Will a paper napkin agreement hold up in court? Probably not according to Craig Fedynich vs Curtis Massood Midwest Outdoor Media . Here are the facts.
- in 2002 Curtis Massood and Craig Fedynich formed Midwest Outdoor Media. Fedynich provided the ground lease and permits. Massood provided the capital. The company built 13 locations in Kansas City and had 4 unbuilt locations.
- In 2007 Fedynich and Massood met and decided to divide the assets of the business. Fedynich created a hand written document at the meeting. The agreement divided up the billboards and permits and was signed by Fedynich and Massood and dated 9/24/07. Under the signatures was the line: “Bank Account – Split-Pay Taxes – New Company.”
- In December 2008 Fedynich filed suite to enforce the contract alleging that the hand written document was a written agreement to divide all the assets of Midwest Outdoor.
- Massood asserted that although the parties had started a process to divide the company they had never reached a meeting of the minds on the material terms of the agreement.
- A trial court entered a judgement in favor of Fedynich to divide the assets but only with respect to the assets above the signature lines.
- Massood and Midwest Outdoor appealed arguing that the hand-written agreement was too vague and incomplete to be the undisputed intent of both parties to divide all of Midwest’s assets.
- In June 2011 an appeals court agreed with Midwest and did not uphold the agreement. It noted: The terms below the signatures, “Bank Account – Split-Pay Taxes – New company” are unduly uncertain. Questions remain regarding the identity of the bank account and how it would be split. Does the word “split” refer to the bank account, taxes, or both? Additionally, the document does not address the parties” capital contributions, loans made to the company by Mr Massood, and expenses and liabilities. Because of this uncertainty, there was no enforceable contract to divide all the assets of Midwest Outdoor.
Insider’s take: Don’t expect a paper napkin agreement to be enforceable. An enforceable contract must be specific and thorough and that’s hard to do on a paper napkin.
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