the court held no duty was created to negotiate in good faith over terms. Id.
The language in Manufacturers Hanover is more appropriately compared to that in Feldman than to that in A/S Apothekernes. It is true that, unlike the letter of intent in Feldman, the revised proposal set forth detailed terms and conditions regarding the proposed lease. This, however, does not end the inquiry. No language in the revised proposal makes references to any prior agreements between Manufacturers Hanover and BWGB, nor does the language reflect an intent by each party to make reasonable efforts towards consummating the deal. The cover letter to the revised proposal merely instructed the agent for BWGB to "review the revised terms and conditions and if they are acceptable to your client, have your client indicate so by signing and returning a copy of the letter." The letter also instructs BWGB to indicate where clarifications or additions were required. In essence, the revised proposal offered sublease terms and conditions acceptable to Manufacturers Hanover, and invited BWGB to comment, disagree or acquiesce to them.
This court is not unmindful of the substantial increase in the amount of security deposit demanded by Manufacturers Hanover, and it is aware that this demand was made after BWGB had signed the revised proposal and had terminated its existing lease. This action by BWGB changed the negotiating posture between the two parties. No formal agreement had been entered, yet BWGB no longer had its bargaining chip; electing to remain in its existing lease. BWGB now had to find new space before January 31, 1992, instead of January 31, 1997. This gave Manufacturers Hanover increased leverage over the terms in the 10 N. Lasalle lease; BWGB had, in a sense, gone past the point of no return.
Unfortunately for BWGB, there was no language in the revised proposal that prevented Manufacturers Hanover from implementing its negotiating advantage in the manner that it did. It may be true, as plaintiff argues, that the defendant increased its security deposit demand to force BWGB to back out of the lease negotiations in favor of a more lucrative deal with another potential lessee. Nonetheless, although Manufacturers Hanover's actions may be characterized as a sharp business practice, they are not actionable where no duty to negotiate in good faith existed. "In a business transaction, both sides presumably try to get the best of the deal." Feldman, 850 F.2d at 1223. Where there is no agreement to temper this business interest, actions taken in furtherance of such interest cannot be characterized as a breach of good faith. Id. In the absence of more explicit language in the revised proposal regarding the shape of further negotiations between the parties, Manufacturers Hanover was free to change, alter or withdraw previously proposed terms as it saw fit. Accordingly, Count II of plaintiff's complaint, alleging a breach of a good faith duty to negotiate, is dismissed.
Counts IV and V: Fraud and Deceptive Business Practice Allegations
Counts IV and V of plaintiff's complaint center on alleged misrepresentations of fact made by Manufacturers Hanover to BWGB during the course of their lease negotiations. Both counts involve the same factual allegations; plaintiff maintains that Manufacturers Hanover wilfully misrepresented the amount of security deposit needed in order to induce the plaintiff to continue negotiating and enter a sublease agreement. Amended Complaint PP 54, 62. BWGB alleges that this alleged misrepresentation constituted both common law fraud and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("Consumer Fraud Act"), Ill. Rev. Stat. ch. 121 1/2, PP 261-272. Because both counts involve the same alleged facts, the court addresses them together.
In order to state a cause of action for common law fraud in Illinois, the plaintiff must allege the following elements: (1) that a false statement of material fact was made; (2) that the party making the statement knew or believed it to be untrue; (3) that the party to whom the statement was made had a right to rely upon it and did so; (4) that the statement was made for the purpose of inducing the other party to act; and (5) that the party reasonably relied upon the statement to its detriment. Redarowicz v. Ohlendorf, 92 Ill.2d 171, 185-86, 65 Ill. Dec. 411 , 441 N.E.2d 324 (1982); Connor v. Merrill Lynch Realty, Inc., 220 Ill. App. 3d 522, 528, 163 Ill. Dec. 245 , 581 N.E.2d 196 (1991), appeal denied 143 Ill. 2d 636 (1992); accord General Motors Acceptance Corp. v. Central Nat'l Bank, 773 F.2d 771, 778 (7th Cir. 1985).
