Commercial Division Blog
Damages for Breach of "Agreement to Agree" Limited to Out-of-Pocket Expenses
On August 17, 2015, Justice Kornreich of the New York County Commercial Division issued a decision in DOLP 1133 Props. II LLC v. Amazon Corporate, LLC, 2015 NY Slip Op. 31544(U), dismissing claims for specific performance and lost profits in connection with an alleged breach of an agreement to negotiate a lease.
In DOLP 1133 Props. II LLC, the plaintiff brought an action for, among other things, the breach a letter of intent under which the plaintiff and defendant agreed to negotiate in good faith a lease on a commercial property. The court granted the portion of the defendant's motion to dismiss relating to the plaintiff's claim for lost profits and specific performance, explaining:
There are, however, limits on the damages recoverable for breach of agreement to negotiate in good faith. Where, as here, a letter of intent requires the parties to negotiate in good faith and only with each other toward a final lease, and to do so on an exclusive basis as long as the parties are negotiating in good faith to consummate the transaction, plaintiffs measure of damages is out-of-pocket loss.
(Internal quotations and citations omitted) (emphasis added).