Media Network, Inc. v. Mullen Advertising, Inc., 2007 NCBC 1 (N.C. Super. Ct. Jan. 19, 2007)(Diaz)

The issue here was whether the parties had reached an agreement by which defendant was to pay fees to plaintiff for managing an advertising program. Plaintiff alleged that the agreement was "non-cancellable" for a term of one year. The Court found that the correspondence relied upon by plaintiff did not establish a binding contract. Although the parties had agreed on the price to be paid for each advertisement, they had not agreed on the number of advertisements that would be posted by the plaintiff, or when or where they would be posted. Material terms had been left open for negotiation, hence there was no valid contract.

The Court also rejected the argument that the contract had been ratified It held that ratification occurs when the person making the contract purported to act for its principal. Plaintiff's argument, however, was that the principal had ratified the contract, which the Court found to be the "legal equivalent of attempting to force a square peg into a round hole." The Court further ruled that an oral promise of a guarantee term to the contract was barred by a merger clause, pursuant to the parol evidence rule.

The Court found, however, that there were material issues of fact as to plaintiff's unfair and deceptive trade practice claims. It ruled that the oral statements by the defendant as to the term of the contract, which it had no authority to make, might have been fraudulent and were certainly unethical, and the defendant had failed to do anything to correct them. The Court also found a factual question on whether the defendant which spoke the misleading statements was acting with the authority of another defendant. Whether the speaking defendant had the apparent authority to act on behalf of the other defendant was a question of fact.

Finally, the Court granted summary judgment on plaintiff's claim for damages based on diminution in business value. Plaintiff's remaining claim was essentially for fraud in the inducement, and the measure of damages for that claim is the difference between plaintiff's expected profit if it had been permitted to perform for the full year, and the amount that it was actually paid before being terminated." Furthermore, the only reason for plaintiff to be in business was to perform under the contract at issue, making a diminuntion in value theory inapplicable and one of "unbounded speculation." The business was a new one, and had value only to the extent that the defendant chose to renew the contract. Although new businesses can recover for loss of profits, they must show them with reasonable certainty like an established business.

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