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Memo Of Understanding Was A Binding Contract

Wednesday, February 01, 2012 03:29 am



Stevens & Wilkinson of South Carolina, Inc. v. City of Columbia, 2011 S.C. App. Lexis 340 (Nov. 30, 2011)

A development team, including an architect that had already performed $1.2 million worth of work, sued a city for reneging on a promise of a hotel development project.

The City of Columbia, South Carolina selected a team consisting of three developers, an architect, a construction company, a hotel corporation, and a bond underwriter to develop, build and operate a hotel. The City executed a memorandum of understanding (MOU) with the team, under which the team performed for more than a year. At that point, the team's publicly financed plan had risen in cost to $72 million. The City then solicited a new request for proposals and gave the project to another team whose privately funded proposal was priced at just $26 million. Several members of the original team (collectively, the Team) sued the City, alleging breach of contract based on the MOU. A circuit court ruled that the MOU was not a contract, but the appellate court reversed.

MOU made its own promises

The City argued that the MOU was a nonbinding framework for the project's development stage. It claimed that the parties would be bound in the future by the written agreements contemplated by the MOU but not by the MOU itself. Indeed, the MOU anticipated several agreements to be negotiated at a later date. For example, a de [...]

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