Friday, October 5, 2012

Teachers Insurance and Annuity Association of America v. Tribune Co. case brief

TIAA v. Tribune Corp (Preliminary Binding Agreements) (Readings)
670 F. Supp. 491 (1987)
-Teachers Insurance and Annuity Association of America (Teachers) (plaintiff) brought suit against Tribune Co. (D), arguing that Tribune breached a commitment letter whereby it agreed to take a loan from Teachers, subject to execution of final documents and approval by Tribune’s board of directors. -To make a more attractive public stock offering, Tribune wished to employ offset accounting, whereby it could withhold disclosure of certain assets on its balance sheets.
-When Tribune learned that offset accounting would likely be unacceptable to the Securities and Exchange Commission, it broke off negotiations, arguing that its obligation to borrow was contingent on its ability to use offset accounting to report the loan on its balance sheets, though no mention of offset accounting was made in the commitment letter.

-A preliminary binding agreement exists when mutual commitment to a contract on agreed
major terms exists, while open terms still remain to be negotiated.

-Court applies four-factor test
-Parties have reached a preliminary binding agreement on some terms with a promise to
negotiate open terms in good faith.

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