On August 10, 2018, Justice Platkin of the Albany County Commercial Division issued a decision in Vincent Crisafulli Testamentary Trust v. AAI Acquisition, LLC, 2018 NY Slip Op. 51219(U), holding that a letter agreement was a binding contract even though the parties envisioned entering into a further, more formal, agreement, explaining:
[T]he plain language of the Letter Agreement evinces the parties’ intention that the writing sets forth the binding business terms of their agreement. While the parties did contemplate that these binding business terms would be supplemented by an appropriate set of legal documents approved by counsel for both parties to be fully executed within 30 days, there was no express reservation by either party of the right not to be bound until a more formal agreement is signed. In other words, the Letter Agreement’s plain language expressed the parties’ intention to be bound thereby.
Given this clear and objective manifestation of the parties’ intention to be bound by the Letter Agreement, it is of no moment that DiCunzolo now claims to have lacked the subjective intent to enter into a binding agreement on behalf of Acquisition. The existence of a binding contract is not dependent on the subjective intent of the parties.
The Court further concludes that the Letter Agreement sets forth the material terms of the parties’ agreement with reasonable certainty. The Letter Agreement describes the demised Premises, states that the new lease would be on the same terms and conditions as the prior Lease, except as otherwise modified therein, and then sets forth the modified terms and conditions of the new lease. And while the parties contemplated supplementation of the Letter Agreement via formalized legal documents approved by counsel, the Letter Agreement sets forth all of the essential terms of a lease agreement, and defendants have not identified any missing terms that were material to the transaction. That the Letter Agreement stated that a more formal contract was to be signed does not render it unenforceable.
(Internal quotations and citations omitted).
In New York, a contract must contain the material terms of the agreement to be binding. As this decision shows, there sometimes are disputes over whether all the material terms of the contract are embodied in the agreement being sued upon. And as this decision shows, even if the parties explicitly envisioned a further, more formal documents, a less formal agreement can be binding. 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.
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