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  • Venture Associates Corp. v. Zenith Data Syst…Venture Associates Corp. v. Zenith Data Systems Corp.
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Venture Associates Corp. v. Zenith Data Systems Corp.

United States Court of Appeals for the Seventh Circuit
96 F.3d 275 (1996)


Venture Associates Corporation (Venture) (plaintiff) sent a “letter of intent” to Zenith Data Systems Corporation (Zenith) (defendant), proposing to acquire Zenith’s subsidiary, Heath Company (Heath) for $11 million. The letter stated that the only binding obligation in it was the obligation of Venture and Zenith to negotiate in good faith toward a purchase agreement for Heath. Zenith sent Venture a letter agreeing to Venture’s letter in principle. Venture and Zenith negotiated for six months, after which Zenith ended negotiations because Venture refused to provide a third-party guaranty of its financial obligations or agree to allow the purchase price to be adjusted after closing. Venture sued Zenith. The district court dismissed the action, and Venture appealed, arguing that a binding contract was formed through the parties’ exchange of non-identical contract drafts. The court of appeals found that no contract was formed by the non-identical drafts, but that the letters between Venture and Zenith created a binding contract to negotiate in good faith toward the formation of a final contract. On remand, the district court found that Zenith had not acted in bad faith and was not liable for any damages. Venture appealed.

Rule of Law


Holding and Reasoning (Posner, CJ.)

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