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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 18, 2019

Text Relating to Negotiation of Agreement Is Not A Binding Agreement

On October 4, 2019, Justice Masley of the New York County Commercial Division issued a decision in RVW Prods. Corp. v. Levin, 2019 NY Slip Op. 32937(U), holding that a text regarding the negotiation of an agreement did not itself constitute a binding agreement, explaining:

To state a claim for breach of contract, a plaintiff must allege: (1) the parties entered into a valid agreement, (2) plaintiff performed, (3) defendant failed to perform, and (4) damages. When it is alleged that a purported oral agreement was breached, plaintiff should specifically state that he is relying upon an ‘oral agreement’ and he should set forth all the relevant terms of that oral agreement.

Plaintiff alleges that RVW Productions and Forest Road came to an agreement on the terms of the Loan, and a closing was scheduled. There is no allegation that this agreement was reduced to writing. Instead, plaintiffs submit a text message sent by Tarica, which states discuss 1. Status update 2. What you are doing with Post 3. CAMA execution – new terms are fine, just need sr lender name to be changed to junior senior lender 4. Mezz execution (need that lender to sign something acknowledging that we are senior to him) 5. Terms: a. 10% yr 1,2,4,6,8 quarterly agreed to change year 3 to 10 (per comments) b. backend agreed 2% c. loan amount $1,544, 169 6. Execution of PG from Nick Loeb. As a matter of law, this text message is not a binding written agreement. The text lists items to “discuss” including contract terms.

Accepting the allegations of the complaint as true, and absent any other evidence, it appears that any alleged agreement was oral. Thus, plaintiffs must specifically state that and set forth the relevant terms of the oral agreement in order to successful plead the existence of a contract, or alternative, allege the.existence of a written agreement, other than the text message, which is not an agreement at all. Plaintiffs’ claim for breach of contract is dismissed with leave to replead.

(Internal quotations and citations omitted).

In New York, a contract need not be in writing. However, whether oral; embodied in an exchange of text messages, like the alleged contract discussed above; or in a full, formal written document, to be binding a contract must contain the material terms of the agreement. 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. 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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