Court Holds Premature Notice Exercising Option Invalid Under New York’s Strict Construction Rule

Posted: October 14, 2026 / Written by: Ian Weiss / Categories Contract Interpretation, Summary Judgment

Court Holds Premature Notice Exercising Option Invalid Under New York’s Strict Construction Rule

On September 8, 2026, in ET JV Holdings, LLC v. TBH-ASL BSA Member LLC, Index No. 659784/2024, Justice Anar Rathod Patel of the New York County Commercial Division granted in part and denied in part the parties’ cross-motions for summary judgment. The operating agreement of a joint venture gave designer Elie Tahari a one-time right to buy out his co-member’s interest for $50 million “by providing written notice” during a 120-day period beginning December 29, 2024. Plaintiffs, Tahari and his affiliates, served the notice on December 2, 2024, about four weeks early. Defendants rejected it and began pursuing a sale to a third-party buyer at a $140 million valuation, which a valid buy-back would have defeated. Plaintiffs argued that the early notice should nevertheless be deemed effective, requiring defendants to sell their interest to Tahari, because no New York authority holds an early notice defective, and because defendants had actual notice and suffered no prejudice. The Court determined that the notice had to be served within the 120-day period and held the December 2 notice invalid. As a result, defendants were not required to sell their interest to Tahari on the strength of that notice. In reaching that holding, the Court explained:

[W]hile there is no legal authority addressing whether an early notice in the context of option contracts, absent other defects, should be deemed as valid, there is likewise no legal authority that this Court can invoke to reach a determination that strict construction does not apply to premature notices. The absence of controlling authority does not grant this Court license to create new law and/or ignore the strict construction principle applied to option contracts, including that the notice must be provided in the specified time period.

The attorneys at Schlam Stone & Dolan LLP have extensive experience litigating disputes among co-owners of closely held businesses, including business separations. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.

To read more about strict compliance with contractual notice requirements, see Schlam Stone & Dolan’s related Commercial Division Blog posts on a decision holding that actual notice did not excuse noncompliance with a contract’s strict notice requirement and a decision holding that a landlord’s notice of an option to terminate a lease was ineffective because it did not strictly comply with the lease’s notice provisions.