If your ability to purchase a property hinges upon which your ability to get needed financing (which is often the case), you’d better make sure that this is memorialized in the contract. Otherwise, you could end up like the defendant in Abart Holdings LLC v. Bayou Properties, Inc., and lose your entire deposit when a court finds you in breach of your real estate contract.

In this New York County case, the plaintiff-seller moved for summary judgment on that branch of its claim seeking a  finding that it was entitled to keep the deposit the defendant buyers had placed into escrow as damages for the defendants’ failure to abide by their contract, and close on the property.

In granting the plaintiff seller’s motion, the Court noted that the only reasons proffered by the buyers for failing to close as had been agreed were two-fold, and neither were convincing: (1) that the plaintiff had failed to deliver certain documents at the closing; and, (2) that the defendants had not received the funding that was needed to close, and that had always been understood as a pre-condition, or in legal terms, a condition precedent, to the deal.

And here’s why the defendants’ arguments failed: First, the defendants did not raise the plaintiff’s purported failure to deliver these documents as an issue at the closing, and therefore, this issue was waived; Second -and this is important – since the parties never expressly made the defendants’ ability to secure financing a condition precedent to closing, the Court would not do so now. In support of its holding, the Court summarized the law governing conditions precedent as follows:

“A condition precedent is ‘an act or event, other than the lapse of time, which, unless the condition is excused, must occur, before a duty to perform a promise in the agreement arises.’” (Oppenheimer & Co., Inc v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995]). “[N]onoccurrence of the condition may yet be excused by waiver, breach or forfeiture.” (Id at 691). ” “Courts will interpret doubtful language as embodying a promise or constructive condition rather than an express condition.”( Id). “If the language is in any way ambiguous, the law does not favor a construction which creates a condition precedent. A contractual duty will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition precedent.” (Ashkenazi v. Kent S. Assoc., LLC, 51 AD3d 611, 611-612 [2d Dept 2008]).

The lesson to be gleaned from this case is clear: if there are conditions that you need fulfilled before you can close on a property, make sure they are memorialized in the contract and/or at the closing.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

The underlying, earlier decision from which this more recent decision stems is even more important, because it serves an important reminder to attorneys litigating breach of contract and breach of employment agreement cases: make sure that your causes of action are not only supported with specific factual allegations, but that they are also separately and distinctly pled.

In short, since the Court found that the plaintiff had not particularized any specific violations of the Labor Law, but had only set forth enough facts to sustain a common law (as opposed to statutory) breach of contract claim, the plaintiff was not entitled to recover statutory damages under the Labor Law, and therefore, the Court dismissed the plaintiff’s claims seeking to recover liquidated damages and attorney’s fees based upon the defendants’ alleged violations of Labor Law § 198 (1-a), stating: “Breach of contract claims do not give rise to the relief afforded under Labor Law §198 (1-a). See Gottlieb v. Kenneth D. Laub & Co., Inc., 82 NY2d 457, 464 (1993); Pachter v. Bernard Hodes Group, 10 NY3d 609 (2008).”

One final note: since the plaintiff failed to allege enough factual particulars, his attempt to pierce the defendants’ corporate veil failed as well.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In 101 Warren Street Associates LLV v. Prestige Homes Realty, LLC, the defendant real estate broker brought a prospective buyer for the plaintiff’s multi-million dollar residential condominium apartment, which at the time was still in the offering plan stages. According to the terms of the brokerage agreement, the broker was entitled to 4% of the sales price, as a result of which the seller advanced the defendant broker over $50,000, representing 20% of the anticipated commission on the sale of this unit.

As has frequently occurred in this economy, the buyer backed out of the deal, indicating that they could no longer afford the $6.8 million unit. Nevertheless, when the seller sought the return of its advance to the broker, though, the broker refused, noting that the seller did receive partial payment for the apartment as part of a settlement agreement it reached with the prospective buyer.

In holding that the seller was entitled to a refund of its advance (and that the broker was liable for breach of contract), the New York County trial court held as follows:

“Here, it is undisputed that the closing, scheduled for April 1, 2009, did not take place because the Buyer was unable to purchase the Unit. Paragraph 2(e), requires reimbursement if there is a failure to convey for any reason, requiring Broker to reimburse Seller with all amounts previously paid to it pursuant to the Brokerage Agreement.

