Family members often transfer family-business ownership interests or other assets between each other. Their discussions sometimes progress from informal negotiations to a written term sheet to a final written agreement. However, a term sheet itself can be found to be a binding agreement if the terms are sufficiently definite for a court to determine each party’s obligations and if the parties’ conduct evidences their agreement to perform according to those terms.
In Kunz v. Kunz, a Court of Appeals in Iowa recently ruled upon a claim by one family member against another to enforce a “Settlement Memorandum” which provided for the purchase and sale of stock in the family business, even though the Memorandum contemplated the drafting of later documents to finalize the transaction. In 1973, brothers Richard and Robert Kunz formed Happy Homes, Inc., a company that sold factory-built homes. Richard died in 2007 and his 50% interest in the company was transferred to his wife, Connie. Connie and Robert then began discussing the sale of Richard’s interests and later participated in mediation to aid in these discussions.