Commercial Division Blog
Parties Bound by Unsigned Contract
On December 3, 2019, the First Department issued a decision in Lerner v. Newmark & Co. Real Estate, Inc., 2019 NY Slip Op. 08611, holding that parties were bound by an unsigned contract based on their conduct, explaining:
Plaintiff has also stated a claim for breach of the Termination Agreement, dated June 16, 2016, and drafted by defendants themselves. The Termination Agreement on its face did little more than confirm the Engagement Agreement's post-termination provisions, including maintenance of confidentiality by plaintiff and non-solicitation of defendants' clients, and payment of commissions per the "pending list" mechanism of Schedule 1. Plaintiff complied with his obligations thereunder, including submission of his list of pending transactions as of the date of his departure.
It is true that neither party signed the Termination Agreement. However, where the evidence supports a finding of intent to be bound, a contract will be unenforceable for lack of signature only if the parties positively agreed that it should not be binding until so reduced to writing and formally executed. While the Termination Agreement contained a counterparts clause and signature lines indicating that it could be accepted by signature and countersignature, it did not positively state that the parties could assent only by signing. By contrast, the Engagement Agreement, also drafted by defendants, expressly provided that in unsigned form it does not become an offer of any kind and does not become capable of acceptance. Thus, defendants knew how to draft an agreement that could be accepted only by signature, but they did not so draft the Termination Agreement. The evidence, i.e., the parties' months-long email exchanges, during which plaintiff submitted his list of pending transactions, defendants drafted the Termination Agreement and forwarded it to plaintiff, and the parties disagreed about the extent to which transactions listed by plaintiff were covered, supports a finding that the parties intended to be bound by the Termination Agreement, despite their failure to sign it.
(Internal quotations and citations omitted).
In New York, a contract need not be in writing. As this decision shows, there sometimes are disputes over whether a contract exists, especially, as here, the parties were negotiating a written contract. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.