“It is well established that a broker only earns its commission when it procures a buyer ready willing and able to purchase on terms agreed to by the seller. Eastern Consolidated Properties v. Lucas, 285 AD2d 421 (1st Dept. 2001); Prime City Real Estate Co., Inc. v. Hardy, 256 AD2d 80 (1st Dept. 1998). Consequently, the Broker did not earn its commission since it did not produce a Buyer that was ready, willing, and able to purchase the Unit. Accordingly, the Broker was not entitled to the commission because it did not earn it and therefore is not entitled to keep the percentage of the commission paid in advance.”

Fortunately for the broker, the Court did not award the seller its attorneys’ fees (which it could have).

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Citing New York’s long-established precedent that an insurer’s obligation to defend an insured (or, as in this case, an additional insured) is broader than its obligation to indemnify them, the Court stated as follows:

“If the claims asserted, though frivolous, are within the policy coverage, the insurer must defend irrespective of the ultimate liability …  A declaration that an insurer is without obligation to defend a pending action could be made ‘only if it could be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [the insured] under any provision of the insurance policy.’  Servidone Const Corp. v. Security Ins Co of Hartford, 64 NY2d 419, 423-424 (1985).”

Under the circumstances, Atlantic’s refusal to defend Cooper Square was clearly improper, and the plaintiff was entitled to recover from Atlantic the costs it incurred in defending the underlying personal injury action from the date that it tendered its defense of that case to Atlantic.

This case is further proof of why it may pay to fight an insurer’s disclaimer of coverage.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

According to the plaintiff in the Suffolk County case of Kimelstein v. Kimelstein, he was wrongfully frozen out of his 50% interest in a property that he and brother had acquired jointly through a non-party corporation.  More specifically, he contends that pursuant to an oral agreement he made with his brother in 2007, the plaintiff agreed to forgo his interest in the non-party corporation and sell his interest in the Defendant corporation as well as the real property it owned for the sum of $350,000, in exchange for his brother’s promise to make weekly payments in the amount of $850, until such time as Defendants were able to refinance the real property, after which the balance of the $350,000 would become due.

As I’m sure you can guess, the defendants stopped making payments, and now, they moved to dismiss the lawsuit on the grounds that the plaintiff’s claim is barred under New York’s Statute of Frauds because the claim pertains to real estate and there was no written contract.

Although the Court was constrained to dismiss the plaintiff’s breach of contract claims, the Court was clearly troubled by the facts of this case, and therefore allowed the plaintiff’s equitable claims for unjust enrichment and the imposition of a constructive trust to survive, stating:

“Plaintiff’s allegations that he was a family member, that Defendant promised him $350,000 to forego his interest in the property owned by L&J as well as the corporation, that Plaintiff spent time and money over seven years investing in L&J, are sufficient to withstand a motion to dismiss …

“Plaintiff has alleged that Defendants received valuable benefits, including his contributions over the years to the corporate entities and toward the purchase of the real property; that he has given up any claim to ownership of stock in at least one of the corporations and that it would be inequitable for the individual Defendant to hold title to both without affording plaintiff some sort of compensation.”

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In Grimaldi v. Guinn, the plaintiff sued the Pennsylvania-based defendants for breach of contract, business fraud, and under New York’s deceptive advertising statute, General Business Law § 349, because he handed over his vintage 1969 Camaro to the defendants to add a specialized manifold and carburetor assembly.

Months later, his Camaro, which was valued at over $100,000 beforehand, was returned to him in bags.

In response to the plaintiff’s lawsuit, the defendants moved to dismiss on the grounds that the New York court lacked personal jurisdiction over them because they had no meaningful contacts with New York State. In affirming the trial court’s denial of the defendants’ motion, New York’s Appellate Division, Second Department reiterated the standard for conferring jurisdiction on a foreign (i.e., non-New York-based) defendant based on contacts that were made via the internet:

“The purposeful creation of a continuing relationship has been a contributing factor in finding sufficient contacts to justify the exercise of long-arm jurisdiction … If the foreign company maintains an informational Web site accessible to the general public but which cannot be used for purchasing services or goods, then most courts would find it unreasonable to assert personal jurisdiction over that company …

“However, passive Web sites, when combined with other business activity, may provide a reasonable basis for the assertion of personal jurisdiction … If a Web site provides information, permits access to e-mail communication, describes the goods or services offered, downloads a printed order form, or allows online sales with the use of a credit card, and sales are, in fact, made … then the assertion of personal jurisdiction may be reasonable.”

