Commercial Division Blog
Promise to Compensate Investor for Failed Investment Unenforceable Gratuitous Promise
On January 21, 2016, Justice Sherwood of the New York County Commercial Division issued a decision in Scola v. Boivin, 2016 NY Slip Op. 30116(U), dismissing a breach of contract claim because it was based on a "gratuitous promise."
In Scola, the "plaintiff Katarina Scola loaned $400,000 to defendant Nordica Capital (Nordica) in return for a private placement note (the Note)." Defendant Bibeau allegedly induced the plaintiff to invest in Nordica. Nordica subsequently defaulted on the note. Among the claims the plaintiff brought against Bibeau was breach of contract based on her "claims that she had an oral contract with Bibeau in which he promised to repay the loan if Nordica defaulted." The court granted Bibeau summary judgment on this claim, explaining: "Bibeau concedes that he told Scola he would make sure she was repaid, even to the extent of selling his personal assets. He denies having guaranteed the Note. He adds that his assurance was made after Nordica defaulted, thereby making it an unenforceable gratuitous promise." (Internal quotations and citations omitted) (emphasis added).