Commercial Division Blog

Posted: March 9, 2015 / Categories Commercial, Contracts

Oral Modification of Completed Contract Not a Breach

On March 4, 2015, the Second Department issued a decision in El-Nahal v. FA Management, Inc., 2015 NY Slip Op. 01778, holding that it is not a breach of contract to demand and receive an oral modification to a completed agreement.

In El-Nahal, the plaintiff sought "damages for breach of contract, unjust enrichment, and violation of the Rules of the New York City Taxi and Limousine Commission." The Second Department affirmed. With respect to the plaintiff's breach of contract claim, the Second Department explained:

The complaint alleged that the plaintiff entered into an oral contract with the defendant to lease a medallion from it for $666 per week, and that the defendant breached the contract by later extracting fees from the plaintiff of $852 per week and imposing a 5% charge for all credit card transactions. Since the plaintiff paid the allegedly excessive fees, the plaintiff was, in effect, describing an oral modification of the original contract, which was fully performed—not a breach of the original contract. Accordingly, the plaintiff failed to state a cause of action sounding in breach of contract.

(Internal quotations and citations omitted) (emphasis added). Taking the allegations at face value, this decision condones the defendant's bad conduct. Still, the lesson here is that if someone asks you to renegotiate a deal, and you agree, you are bound by the new deal.