In some contracts, a party must meet its obligations by a certain date or forfeit its rights, and some of those contracts also include a “time is of the essence” clause. As most practitioners know, coupling a date for performance with a time is of the essence clause means that the deadline is inflexible. Having said that, there also are a number of cases where such hard deadlines were deemed to have modified by the conduct of the parties. See, e.g., McCarthy v. Tobin. However, it is perilous to assume that your negotiations imply an extension when a time is of the essence clause is in play. Indeed, that is exactly what happened to the defendant in Reem Property, LLC v. Transfer Financial, LLC.
Reem Property was the high bidder in a foreclosure sale of real estate, and it entered into a Memorandum of Understanding with Transfer Financial to purchase that property. Pursuant to the MOS, Reem paid a $10,000 deposit. The time for closing was set for 12:00 p.m. on June 30, 2014, and time was of the essence. Before the closing, Reem’s counsel found that there was a problem with the newspaper advertisement … Keep reading
As I discussed in a blog post several years ago, even an informal email can constitute acceptance of a contractual offer. Moreover, just a few months ago, Judge Timothy Hillman took this principle one step further by ruling, in Witt v. American Airlines, that an exchange of emails can form a binding settlement agreement, even if the parties have not agreed to all of the terms of that settlement.
In 2014, Diane Witt sued American Airlines for injuries she claimed to have sustained while on a flight. After litigating that case for more than three years, the parties finally engaged in serious settlement discussions. Ultimately, American Airlines’ counsel sent the following email to Witt’s counsel:
I have been informed $15,000 is firm (together with acceptable release) and that the settlement must happen promptly before more costs are incurred. This really needs to get done this week and certainly before any further hearing for the experts have to spend any more time preparing for deposition.
Witt’s counsel eventually responded: “Thanks for getting back to me. Ms. Witt accepts the settlement offer of $15,000. Please send the proposed release when you can.”
Less than one month later, however, Witt’s counsel … Keep reading
As I discussed in a prior blog post, agreements to negotiate in good faith can be enforceable. Nevertheless, I recently was reminded when re-reading Schwanbeck v. Federal-Mogul Corp., that if you really want an agreement to negotiate in good faith to be enforceable, you have to be precise in how you describe what the parties will and will not do going forward.… Keep reading
Not spelling out in your agreements, even in informal agreements, where disputes can be resolved and what law will govern them can lead to some unhappy results. That is exactly the position that United Excel Corporation and its president, Ky Hornbaker, now find themselves.… Keep reading
Letters of intent (LOI) are routinely used after business people have reached some degree of common ground on a potential deal. Sometimes an LOI comes very early on, before the parties know whether an ultimate agreement is likely or not. In other situations, however, LOI’s are entered into only after there is agreement on all the key business terms. Even in those cases, however, deals often crater during the process of negotiating a full-blown contract. This can be the result of one side simply getting cold feet and/or otherwise changing its mind about moving forward. Further, all too often the party left at the altar can do nothing but lament the fact that it expended a lot of time and money with nothing to show for it. Here are two strategies in-house counsel might consider employing in the LOI process to limit the risk that they have to go back to their internal client and explain that even though there was a letter of intent, the other side walked away from the deal and there is nothing that can be done about it.… Keep reading
Time-honored precedent holds that “[a]n agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto.” Thus, as I discussed in a prior post, a letter of intent (LOI) will not be binding if it does not contain all of the material terms of the contemplated agreement. But what happens if there is an open material term, and the parties agree to “negotiate in good faith” towards resolving that outstanding matter? That is exactly the situation addressed by the Delaware Supreme Court in Siga Technologies, Inc. v. Pharmathene, Inc.… Keep reading
Like many lawyers, I learned way back in law school that an “agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto,” (Rosenfield v. United States Trust Co. ). What I didn’t learn until many years later, however, was that although a Letter of Intent (LOI) expressly says that the parties’ rights and obligations are subject to the execution of a full-blown contract, that LOI can be binding – even if the contemplated full-blown contract never is executed.
I learned this through my representation of Robert and Juliann DiMinico in the case of McCarthy v. Tobin. In that case, Ann Tobin and John McCarthy executed a one-page “Offer to Purchase Real Estate” in connection with Tobin’s condominium at Burrough’s Wharf. The Offer to Purchase expressly made the parties’ rights and obligations “Subject to a Purchase and Sale Agreement satisfactory to Buyer and Seller,” which was required to be executed by August 16, 1995, and time was of the essence. After McCarthy failed to return a signed Purchase and Sale Agreement by the August 16 deadline, Tobin sold her property to the DiMinicos.
… Keep reading