Commercial Division Blog
No Oral Contract Where Party Refused to be Bound Except in Writing
On April 7, 2015, the First Department issued a decision in Stonehill Capital Management, LLC v. Bank of the West, 2015 NY Slip Op. 02900, granting a defendant summary judgment dismissing a breach of contract claim.
In Stonehill Capital Management, the trial court granted the "plaintiffs' motion for summary judgment on its breach of contract cause of action and denied defendant bank's cross motion for summary judgment dismissing the amended complaint." The First Department reversed, explaining:
Defendant auctioneer had apparent authority to acknowledge plaintiffs' winning bid on the loan at issue and to state on defendant bank's behalf that the sale of the loan would go through subject to a final, executed agreement. Defendant bank was aware of the auctioneer's statements and the bank's counsel acted as if the statements were true. However, the bank made explicit statements that it was not to be bound absent an executed writing. Although it agreed to the use of a standard industry form to represent the prospective agreement, when it was discovered that the nature of the loan did not permit use of the form, the parties entered into negotiations regarding the necessary modifications to its language. Before any writing was executed, defendant exercised its right under the offering memorandum to withdraw the loan asset in question from the auction process and refused to go forward with the transaction.
For a court to enforce a purported contract, the proponent must establish, in the first instance, that the parties intended to be mutually bound by an agreement, together with all material terms of the agreement, factors that implicate the doctrine of definiteness. That the bank may have agreed to most of the material terms and remained silent when presented with changes proposed by plaintiffs does not fulfill the condition requiring a written agreement and tender of a deposit equal to 10% of the purchase price. These conditions comprising a valid acceptance under the agreement were not fulfilled. Thus, even if all of the material terms were agreed upon, as plaintiffs contend, plaintiffs have not established that acceptance was clear, unambiguous and unequivocal so as to render such terms enforceable.
(Internal quotations and citations omitted).