Contract – Jury’s mistaken execution finding upheld

The district court’s full jury instructions on mutual assent were a correct statement of Virginia law and not in error.

Background

Appellants Knox Energy LLC and Consol Energy Inc. filed this action seeking declaratory judgment that a drilling contract with Gasco Drilling Inc. was unenforceable. Consol contended that there was no meeting of the minds because it accidentally sent an unexecuted drilling contract form to Gasco and then inadvertently signed it once Gasco returned the completed form. It alleged that Gasco knew that Consol had not intended to enter into the drilling contract, as Consol had previously informed Gasco that it was not interested in entering into the type of drilling contract that Gasco claims they formed and that it had already entered into a drilling contract with another drilling company for the period in question.

The jury found that there was no meeting of the minds — no mutual assent — between the parties and accordingly rendered a verdict in favor of Consol.

Mutual assent instruction

Gasco contends that the district court erred in instructing the jury on mutual assent, arguing that the instruction it gave conflicted with established Virginia contract law, which applies in this diversity action. In instructing the jury on mutual assent, the district court stated:

“For a contract to exist, the minds of the parties must have met on every material term of the alleged agreement. Whether the minds have met is a question of intention. For there to be an agreement, the parties must have a distinct intent common to both and without doubt or difference. Because the offer and acceptance may be by word, act or conduct, a meeting of the minds may be shown by direct evidence of intent, or by indirect evidence of facts which imply intent. If a party’s words or actions warrant a reasonable person in believing that it intended a real agreement, its contrary, but unexpressed, state of mind is immaterial. A party cannot snap up an offer that is too good to be true. If either party knew, or should have known, that the other had made a mistake with respect to the alleged agreement, then there was no meeting of the minds, and no contract.”

This instruction fairly states Virginia law on mutual assent. It calls for an objective manifestation of intent. This is not only the correct standard, but it also employs the precise language that we used in this case on a prior appeal.

Gasco challenges the portion of the district court’s instruction stating: “If either party knew, or should have known, that the other had made a mistake with respect to the alleged agreement, then there was no meeting of the minds, and no contract.” Here, the district court was not suggesting that because Consol made a mistake regarding the contract’s contents it was entitled to be relieved of the contract’s obligations, as a defendant typically maintains when mounting a mistake defense. It was noting that when one party’s mistaken entry into a purported contract is coupled with the other party’s knowledge of that mistake, there is no meeting of the minds; there is no mutual assent as required to form a valid contract.

Consol contended that it sent the contract form to Gasco in error and that Gasco knew, or should have known, that it was sent in error and was not intended to be the basis for a contract. Given that context, the statement accurately describes the requirement under Virginia law of mutual assent to the agreement.

Gasco also contends that the district court erred in telling the jury that a party “cannot snap up an offer that is too good to be true.” This instruction, in context, informed the jury that Gasco could not “snap up” Consol’s mistaken offer and take advantage of that error if it knew or a reasonable person would have known that Consol had indeed made a mistake.

Finally, contrary to Gasco’s contentions, the trial court did not limit the jury to consideration of communications at the time the contract was executed. Such a limitation would be both unsupported by case law and by commonsense. Taking the instructions as a whole, it did not err in instructing the jury on mutual assent.

No new trial

Gasco nonetheless requests a new trial based on alleged misconduct by Consol during discovery and, alternatively, the district court’s ruling excluding a document that Gasco offered into evidence during trial.

Gasco argues that Consol failed to disclose a 2012 drilling contract that Consol had entered into with a third party. The district court concluded that Gasco failed, as required by Federal Rule of Civil Procedure 60(b)(3), to prove by clear and convincing evidence that Consol engaged in any misconduct. The court also concluded that, in any event, Gasco failed to show that it was prevented from presenting its claim that it neither knew nor should have known that Consol made a mistake because the 2012 Contract was executed after the parties allegedly entered into the contract at issue in this case. This court finds no abuse of discretion in the trial court’s conclusion.

Gasco further argues that it was entitled to a new trial because the district court excluding the same 2012 Contract from evidence when Gasco sought to introduce it on the third day of trial. The district court excluded the document because it was not identified on Gasco’s exhibit list and was offered in the middle of trial without prior notice to Consol. The district court considered Gasco’s explanation for the contract’s late introduction and why it should nonetheless be admitted at trial given its professed importance. It also considered Consol’s arguments that admitting the document would be unfair and that it was, in any case, not relevant. The district court concluded that “Gasco was not justified in waiting until the third day of trial to disclose to [Consol] a document that it had received a week earlier pursuant to a subpoena.”

The challenged rulings by the district court clearly fell within a trial court’s broad discretion to manage litigation, and there was no abuse of such discretion in denying Gasco a new trial.

Affirmed.

Knox Energy LLC v. Gasco Drilling Inc. (Lawyers Weekly No. 006-007-18, 10 pp.) (Niemeyer, J.) No. 17-1878; June 11, 2018; from WDVA at Abingdon (Jones, J.). Daniel G. Bird for Appellant; Michael John Finney and Monica Taylor Monday for Appellees. 4th Cir. Unpub.