
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comCounsel
212-286-0747 dbrecher@sh-law.comA recent New York court decision highlights that letters of intent can often lead to messy breach of contract lawsuits – especially when it comes to the concept of agreement to agree.
As the appeals court highlighted in New York Military Academy v. NewOpen Group, businesses can’t enforce the terms of a letter of intent unless both parties intended it to be a binding contract.
The New York Military Academy and NewOpen Group executed a letter of intent regarding a potential joint venture and loan. The letter of intent provided that parties “shall negotiate to arrive at mutually acceptable Definitive Agreements” regarding the potential joint venture and loan. The letter of intent further provided that the parties “each reserve the right to withdraw from further negotiations at any time if, in the sole judgment of either or both, it is in either Party’s best interest to do so, without further liability or obligation to the other.”
…it is essential that that the letter of intent is precisely written to reflect the true intent of the parties…
After negotiations broke down, the New York Military Academy filed suit, asserting causes of action alleging breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, and fraud. The defendants moved to dismiss the complaint. After the New York Supreme Court denied the motion, NewOpen Group appealed.
The New York appeals court reversed the lower court’s decision and dismissed the New York breach of contract litigation. “The Supreme Court should have granted the defendants’ motion pursuant to CPLR 3211(a) to dismiss the complaint, as documentary evidence, in the form of the letter of intent, utterly refuted the plaintiff’s factual allegations, thereby conclusively establishing a defense as a matter of law,” the court held.
In support of its decision, the court cited prior precedent holding that it is well-settled under New York common law of contracts that a mere agreement to agree, in which a material term is left for future negotiations, is unenforceable. “Here, the letter of intent demonstrated that the plaintiff’s allegations of breach of contract related to a mere agreement to agree,” the appeals court explained.
To avoid a costly legal dispute, New York businesses should ensure that all letters of intent are properly drafted to expressly indicate if certain provisions are enforceable agreements in and of themselves (such as confidentiality provisions), even if a final transaction is still under negotiation. Since it is essential that that the letter of intent is precisely written to reflect the true intent of the parties, the assistance of an experienced business lawyer is often advisable.
Otherwise, if you’re a business owner unsure of how to properly put together a letter of intent or would like to discuss the matter further, please contact me, Dan Brecher.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
Author: Christopher D. Warren
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Author: Dan Brecher
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Author: Bryce S. Robins
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
Author: Dan Brecher
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Author: Bryce S. Robins
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Author: Matthew F. Mimnaugh
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!