Commercial Division Blog

Posted: January 20, 2023 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Seth D. Allen, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Breach of Contract, Rescission

Plaintiff Cannot Bring Claim for Rescission Where There was a Meeting of The Minds

On December 20, 2023, Justice Andrew Borrok of the New York County Commercial Division issued a case in Ametek, Inc. v. Goldfarb, 2022 N.Y. Misc. LEXIS 7917, dismissing the defendants’ counterclaim for rescission but denying the motion to dismiss the counterclaim for reformation where the defendants did not dispute that there was a meeting of the minds as to the relevant contract provision but disputed whether the provision in the written contract reflected the agreement of the parties, explaining:

The recission (first counterclaim) and reformation (second counterclaim) counterclaims are predicated on the Defendants' claim that the Supplemental Agreement which they provided signature pages for in 2005 (but allege that they did not review at the time because they say they were never provided a copy of such Supplemental Agreement) fails to provide for a dollar for-dollar credit for third party funds as to their $30 million indemnification obligation. This they argue is a mistake and does not reflect the business deal. The Defendants are not however entitled to recission. Simply put, the Defendants do not dispute that there was a meeting of the minds as to their $30 million environmental cost indemnification obligation. The parties are fighting about damages related to that obligation and whether the Defendants are entitled to a credit, not whether the obligation exists at all. Thus, the counterclaim seeking recission (first counterclaim) must be dismissed.

On the record before the Court, and although a much closer call, however, dismissal is not appropriate at this time as to their counterclaim seeking reformation (second counterclaim). The Defendants do not dispute that their attorney negotiated and received drafts of the Supplemental Agreement. The drafts of the Supplemental Agreement are not however in the record. Nor is evidence that the final Supplemental Agreement was in fact provided to the Defendants' attorney when the Defendants' signature pages were affixed to such Supplemental Agreement. Thus, the 3211(a)(1) evidence or other evidence in the record does not utterly refute the Defendants' claim that the Supplemental Agreement which they say they were never provided reasonably relied on the fact that it provided for a dollar for-dollar credit.

While a claim for rescission requires an allegation that there was never a meeting of the minds between the parties to the contract, a claim for reformation requires an allegation that there was a meeting of the minds but that written contract does not reflect the parties’ actual agreement.  And while a successful claim for rescission results in the revocation of the contract entirely, a successful claim for reformation will result in re-writing the contract to reflect the parties’ actual agreement.  Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning bringing a claim for rescission or reformation of a contract.