In a case that one legal journalist wrote is “likely destined for inclusion in law school casebooks,” an appellate court has reversed a trial court’s ruling that invalidated a two-page contract written in a coffee shop with a pen borrowed from a server. The opinion said that the restaurant text plus parol evidence “was definite enough to be an enforceable contract.”

At a Coffee Bean restaurant in Calabasas, California, defendant David Delrahim of Blue Vista Partners and plaintiff Edwart Der Rostamian of Tiffany Builders, hastily composed two pages of text that both signed. The writing on notebook paper later became the basis of a breach of contract suit between the two men. At the time of their meeting, Rostamian was involved in negotiations that would allow his company to purchase 13 gas stations from Ibrihim Mekhail, who was not at the coffee shop and not a party to the case. That agreement was in escrow, but was encountering problems.

Delrahim was introduced to Rostamian by a mutual acquaintance who thought he could help “consummate the transaction” between Tiffany Builders and Mekhail, who owned the properties through a family trust.

In a document that the appellate court named “The Writing,” Delrahim suggested that for $500,000, he would renegotiate the purchase terms with Mekhail, so Rostamian could “back his company” out of the current purchase agreement. Delrahim also proposed that Rostamian would continue to own four of the 13 gas stations, and would pay him a monthly fee for him to “run” the sites.

The essence of this deal contained four points: a new price, of “from $12,400,000 to X“ would be negotiated, Tiffany Builders would pay Delrahim $500,000 to release him from the pending escrow, the balance would be “charged against the purchase of the four dealer sites, and the stations would then be owned by Delrahim on behalf of Rostamian for 24 months or sooner with a $4,000 per month cost for the four stations. Both Delrahim and Rostamian then signed “The Writing.”

In his declaration, Delrahim explained that the “X” was a placeholder because they were not sure what a new, negotiated purchase price would be. He said the actual purchase price would be added later, after it was approved by Mekhail, and the pending escrow was canceled so Delrahim could open his own escrow.

The opinion summarized the transaction as, “In short, Delrahim would take the lead in the stations deal in return for guaranteeing benefits for Rostamian.” Unfortunately, none of the four points in the deal came to pass. Instead, Delrahim “cut Rostamian out of the picture” when he dealt directly with Mekhail and bought the 13 stations for about $11 million.

Rostamian and Tiffany then sued Delrahim and Blue Vista for “breach of contract, specific performance, intentional and negligent interference with prospective economic advantage and unfair business practices.” Delrahim moved for summary judgment, and Los Angeles Superior Court of Judge Ralph C. Hofer granted his motion because “The Writing was too indefinite to be a contract.” He pointed out several flaws, including information about who would actually own the 13 stations when the transactions were completed. Rostamian and Tiffany appealed.

In a unanimous 3-0 ruling, Associate Justice John Shepard Wiley of Division Eight of the California Court of Appeal on November 28 wrote that The Writing plus “parol or extrinsic evidence” from a declaration by Rostamian which added information about agreements that were not covered in the Coffee Bean text, “was definite enough to be an enforceable contract.” He also noted that the court “construe(d) instruments to make them effective rather than void.”

Wiley found three “controlling streams of law” to support his dismissal of most of Hofer’s order. First, he discussed the parol evidence, explaining that Rostamian’s declarations met the legal test for admissibility because they were “relevant to prove a meaning to which the language of the instrument is reasonably susceptible.” Second, he concluded that “The Writing was not too indefinite to enforce,” because both parties signed “their joint creation,” which constituted a “ritual commitment: an exchange of promises.” Also, Rostamian had alluded to terms that the court felt were “a series of clear promises.”

Third, the opinion did not find that the “inexactitudes” that troubled the trial court were enough to invalidate the contract. Wiley wrote that the first omission, the locations of the gas stations, were “easily discoverable.” The second was information about ownership of the other nine stations, which Wiley found had been explained in Rostamian’s declaration. The third was ambiguities about whether just the plaintiff and the defendant were parties to the deal, or whether their businesses were also included. The fourth was the use of the “X” term, which the opinion said was a common placeholder when price is yet to be determined.

Wiley also wrote that “The trial court misapplied the doctrine against sham declarations,” which it erroneously used to discredit part of Rostamian’s declaration because it contradicted something he said in his deposition. The opinion found that Rostamian’s statements to the court were consistent.

The court next reviewed Rostamian’s claims “for tortious interference with prospective economic advantage.” It reviewed the status of the various interests and found that it was “undisputed” that after Tiffany assigned its interest to a group of investors, the company “no longer had an interest in the economic relationship with Mekhail.” The court therefore affirmed the order that dismissed the causes of action about tortious interference but reversed and remanded those related to breach of contract, specific performance and unfair business practices.