An Illinois Appellate Court upheld the dismissal of a lawsuit claiming a city was responsible for damages relating to a failed sale of city land because of alleged verbal promises of a city employee. Arroyo et al. v. City of Chicago.
According to the lawsuit, the city economic development coordinator met with a potential purchaser of property that was owned by the city. The city entered into a right of entry agreement allowing the potential purchaser to access the properties to conduct due diligence. However, the parties did not enter into a purchase and sale agreement for the sale of the property. The potential purchaser retained consultants to conduct investigations of soil and other conditions of the property. The potential purchaser claims that the city employee assured him that the city would sell the property to him, but when he was not provided with an appraisal by the city to complete the negotiations for the purchase, he filed a lawsuit seeking $500,000 in damages from the city for the investigations. The circuit court dismissed the case, and he appealed.
The Appellate Court upheld the dismissal. First, the Court held that there could be no “implied-in-fact contract” under a promissory estoppel theory because the city could not be bound by a contract that does not comply with legal requirements for a valid contract. Here, city ordinances provided that only the city council had the authority to sell city land, so any promises made by a city employee were void and unenforceable.
Second, it was not reasonable for the plaintiff to rely on assurances from a city employee who did not have actual authority to bind the city.
Third, the Court noted that verbal contracts for the sale of land are unenforceable.
Finally, the Court held that the right of entry agreement that the parties did enter into did not provide for compensation to the plaintiff for his due diligence efforts, which were conducted to benefit the plaintiff, and not the city.
