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Current Developments in the Commercial Divisions of the
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Posted: December 9, 2013

Failure to Give Required Notice of Termination a Failure to Perform a Condition Precedent to Entitlement to Termination Payments

On December 3, 2013, Justice Demarest of the Kings County Commercial Division issued a decision in Sutton v. E&B Giftware LLC, 2013 NY Slip Op. 33019(U), holding that the failure to give a contractually required notice of termination was a failure to perform a condition precedent to the plaintiff’s entitlement to post-termination payments.

In Sutton, the plaintiff alleged that the defendant breached the consulting agreement between them by failing to pay plaintiff “consulting fees and bonus payments . . . following his termination of his retention under the Agreement.” The court found that plaintiff was not entitled to those payments because he had failed to give the required sixty days’ notice required by the agreement. The court explained:

[T]he Agreement leaves no doubt that the provision of 60 days notice under section 5.2(c) is a condition precedent to [defendant] paying post-termination compensation under section 5.2(d). [Plaintiff] argues that the 60 day notice component of section 5.2(c) does not constitute a condition precedent because the mere lapse of time does not create a condition precedent. This case, however, does not involve the mere lapse of time, since section 5.2(d) requires compliance with section 5.2(c) before it becomes applicable. Further, the use of the language “in the event that Consultant terminates his retention hereunder pursuant to Section 5.2(c)” is a form of construction frequently used to establish a condition precedent.

(Internal quotations and citations omitted).

Notice provisions in contracts may look like boilerplate, but as Sutton shows, parties (and counsel) ignore them at their peril.

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