What elements must a plaintiff prove to show that a contract existed in a breach of contract action?

It is essential to the existence of a contract that there should be:

1. Parties capable of contracting;

2. Their consent;

3. A lawful object; and,

4. A sufficient cause or consideration.

All persons are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights.

The consent of the parties to a contract must be:

1. Free;

2. Mutual; and,

3. Communicated by each to the other.

The object of a contract is the thing which it is agreed, on the part of the party receiving the consideration, to do or not to do.

Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise.

A contract is either express or implied. (Civ.Code, § 1619.) The terms of an express contract are stated in words. (Civ.Code, § 1620.) The existence and terms of an implied contract are manifested by conduct. (Civ.Code, § 1621.) The distinction reflects no difference in legal effect but merely in the mode of manifesting assent. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 102, p. 144.) Accordingly, a contract implied in fact “consists of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words.” (Silva v. Providence Hospital of Oakland (1939) 14 Cal.2d 762, 773, 97 P.2d 798.)

Even when a written contract exists, “ ‘ “[e]vidence derived from experience and practice can now trigger the incorporation of additional, [52 Cal.4th 1179] implied terms.” ’ ” (Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 463, 46 Cal.Rptr.2d 427, 904 P.2d 834.) “Implied contractual terms ‘ordinarily stand on equal footing with express terms' ” (ibid.), provided that, “as a general matter, implied terms should never be read to vary express terms.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374, 6 Cal.Rptr.2d 467, 826 P.2d 710.)

Oral contracts are authorized by California law. (§ 1622.) Every term of an oral contract need not be stated in minute detail. (Skirball v. RKO Radio Pictures, Inc. (1955) 134 Cal.App.2d 843, 861, 286 P.2d 954.) But to be enforceable, there must at a minimum be evidence of a " ‘ "meeting of the minds upon the essential features of the agreement, and [evidence showing] that the scope of the duty and limits of acceptable performance be at least sufficiently defined to provide a rational basis for the assessment of damages." ’ " (Scott v. Pacific Gas & Electric (1995) 11 Cal.4th 454, 467, 46 Cal.Rptr.2d 427, 904 P.2d 834.) "Where the existence of a contract is at issue and the evidence is conflicting or admits of more than one inference, it is for the trier of fact to determine whether the contract actually existed." (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208, 45 Cal.Rptr.3d 692.) We review those factual findings for substantial evidence. (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 987, 212 Cal.Rptr.3d 158.)

Substantial evidence supports the trial court's decision that an oral contract existed with the following essential features: plaintiff and Monterra LLC agreed to pay interest on past-due invoices; the interest rate would be 10 percent; and interest would accrue "60 days from the last day of the month in which the work was performed." Williams testified that he approached Mills at the end of 2000 when Monterra LLC's unpaid balance was over $2

[48 Cal.App.5th 519]

million. The two made a handshake agreement that Monterra LLC would pay interest at a rate of 10 percent on outstanding balances, starting in January 2001. Mills confirmed the existence of that agreement in his trial testimony, explaining that he agreed to pay interest because he recognized that plaintiff would be in effect financing the project. Mills testified that he could not remember the precise details regarding interest accrual, but that he recalled it would "accrue in either 30 days after the end" of the month when the work was completed, "or 60 days." He noted that he would have wanted the accrual period to be as long as possible, meaning he "might have pushed for 60 days." Williams testified that interest "was due the month after we did the work," and that "interest would be charged in the month afterwards."

Defendants challenge the finding of an oral contract because "there was no evidence that Mills and Williams ever agreed on the essential term of when interest would begin to accrue." In selecting a 60-day accrual period as the "most reasonable conclusion under the circumstances," the trial court chose the period that was more beneficial to Monterra LLC (and, by extension, defendants). The trial court was entitled to credit Mills's testimony that interest accrued 60 days after the month the work occurred. Indeed, in their reply brief defendants "concede that substantial evidence exists to support such a finding" that the parties agreed to a 60-day accrual period.

Defendants urge viewing the testimony about the interest agreement "with extreme skepticism, given the wealth of contrary evidence presented to the trial court." Defendants cite evidence of no oral

[261 Cal.Rptr.3d 900]

contract to pay interest, including: the lack of contemporaneous documentary evidence showing that plaintiff was charging interest; the lack of a written contract to charge interest; plaintiff's office manager's testimony that she did not track interest owed until preparing the liens in 2008; that the invoice spreadsheet the office manager used until preparing the liens did not track interest; and that financial information Monterra LLC reported to creditors did not show that plaintiff was charging interest. But as our review is for substantial evidence, we will not reverse merely because there was evidence to support a different decision by the trial court. (Heard v. Lockheed Missiles & Space Co. (1996) 44 Cal.App.4th 1735, 1747, 52 Cal.Rptr.2d 620 ["All factual matters must be viewed in favor of the prevailing party and in support of the judgment. All conflicts in the evidence must be resolved in favor of the judgment."].) Substantial evidence supports the trial court's finding that an oral agreement for contractual interest was formed.⁴