The Consumer Fraud Act defines a deceptive business practice as "the concealment, suppression or omission of any material fact, with the intent that others rely upon the concealment, suppression or omission of such material fact." Ill. Rev. Stat. ch. 121 1/2, P 262.
Although the Act was intended to provide broader protection than common law fraud, Connor, 220 Ill. App. 3d at 530, examination of Illinois case law interpreting the Consumer Fraud Act reveals a common thread tying together the elements comprising common law fraud and a violation of the Act: in both causes of action the plaintiff must allege reasonable reliance upon the purported misrepresentation. See I.K. Corp. v. One Fin. Place Partnership, 200 Ill. App. 3d 802, 816-17, 146 Ill. Dec. 198 , 558 N.E.2d 161 , appeal denied 135 Ill. 2d 556 (1990). BWGB has failed to allege facts supporting reasonable reliance; therefore, this "common thread" ultimately unravels both plaintiff's fraud count and its Consumer Fraud Act count.
Initially, the premise implicit in plaintiff's allegations is that had Manufacturers Hanover stated from the outset of negotiations that a $ 700,000 security deposit would be required, BWGB would have terminated negotiations with Manufacturers Hanover. Nevertheless, the injuries BWGB alleges it sustained did not result directly from BWGB's continued negotiations. Instead, the alleged injuries flowed from actions BWGB took outside the negotiation process: it terminated its existing lease, incurring forfeiture costs and other costs associated with the BWGB's subsequent failure to enter a formal lease agreement with Manufacturers Hanover.
This irrevocable change of position by BWGB did not constitute reasonable reliance on Manufacturers Hanover promise of a specified security deposit amount. Assuming that Manufacturers Hanover misrepresented deliberately the size of the security deposit, plaintiff still had to consider that, according to the provisions of defendant's January 25 revised proposal, there was no binding obligation upon either party until a formal lease was executed by both parties. When a proposed term, even if false, is conditioned upon the execution of a formal lease, the party to whom the representation cannot justifiably rely upon it. I.K. Corp., 200 Ill. App. 3d at 817. Here, until BWGB and Manufacturers Hanover executed a formal sublease, BWGB was free to back out of the deal at its convenience.
BWGB was well aware that the security deposit provision proposed by Manufacturers Hanover was contingent upon the execution of a formal sublease by the parties. The revised proposal explicitly stated that it did not create any binding obligations upon either party. Echoing the non-binding nature of the proposal, BWGB proposed an amendment to the security deposit provision that would delay its performance obligations until a fully executed sublease was delivered to it. Yet despite its knowledge that nothing contained in the revised proposal was binding upon Manufacturers Hanover, BWGB still terminated its existing lease before the 10 N. LaSalle lease was executed. Under Illinois law, this type of reliance is simply not reasonable. Accordingly, Counts IV and V of plaintiff's complaint are dismissed.
Count III: Promissory Estoppel
Count III of BWGB's complaint alleges that Manufacturers Hanover should be estopped from denying the existence of a contract. Under Illinois law, to state a cause of action based on promissory estoppel, the plaintiff must allege that: (1) the defendant made an unambiguous promise to the plaintiff; (2) plaintiff reasonably relied on defendant's promise; (3) plaintiff's reliance was expected and foreseeable by the defendant; and (4) plaintiff was injured by its reliance. Quake Construction, (1990) 141 Ill. 2d at 310; I.K. Corp., 200 Ill. App. 3d at 816; accord M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1408 (7th Cir. 1991); Ziese v. Ramada Inns, Inc., 463 F.2d 1058, 1060 (7th Cir. 1972).
Plaintiff's complaint alleges that Manufacturers Hanover accepted the revisions BWGB made to the terms and conditions of the revised proposal on January 28, 1991. Amended Complaint P 18. Subsequently, plaintiff alleges, defendant's agent informed BWGB they had a "done deal". Amended Complaint P 19. Plaintiff alleges that in reliance upon this representation, and with the knowledge, encouragement and approval of Manufacturers Hanover, it terminated its existing lease and incurred costs associated with fulfilling obligations associated with leasing the 10 N. LaSalle space. Amended Complaint P 30.
