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Current Developments in the Commercial Divisions of the
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Posted: November 17, 2013

Contract-Related Claims Dismissed Despite Allegation that Provisions Were Added Surreptitiously or by Mistake

On November 14, 2013, the First Department issued a decision in VFS Fin. v. Insurance Servs. Corp., 2013 NY Slip Op. 07576, illustrating the bedrock principle of contract interpretation that a party is presumed to have read and understood the contract it signed.

In VFS Fin., the defendant asserted “counterclaims and third-party claims of fraud in the inducement, breach of contract, tortious interference with contract, mutual mistake (reformation), and breach of the duty of good faith and fair dealing” based on an allegation that the plaintiff or the third-party defendant had “either surreptitiously or by mistake, inserted” certain terms into a contract. The First Department affirmed the trial court’s dismissal of those claims, holding that the agreements were unambiguous and contained a merger clause and thus that “[i]n this arm’s-length transaction between sophisticated, counseled business entities and a principal — which had had a prior course of dealing — the parties are deemed to have read and understood the terms of the loan documents, which are unambiguous on their face.” (Citations omitted).

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