Intuit seeks to establish its entitlement to summary adjudication of Bustamante's contract claim by demonstrating that no enforceable contract was ever formed between the parties. Contract formation requires mutual consent, which cannot exist unless the parties "agree upon the same thing in the same sense." (Civ. Code, §§ 1580, 1550, 1565.) "If there is no evidence establishing a manifestation of assent to the `same thing' by both parties,

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then there is no mutual consent to contract and no contract formation." (Weddington Productions, Inc. v. Flick (1998) 60 Cal. App.4th 793, 811, 71 Cal.Rptr.2d 265.) "Mutual consent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings." (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141, 127 Cal.Rptr.2d 145; see also Meyer v. Benko (1976) 55 Cal.App.3d 937, 942-943, 127 Cal.Rptr. 846 [existence of mutual consent "is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe"].)

Where the existence of a contract is at issue and the evidence is conflicting or admits of more than one inference, it is for the trier of fact to determine whether the contract actually existed. But if the material facts are certain or undisputed, the existence of a contract is a question for the court to decide. (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407, 110 Cal.Rptr. 675.)

[141 Cal.App.4th 209]

"Under California law, a contract will be enforced if it is sufficiently definite (and this is a question of law) for the court to ascertain the parties' obligations and to determine whether those obligations have been performed or breached." (Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613, 623, 2 Cal.Rptr.2d 288.) "To be enforceable, a promise must be definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages." (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770, 23 Cal.Rptr.2d 810; Robinson & Wilson, Inc. v. Stone, supra, 35 Cal.App.3d at p. 407, 110 Cal.Rptr. 675.) "Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable." (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481, 289 P.2d 785; Civ.Code, § 1598; see also Ladas v. California State Auto. Assn., supra, 19 Cal.App.4th at p. 770, 23 Cal.Rptr.2d 810.) "The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." (Rest.2d Contracts, § 33, subd. (2); accord, Weddington Productions, Inc. v. Flick, supra, 60 Cal.App.4th at p. 811, 71 Cal.Rptr.2d 265.) But "[i]f . . . a supposed `contract' does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, there is no contract." (Weddington Productions, Inc. v. Flick, supra, 60 Cal. App.4th at p. 811, 71 Cal.Rptr.2d 265.)

In this case, by contrast, the parties always understood that it would not be possible to "form and launch" Intuit Mexico without significant third-party involvement in the enterprise. Clearly there was no expression of mutual consent to create a company without investor financing, which in turn could not be obtained without first ironing out the details of the contemplated network of relationships. Because essential terms were only sketched out, with their final form to be agreed upon in the future (and contingent upon third-party approval), the parties had at best an "agreement to agree," which is unenforceable under California law. "[T]here is no contract where the objective manifestations of intent demonstrate that the parties chose not to bind themselves until a subsequent agreement [was] made." (Rennick v. O.P.T.I.O.N. Care, Inc. (9th Cir.1996) 77 F.3d 309, 316; see also Beck v. American Health Group Internat. Inc. (1989) 211 Cal.App.3d 1555, 1562-1563, 260 Cal.Rptr. 237 [letter manifested intent not to be bound until formal contract was written].) "Preliminary negotiations or [agreements] for future negotiations are not the functional equivalent of a valid, subsisting

[141 Cal.App.4th 214]

agreement. `A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.' (Rest.2d Contracts, § 26, p. 75.)" (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 59, 248 Cal.Rptr. 217; but see Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal. App.4th 1251, 1255, 117 Cal.Rptr.2d 875 [recognizing cause of action for breach of agreement to negotiate in good faith]⁹ and Boyd v. Bevilacqua (1966) 247 Cal.App.2d 272, 287, 55 Cal.Rptr. 610 [tort action permitted where joint venture agreement was sufficiently definite, as joint venture could be created with little formality and less definiteness in its details].)

"Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable. [Citations.] ‘Although the terms of a contract need not be stated in the minutest detail, it ... must evidence a meeting of the minds upon the essential features of the agreement, and ... the scope of the duty and limits of acceptable performance [must be] sufficiently defined to provide a rational basis for the assessment of damages.’ " (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407, 110 Cal.Rptr. 675.) "[F]ailure to reach a meeting of the minds on all material points prevents the formation of a contract even though the parties have orally agreed upon some of the terms, or have taken some action related to the contract." (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 359, 72 Cal.Rptr.2d 598, italics omitted.)

