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Posted: March 25, 2017

IM’s Did Not Create Contract Because Deal Was “Subject To” Further Documentation

On March 23, 2017, the First Department issued a decision in Luxor Capital Group, L.P. v. Seaport Group LLC, 2017 NY Slip Op. 02167, holding that an exchange of instant messages did not create a binding contract, explaining:

The instant messages exchanged between the parties reflect that the transaction at issue was “subject to language” to be agreed upon, and was contingent upon “mutually satisfactory documentation.” Further, plaintiff Luxor Capital Group, L.P.’s internal communications and actions reflect an intent not to be bound absent execution of various documents and receipt of additional information, and the record shows that Luxor never received those documents and information.

The Court of Appeals’ decision in Stonehill Capital Mgt. LLC v Bank of the W. (28 NY3d 439 [2016]) does not compel any result to the contrary. Here, in contrast to Stonehill, the documents to be executed was not between plaintiffs and defendants. Rather, in this case, the document was to be executed by plaintiffs and a third-party seller; indeed, the parties did not even discuss the document before agreeing to the trade. Moreover, unlike in Stonehill, the totality of the circumstances here does not reflect any certainty as to the existence of an enforceable agreement.

(Internal citations omitted).

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