While parties may discuss the terms of a business arrangement, absent definite agreement on all material terms or a definite promise, these arrangements are generally unenforceable.  However, as the Delaware Court of Chancery held in its post-trial decision in Schaeffer v. Lockwood, C.A. No. 2018-0926-MTZ (Del. Ch. Nov. 30, 2021), where an unformed arrangement results in a benefit to one party, at the expense of the other, the quasi-contract theory of unjust enrichment steps in to compensate the party who provided the benefit.

Background and the Court of Chancery's Decision

Plaintiff Mark G. Schaeffer (Schaeffer) and defendant Donald Lockwood (Lockwood) had a longstanding history of collaborating on real estate ventures both locally in Delaware and in other states. Schaeffer specializes in what is called "bird-dogging"—locating undervalued, attractive real estate properties and passing them along to motivated investors. In return, a bird dog earns a percentage or a fee. Schaeffer located such a property near the Delaware beaches that was in foreclosure and brought the opportunity to Lockwood and a third individual, John O'Brien (O'Brien). The parties began negotiating a purchase with the foreclosing bank and discussed among themselves how to structure their collective investments in the property, including through the formation of a limited liability company. Their internal discussions never led to a formalized arrangement and, in need of funding to close the deal with the bank, Lockwood turned to a fourth individual, Constantine Malmberg, with whom he formed a new entity and ultimately purchased the property. Lockwood and Malmberg then began subdividing the property and selling lots to developers.