Nelson v. Elway

Nelson (plaintiff) owned two automobile dealerships. General Motors Acceptance Corporation (GMAC) provided all the financing for both dealerships. The dealerships were having financial difficulties. In July of 1990, Nelson hired Pico to represent him in selling or refinancing one or both of the dealerships. Pico entered into negotiations to sell the dealerships to Elway (defendant). Elway could not afford Nelson’s asking price. Pico proposed a “service agreement” under which Nelson would sell Elway the dealerships at a greatly reduced price in exchange for Elway’s agreement to pay Nelson $50.00 for every vehicle sold by the dealerships for seven years. Nelson and Elway orally agreed to this arrangement, but did not reduce it to a signed writing. Nelson and Elway did, however, execute a written “buy-sell agreement” outlining the terms of the sale of the dealerships by Nelson to Elway. When Nelson and Elway met to sign the agreement, GMAC informed Elway that it would pull all financing for the dealerships if Nelson received any proceeds from the sale of the dealerships. After receiving this information from GMAC, Elway informed Nelson that he would not sign the service agreement after all. Thus, the buy-sell agreement did not contain the terms of the service agreement. The buy-sell agreement did, however, contain a merger clause stating that the written agreement constituted the final agreement of Nelson and Elway and represented all previous discussions of the parties. After the sale of the property was finalized, Elway refused to abide by the terms of the oral service agreement. Nelson brought suit in Colorado state court against Elway, seeking damages for breach of contract. The trial court held for Elway, and the appellate court affirmed. Nelson appealed.