Background
Neil Galpin and his wife co-owned Galpin Entertainment, LLC, which operated The Pier Bar & Grill in Bismarck, North Dakota, listed for sale at $4,500,000. Cantina Holdings delivered a confidential offer letter agreeing to purchase The Pier for $4,000,000—$500,000 at closing and $3,500,000 via contract for deed—and deposited $100,000 in earnest money with Bismarck Title Company. The letter specified that the earnest money would become non-refundable upon the buyer’s satisfaction of its due diligence or by March 30, 2023, whichever came first, and that only a pre-deadline termination notice would entitle the buyer to a refund. Cantina assigned its interest to Clay Butte Holdings, and neither entity notified the seller of any intent to terminate before the deadline.
On April 4, 2023, the parties executed a standard-form purchase agreement prepared by Clay Butte’s real estate broker. That agreement expressly incorporated the confidential letter in full and extended the due diligence period to April 20, 2023, but also contained pre-printed checkbox language stating that if “financing fails after the contingency completion date, earnest money shall be released to Buyer”—a provision in direct conflict with the non-refundable earnest money term in the confidential letter. The parties negotiated toward closing and drafted a contract for deed, but disagreed over personal guarantees from Clay Butte’s owners. The closing deadline of June 30, 2023 passed without a signed contract for deed, and Galpin Entertainment sold The Pier to another buyer in mid-July 2023.
Galpin Entertainment assigned its claims to Neil Galpin, who sued for a declaratory judgment that he was entitled to the $100,000 earnest money. Clay Butte and Cantina counterclaimed, asserting the purchase agreement’s financing contingency entitled them to the refund. After a bench trial, the Burleigh County District Court awarded the earnest money to Galpin and denied all counterclaims. The appellants appealed.
The Court’s Holding
The North Dakota Supreme Court affirmed, holding that the district court correctly construed the conflicting contract provisions against the appellants. Under N.D.C.C. § 9-07-19, ambiguous contract language is interpreted against the party who caused the uncertainty. Here, the appellants drafted both the confidential letter—which made the earnest money non-refundable after the due diligence period—and introduced the standard-form purchase agreement containing the conflicting financing contingency. Having created the conflict, they could not benefit from it. The court also applied N.D.C.C. § 9-07-16, which provides that specially drafted contract language controls over standard form language; the confidential letter’s non-refundable earnest money provision was specially drafted, while the conflicting purchase agreement language was pre-printed boilerplate. Because the confidential letter was expressly incorporated into the purchase agreement, the appellants’ reliance on the later-in-time doctrine from Metcalf v. Security Int’l Ins. Co. was rejected—there was no temporal distinction once incorporation occurred.
The court also affirmed the district court’s finding that Galpin did not breach any duty to negotiate the contract for deed in good faith. Applying a clearly erroneous standard of review, the court found sufficient evidentiary support for the conclusion that Galpin Entertainment’s request for personal guarantees, though raised close to the original closing date, was not fatal to negotiations. The parties remained in active dialogue on alternatives, Clay Butte itself requested a closing extension after the guarantees were raised, and Galpin agreed to the extension. The district court’s adverse credibility findings against the appellants further supported the judgment.
Key Takeaways
- When a party drafts multiple agreements with conflicting earnest money provisions, North Dakota courts will construe the conflict against the drafter under N.D.C.C. § 9-07-19.
- Specially negotiated contract terms override pre-printed standard form language under N.D.C.C. § 9-07-16; boilerplate checkboxes do not supersede purpose-drafted provisions.
- Where an earlier agreement is expressly incorporated into a later one, the later-in-time interpretive rule does not apply—the incorporated document is treated as part of the later agreement.
- A seller’s late-stage request for personal guarantees does not automatically constitute bad-faith negotiation; courts assess the totality of conduct, including whether parties continued negotiating and agreed to extensions.
Why It Matters
This decision offers a practical lesson for parties negotiating complex business acquisitions: conflicting earnest money provisions across a term sheet and a subsequent standard-form purchase agreement create litigation risk borne by the drafter. Buyers and their counsel should ensure that pre-printed form language is reconciled with—or explicitly supersedes—any incorporated letter of intent or offer letter, or risk having the specially drafted terms govern.
The case also reinforces that good-faith negotiation obligations in North Dakota are assessed holistically. A single disputed term raised near a deadline does not doom a party’s good-faith argument if the overall record shows continued engagement and willingness to compromise, as demonstrated by the agreed closing extension here.