From the litany of cases from other jurisdictions cited by this opinion, it seems rather clear that this standard is equally applicable in other states as well. Therefore, when establishing your web presence and/or contacts with prospective clients or customers, it is critical that you remain cognizant of the jurisdictional implications of your communications.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In a case that they brought in Federal Court in Upstate New York, Opto Generic Devices Inc. (“OGD”) sued Air Products & Chemicals Inc. (“ACC”) for breach of contract and for consequential damages, asserting that it lost profits when the defendant did not buy its products. In this case, the defendant admitted that the parties had entered into a series of agreements that delineated the scope of work to develop certain products for plaintiff, and included a $400,000 agreement for license rights to these products. In light of the ongoing working relationship between the parties, and the exchange of nearly $1,000,000 between them with regard to the development of this product, the plaintiff was caught off guard when the defendant never actually bought the finished product.

But the plaintiff had one “small” problem with their case – while the contract set forth the parties’ responsibilities as to patent prosecution and maintenance, commercial rights and licenses (i.e., it was a development contract), there was absolutely no provision requiring ACC to buy any OGD products. Consequently, I can’t say I’m surprised that the Court dismissed this aspect of their breach of contract action.

You know the old saying about what happens when you assume something …

It’s just another example of the costs of failing to reduce your agreements to writing.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Not surprisingly, these distinctions have ramifications in terms of these parties’ respective exposure to liability for construction site accidents. Unlike the site owner and a general contractor, who are both explicitly named in Labor Law §§ 240(1) and 241(6) as potentially liable parties for work site accidents, a construction site manager’s liability for worksite accidents is less certain; if he neither directs nor controls any of the work being performed, he may escape liability altogether (assuming there is no contractual indemnity), leaving the owner one less important avenue for contribution.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Absolutely not, held a New York County trial court.

In Nichols v. SG Partners, Inc., the plaintiffs were employed by defendant as placement professionals, earning both a base salary as well as a percentage of defendant’s revenues generated for placements that the plaintiffs made, or commissions. After the plaintiffs found the working conditions “intolerable,” they resigned, and requested that the defendant pay them for the commissions they had earned during their employment. Not surprisingly, the defendant ignored these requests.

Accordingly, the plaintiffs sued the defendants, contending that the defendants were liable for breach of contract, breach of an implied covenant of good faith and fair dealing, unjust enrichment and violation of New York Labor Law (“Labor Law”) §193. The defendant then promptly moved to dismiss the case, arguing, among other things, that since the plaintiffs did not have a written contract the plaintiffs’ claims were barred under New York’s Statute of Frauds (N.Y. Gen. Obl. Law §5-701).

In rejecting the defendant’s argument, the Court cited a long litany of precedent for the proposition that “[B]ecause an at-will employment relationship may be freely terminated by either party at any time for any reason or even no reason, employment agreements of this type generally do not fall under the proscription of the Statute of Frauds.”

Importantly, the Court also noted that if it is later found at trial that an employer willfully withheld the plaintiffs’ wages, in derogation of Labor Law §198.1-a, “an additional amount as liquidated damages equal to twenty-five percent of the total amount of the wages found to be due” (Rasmussen v. Yellow River, Inc. 298 AD2d 322 [1st Dept 2002]; Wolintetz v. Island Stationary Corp., 16 Misc 3d 1133 [NY Dist Ct 2007] (withholding of payment of commissions was a willful act of retaliation for the plaintiff’s leaving the defendant’s employ)).

The message to employers is unmistakably clear: if you wrongfully withhold earned wages or payments due to your former employees, you do so at your own peril.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In Al-Bawaba.com, Inc. v. Nstein Tech. Corp., a decision that was discussed in last week’s New York Law Journal, a Kings trial court dismissed their lawsuit against a software company that sought more than $1 million in damages for the defendant’s alleged breach of contract to provide software that would translate the news from English to Arabic.  In this case, there were substantial negotiations over price, the manner and time in which the payments would be made for the software license. And although some of these e-mails went so far as to say “we have an agreement in principle,” no further, formal contract was ever executed.

As noted by the Court, “the record in this matter fully supports defendant’s contention that the parties intended to execute a written agreement, foreclosing any argument that an enforceable oral agreement was ever reached, or even intended … [P]laintiff’s statement that before an agreement could be “filed away in the company’s filing cabinets, it has [sic] to be reviewed by a lawyer and signed” convincingly demonstrate that, as far as plaintiff was concerned, additional terms needed to be resolved and reduced to writing prior to entering an enforceable agreement.” In legalese, this claim was barred by New York’s Statute of Frauds.

The worst part of it, from the plaintiff’s perspective is this: they had a full 15-page contract in hand, but never had their lawyers finish reviewing it.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.