Commercial Division Blog

Posted: October 3, 2015 / Categories Commercial, Contracts

Agreement to Agree Not an Enforceable Contract

On October 1, 2015, the First Department issued a decision in Offit v. Herman, 2015 NY Slip Op. 07056, holding that an agreement to negotiate a contract was not an enforceable contract, explaining:

Plaintiffs contend that a memorandum of understanding (MOU) that they and defendant signed was a "Type II" agreement under federal case law, requiring defendant to negotiate in good faith to finalize a settlement of various lawsuits among the parties. The New York Court of Appeals has rejected the rigid classification into Types in favor of asking whether the agreement contemplated the negotiation of later agreements and if the consummation of those agreements was a precondition to a party's performance. The MOU says that the parties have reached an agreement in principle, subject to documentation acceptable to the parties and court approval. Moreover, in prior motion practice, counsel for plaintiff . . . admitted that the MOU was merely an agreement to agree. Thus, the MOU is not an enforceable contract, and the motion court correctly dismissed the complaint.

(Internal quotations and citations omitted).