Standing alone, defendant's statement that the sublease was a "done deal" was ambiguous. Similar language was found to be unenforceable in Ziese, 463 F.2d at 1060, where the defendant told plaintiff to "quit worrying . . . you've got a deal." The Ziese court held this statement was not unequivocal, and that therefore, promissory estoppel could not be invoked to create a contract.
In addition, the alleged oral promise by Manufacturers Hanover directly contradicted the written terms of the revised proposal, which stated that no binding obligations were to be imposed until a formal sublease was executed. In light of this contradiction, it was not reasonable for BWGB to rely solely on this statement as a basis for terminating its lease. Reliance is not reasonable where the plaintiff has knowledge that final approval of the deal may be withheld, or that any agreement is contingent upon execution of a formal contract. M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1408 (7th Cir. 1991); I.K. Corp., 200 Ill. App. 3d at 816-17.
BWGB's promissory estoppel theory, however, does not rest on this representation alone. BWGB also alleges that Manufacturers Hanover knew that plaintiff had to exercise its option to cancel its existing lease within three days from the "done deal" representation, and that it encouraged BWGB to terminate its existing lease. Amended Complaint, P 30. Construing the alleged "done deal" representation and defendant's alleged encouragement of lease termination together, plaintiff has alleged sufficient facts to support a cause of action for promissory estoppel.
Plaintiff's complaint does not make clear how or when Manufacturers Hanover encouraged or approved BWGB's decision to terminate its existing lease. If the claims of active encouragement were based only on the terms and conditions contained within the revised proposal, then plaintiff's estoppel argument would fail, because BWGB knew the sublease proposal was not binding and enforceable. Thus, any reliance on the terms of the revised proposal would not be reasonable.
It is, however, equally plausible to interpret plaintiff's complaint as alleging that Manufacturers Hanover encouraged BWGB to terminate its existing lease after the revised proposal was signed and returned to the defendant by BWGB, after Manufacturers Hanover allegedly accepted BWGB's revisions to the proposal, and after the defendant allegedly stated the sublease was a "done deal". Although the complaint does not indicate an express promise was made, the promise necessary to invoke promissory estoppel does not have to be express to be enforceable; it may also be inferred from the words and conduct of the defendant. First Nat'l Bank v. Sylvester, 196 Ill. App. 3d 902, 912, 144 Ill. Dec. 24 , 554 N.E.2d 1063 , appeal denied 133 Ill. 2d 555 (1990). Here, it may be reasonably construed that the combination of these statements and activities constituted an unambiguous promise by defendant to BWGB that it intended to make final the sublease agreement in substantial accordance with the terms contained in the revised proposal.
Examination of defendant's alleged statements in conjunction with the time frame constraints on the negotiations also supports an inference that Manufacturers Hanover expected BWGB to rely upon its promise, and that such reliance was reasonable. Manufacturers Hanover knew that unless BWGB terminated its existing lease by January 31, 1991, three days after it allegedly stated there was a "done deal," BWGB would be locked into that lease for another five years. This would be fatal to the proposed deal. It is logical to infer that defendant desired that progress continue on the sublease agreement, a course of action which would require BWGB to terminate its existing lease. Thus, it is reasonable to infer that defendant's "done deal" statement, combined with its encouragement of BWGB to terminate the existing lease, was intended to induce the plaintiff into terminate its existing lease.
The detrimental reliance element necessary to maintain a promissory estoppel action requires little discussion here. Plaintiff's complaint adequately alleges that BWGB sustained injury by relying on the alleged promises made by Manufacturers Hanover to it. Accordingly, defendant's motion to dismiss Count III of plaintiff's complaint is denied.
For the foregoing reasons, Manufacturers Hanover's motion to dismiss Counts I, II, IV, and V, alleging breach of contract, breach of a good faith duty to negotiate, fraud, and violations of the Consumer Fraud Act respectively, is granted. Defendant's motion to dismiss Count III of plaintiff's complaint, alleging promissory estoppel, is denied.
BRIAN BARNETT DUFF, JUDGE
UNITED STATES DISTRICT COURT
March 19, 1993