Corp. v. Chicago Aerial Indus., Inc.

Itek Corp. (Itek) (plaintiff) and Chicago Aerial Indus., Inc. (CAI) (defendant) are both producers of photographic equipment. Over 50 percent of CAI’s stock was held by its president and the estates of its two founders. These individual stockholders sought to realize cash for their CAI stock. Accordingly, they formed a committee to seek out a purchaser for their CAI stock. In spring of 1964, Itek became interested in acquiring CAI’s assets and began negotiations with the CAI stockholders to purchase their CAI stock. In fall of 1964, CAI conditionally accepted an offer by Itek to purchase all of CAI’s assets at a total price of $6,759,600, or $12.00 per share. CAI’s acceptance of Itek’s offer was conditioned on the requirements that Itek would obtain the necessary financing for the purchase, that an informal letter of intent would be executed between CAI and Itek, that the details of the agreement would be worked out, and that formal documents would be prepared to the satisfaction of both parties. Itek obtained the necessary financing, and on January 15, 1965, Itek and CAI executed a letter of intent. The letter of intent outlined the terms for further negotiations between Itek and CAI. Paragraph Two of the letter of intent stated that Itek and CAI would make “every reasonable effort” to agree upon and have prepared as quickly as possible a contract providing for the purchase of CAI stock by Itek, subject to the approval of CAI stockholders. The last sentence of Paragraph Two provided that if the parties failed to agree upon and execute such a contract, they would be under no further obligation to one another. On February 23, 1965, CAI’s individual shareholders received a separate offer from Bourns, another company, to purchase CAI’s stock at $16.00 per share. CAI’s shareholders accepted this offer and informed Itek that it would no longer continue with negotiations to sell stock to Itek. Itek brought suit against CAI and CAI’s individual shareholders in Delaware court alleging breach of contract and failure to negotiate in good faith. The trial court granted motions for summary judgment brought by CAI and CAI’s individual shareholders, and Itek appealed.