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Current Developments in the Commercial Divisions of the
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Posted: June 12, 2018

Whether Trade Confirmation is Enforceable Agreement is Question of Fact

On June 7, 2018, the First Department issued a decision in Seaport Global Securities LLC v SB Group Holdco, LLC, 2018 NY Slip Op. 04111, holding that whether a trade confirmation is an enforceable agreement is a question of fact, explaining:

The motion court properly denied defendant’s motion to dismiss the amended complaint, as it states a claim for breach of contract, including breach of the implied covenant of good faith and fair dealing. The amended complaint alleges that the parties entered into a binding contract for the sale of stock, that defendant breached the contract by refusing to transfer the shares of such stock and by failing to make commercially reasonable efforts to settle the trade and that such breach caused injury preventing plaintiff from selling the stock to a third party. Indeed, the trade confirmation in this case states that it “shall constitute a binding agreement between the parties.” Defendant has failed to establish at this juncture that the trade confirmation is not enforceable based on its inclusion of language that “in the event that the trade cannot settle as a sale and assignment of the shares, the trade shall settle by a mutually agreeable alternative structure or other arrangement that affords buyer and seller the economic equivalent of the agreed-upon trade,” as courts have found trade confirmations with similar language to be binding agreements. The above case law also makes clear that the issue of whether the trade confirmation is an enforceable agreement is properly determined on a motion for summary judgment and not on a motion to dismiss.

(Internal citations omitted).

Under New York law, the starting point of contract interpretation is the words of the contract. As this decision shows, sometimes those words may be insufficient to establish what the parties intended–if anything. 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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