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Posted: December 30, 2013

Unambiguous Commercial Contract Enforced As Written Despite Burden

On December 26, 2013, the Second Department issued a decision in Obstfeld v. Thermo Niton Analyzers, LLC, 2013 NY Slip Op. 08601, reaffirming the rule that unambiguous commercial contracts will be enforced as written, even if it results in possible unfairness to one of the parties.

In Obstfeld, plaintiff contracted in December 2001 to provide investment banking services to defendant’s predecessor-in-interest. The agreement was “cancelable on sixty days notice by either party after August 1, 2002. In September 2002, the parties entered into an addendum to the [a]greement” that granted plaintiff “the exclusive right to act as financial advisor for [defendant’s predecessor-in-interest] for the next two rounds of institutional fundraising following the present round, as well as for any investment or merger/acquisition transaction or IPO.” The addendum by its terms “supersede[ed] any inconsistencies between the addendum and the [original] agreement,” but it neither provided for the termination of the amended agreement nor referred to the cancellation provisions in the original agreement.

In June 2003, defendant’s predecessor-in-interest informed plaintiff that it was cancelling the agreement pursuant to the 60 day notice provision on the original agreement. In March 2005, defendant’s predecessor-in-interest was acquired by defendant. Plaintiff demanded, and ultimately sued for, its investment banking fees. The trial court denied the defendant’s motion for summary judgment on the breach of contract claims. The Second Department reversed, writing:

A contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself. Consequently, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. . . .

Contrary to the plaintiffs’ contention, the Agreement, as amended by the Addendum, was not ambiguous with respect to the issue of whether termination was permitted upon 60 days’ notice. Although the Addendum gave Morningside the exclusive right to act as . . . financial advisor for further fundraising, including a possible merger or acquisition, the Addendum in no way abrogated the provision in the Agreement that the parties could end their relationship upon 60 days’ written notice, and thus was not ambiguous. In addition, the terms of the Addendum were not inherently inconsistent with the cancellation provision of the Agreement such that there was need to rely upon the final provision in the Addendum, which stated that the Addendum would “supersede any inconsistencies between the Addendum and the Agreement.”

(Internal quotations and citations omitted).

It is not news that the parol evidence rule is alive and well in New York. It is a little surprising that there are so many decisions that have to remind us of that fact.

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