929 Flushing LLC v. 33 Dev. Inc., No. 506801/2015, 3/1/15 (Demarest, J.)

Contract interpretation; contract formation; statute of frauds

By: Mia Piccininni | Staff Member

Principal and agent for Plaintiff-purchaser signed and executed a short form agreement with Defendant-seller’s managing agent entitled “Binder of Sale” (“Binder”), for the sale of real property located in Brooklyn. The terms in the Binder set forth the property’s address, purchase price, down payment amount, closing date, and a provision outlining the process for executing a “more formal contract.” The Binder did not identify Plaintiff, 929 Flushing LLC, as the buyer or Defendant, Developer 33, as the seller anywhere in the agreement. After the Binder was executed, the parties exchanged drafts of the formal contract and continued to negotiate and modify the terms of the sale. In the course of negotiations, Defendant informed Plaintiff it no longer intended to sell the property.

Plaintiff subsequently commenced this action to enforce the sale of the property, arguing the Binder constituted a legally enforceable contract absent a formal agreement. Defendant, then, moved to dismiss the complaint, pursuant to CPLR 3211, arguing that the Binder lacked the material terms necessary for its enforcement. Plaintiff then cross-moved for summary judgment and specific performance for the sale of the property reiterating its original claim that the Binder was a legally sufficient agreement to enforce the sale.

The Court granted Defendant’s motion to dismiss on the grounds that the Binder did not amount to a “viable signed writing.” The Court noted that a short form agreement may only constitute a binding contract if it contains the necessary elements of the agreement and reflects the parties’ intent to be bound by its terms. Here, the Binder failed to fulfill both conditions and was, therefore, not enforceable.

The Court’s basis for granting Defendant’s motion to dismiss rested on three grounds. First, the enforceability of the Binder was fatally flawed because neither Plaintiff-purchaser nor Defendant-title holder of the property were specifically named or identified in the Binder. Specifically, the Court relied on New York General Obligations Law §5-703, which provides that a contract for real property is void unless it is “subscribed by the party to be charged.” Here, the Court stated that the Plaintiff-corporation did not exist until after the Binder was signed and that there was no evidence that Defendant’s managing agent who signed the Binder had authority to bind the Defendant. Thus, the Court concluded that the Binder did not identify either the plaintiff or defendant as parties to be charged in its enforcement.

Additionally, the Court found the Binder was not enforceable as a contract because it called for the parties to execute a “more formal contract” at a later date. This key finding indicated that the Binder was merely an “an agreement to agree at a later time” and not enforceable as a contract. Finally, the Court concluded that the Binder did not satisfy the statute of frauds because the parties continued to negotiate significant terms, such as the amount payable upon signing, and additional conditions for the transfer of the property, thus indicating the Binder did not “reflect a meeting of the minds.”

Based on the foregoing, the Court found the agreement unenforceable and granted Defendant’s motion to dismiss and denied Plaintiff’s cross motion for summary judgment.

929 Flushing LLC v. 33 Dev. Inc., No. 506801/2015, 3/1/15 (Demarest, J.).

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