While it is undisputed that the parties orally agreed that Cheema would resell the dumpster box to LS Trucking, LS does not contend that the parties agreed on an exact price, payment schedule, or interest rate, and the trial court found that "there was never any clear and definite agreement between the parties that the [box] would transfer immediately to LS Trucking with [the] purchase price to be paid to Cheema in monthly installments." We review factual findings about the terms of an oral contract for substantial evidence (Garfein v. Garfein (1971) 16 Cal.App.3d 155, 158, 93 Cal.Rptr. 714; Murphy v. Davis (1937) 19 Cal.App.2d 316, 319–320, 65 P.2d 917). Ample evidence supports the trial court’s finding here.⁹

LS Trucking insists that "everyone understood that ownership of the box had to transfer to LS immediately for [the parties’] entire relationship to work," as Cheema "would not have received any dispatches from LS Trucking unless he was acting as a ‘puller’ of equipment owned by [LS], for which the company would receive a rental fee." LS Trucking notes that Cheema repeatedly checked a box on his truck tags indicating that he was using an LS trailer, that LS deducted from all of his payments a sum labeled "Trailer Rental," and that Cheema never protested the deductions in writing. But Cheema testified that he had not understood that ownership of the box

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would pass before LS Trucking paid for it, and he claimed to have orally

[252 Cal.Rptr.3d 613]

objected to the rental deductions from the start. No writing suggests that title to the box was intended to be transferred to LS Trucking before it reimbursed Cheema for the cost of its purchase. LS contends that the agreement was "supposed to be reduced to writing, but Cheema never brought in the necessary documentation regarding his financing agreement with his family" who had loaned him money to buy the truck. Nonetheless, the facts remain that the terms of the transaction were never spelled out, and that title to and registration of the truck, with the box attached, remained in Cheema’s name. While LS Trucking contends it was agreed that it would pay for the box "plus interest" within three years with monthly $1,000 installments, it does not contend that anything was said about when installments would commence, what rate of interest would be paid or, most importantly, when ownership would be deemed to pass to LS Trucking. And it does seem highly unlikely that Cheema would have agreed to begin paying LS rent for use of the box that he, Cheema, had purchased—at least before LS had even begun reimbursing him for the cost of the box. The fact that when LS Trucking began making monthly payments to Cheema in June 2010 it labeled the checks as repayment of a "loan"—which certainly was never discussed—highlights the absence of any meeting of the minds on the essential terms under which LS was to acquire ownership of the box.

LS Trucking notes the general principle that the law " ‘does not favor but leans against the destruction of contracts because of uncertainty,’ " and will thus infer "[u]nexpressed provisions of a contract ... from the writing or external facts." (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481–482, 289 P.2d 785.) But all the cases LS Trucking cites involve written contracts. (Ibid.; Crawford v. Continental Cas. Co. (1968) 261 Cal.App.2d 98, 99–100, 67 Cal.Rptr. 641; Lunden v. County of Los Angeles (1965) 233 Cal.App.2d 811, 813, 43 Cal.Rptr. 849; McIllmoil v. Frawley Motor Co. (1923) 190 Cal. 546, 550, 213 P. 971.) We may assume the same principle applies to oral contracts, but application of the principle to an oral understanding is more problematic in the absence of undisputed explicit provisions from which such inferences can be drawn. In this case, given the divergent understandings of the two parties, and the fact that, for almost nine months LS Trucking made no payments consistent with its contention that it was to purchase the box from Cheema with monthly installments, the court did not err in finding the terms on which LS was to acquire ownership of the box so uncertain that the loose understanding could not be judicially enforced.

The principal question is whether the contract is illusory and void for failing to stipulate the purchase price. California Lettuce argues that the contract leaves the price to the future discretion of one party and therefore lacks mutuality. Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable. See Civ.Code § 1598; Sutliff v. Seidenberg, Stiefel & Co., 132 Cal. 63, 64 P. 131, 469. If the price of a commodity in a sales contract is intended to be left to the subsequent agreement of the parties, the purported contract is merely an agreement to agree and therefore mudum pactum until the price is fixed or agreed upon. See Schimmel v. Martin, 190 Cal. 429, 213 P. 33; Avalon Products, Inc., v. Lentini, 98 Cal.App.2d 177, 219 P.2d 485; Jules Levy & Bro. v. A. Mautz & Co., 16 Cal.App. 666, 117 P. 936. Unless the court has ascertainable provisions of agreement before it, there is no contract on which the court may act. However, "'The law does not favor, but leans against, the destruction of contracts because of uncertainty; and it will, if feasible, so construe agreements as to carry into effect the reasonable intentions of the parties if that can be ascertained."' McIllmoil v. Frawley Motor Co., 190 Cal. 546, 549, 213 P. 971, 972; see Roy v. Salisbury, 21 Cal.2d 176, 130 P.2d 706; Long Beach Drug Co. v. United Drug Co., 13 Cal.2d 158, 88 P.2d 698, 89 P.2d 386; Sutliff v. Seidenberg, Stiefel & Co., [45 Cal.2d 482] supra, 132 Cal. 63, 64 P. 131, 469. Unexpressed provisions of a contract may be inferred from the writing or external facts. Thus it is well settled that a contract need not specify price if it can be objectively determined. Section 1729 of the Civil Code recognizes three ways of determining price. It can be fixed by the parties, determined from the prior course of dealings of the parties, and if these procedures are inapplicable, the contract price may be deemed the reasonable price under the circumstances of the particular case. The absence of price provisions does not render an otherwise valid contract void. Civ. Code §§ 1728, 1655, 1656; Great Western Distillery Products, Inc. v. John A. Wathen Distillery Co., 10 Cal.2d 442, 74 P.2d 745. Unless the parties intended to leave the determination of price to future negotiations, courts should make the necessary findings and set the price under the applicable code provisions.