According to the Los Angeles Times, its all to do with sloppy correspondence:
"It's pretty simple," said Doug Hamilton, the Galaxy's president and general manager. "There is no agreement in place. We were still discussing the possibility of a game."
The Galaxy originally had been negotiating with Everton, which finished fourth in the Premier League and thereby qualified for the European Champions League, but Everton bowed out after receiving a better offer from a club in Asia.
That brought West Bromwich into the picture, but the English club apparently jumped the gun, making its announcement before all the details could be worked out.
And then along came a better offer from Real Madrid.