Commercial Division Blog
Agreement to Agree Unenforceable
On April 6, 2016, Justice Ramos of the New York County Commercial Division issued a decision in Lipton v. Green, 2016 NY Slip Op. 30569(U), denying summary judgment on a breach of contract claim because it alleged no more than an agreement to agree, explaining:
Mutual assent is often referred to as a meeting of the minds of the parties on all essential terms of the contract. [The plaintiff] fails to raise a triable issue that there was mutual assent on the essential terms of the alleged oral contract. Regarding equitable shares in [the venture], the record shows that the parties discussed [the plaintiff's] share to be between 20%-33% but never agreed on an exact number. Furthermore, the day that the parties allegedly agreed on the equity share term, [the plaintiff] admits that there was no final and complete agreement. Similarly, regarding capital contribution, the parties allegedly agreed on the amount of capital each would contribute to [the venture] to be between $3 million and $5 million depending on the influx of cash by investors and [its] launching. . . . Furthermore, the record shows that salaries was a term that was in flux since, according to [the plaintiff], the agreement entered into called for salaries of $250,000 each, but as late as May 2013, [the plaintiff] proposed a salary structure of $100,000 for him and $350,000 for [the defendant].
This Court cannot enforce this alleged oral agreement where the evidence shows that the material terms were indefinite. If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract. . . . A mere agreement to agree, in which a material term is left for future negotiations, is unenforceable. Moreover, the alleged contract was dependant on a condition precedent that [the venture] would not move forward until investors pledge sufficient capital. A condition precedent to the formation of a contract itself dictates that no contract arises unless and until the condition occurs. Undisputedly, the condition precedent of obtaining a seeding investment by an outside hedge fund never occurred, and thus the contract was never formed.
(Internal quotations and citations omitted).