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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 4, 2020

Contract’s Definition of Term Controls, Not the Common Understanding of the Term’s Meaning

On January 28, 2020, the First Department issued a decision in Condor Capital Corp. v. CALS Invs., LLC, 2020 NY Slip Op. 00536, holding that a contract’s definition of a term controlled over the common understanding of the term, explaining:

The parties’ contract defines MOIC Target as 115% of the Target. In turn, Target is defined as the Closing Cash Purchase Price; the parties agree that the Closing Cash Purchase Price was $64,464,497.

Plaintiff contends that the MOIC Target should be 115% of $20,389,153.90 because that is the amount defendant actually invested, and MOIC means multiple of invested capital. However, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. The definition of MOIC Target is unambiguous. Contrary to plaintiff’s contention, enforcing the definition as written does not produce a result that is absurd, commercially unreasonable or contrary to the reasonable expectations of the parties.

(Internal quotations and citations omitted).

One reason that commercial parties all over the world choose to have their contracts governed by New York law is that the general rule in New York–as shown here–is if the contract is unambiguous, it is enforced as written despite what someone might later argue in a lawsuit. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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Posted in Commercial, Contracts
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