Plaintiff appeals from an order of the Supreme Court, New York County (Saliann Scarpulla, J.), entered August 3, 2011, which, to the extent appealed from, granted defendant's motion for summary judgment dismissing the complaint, and denied plaintiff's cross motion for summary judgment.
The opinion of the court was delivered by: Saxe, J.
Nassau Beekman, LLC v Ann/Nassau Realty, LLC
Appellate Division, First Department
Decided on January 31, 2013
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Richard T. Andrias,J.P. David B. Saxe Karla Moskowitz Helen E. Freedman Sheila Abdus-Salaam, JJ.
A standard provision included in many commercial contracts is one requiring any modification of the agreement to be in writing. Nevertheless, courts are presented over and over again with litigation arising out of circumstances where one party to a contract wrongly presumes, based on past practice, that an oral modification will be sufficient. This appeal illustrates the problem.
Plaintiff, by contract dated August 14, 2007, agreed to purchase and defendant agreed to sell a parcel of real property comprised of 21 Ann Street and 109, 111 and 113 Nassau Street, in Manhattan, for a purchase price of $56,700,000, with a down payment of $5 million. Section 16.01 of the contract contained a standard integration clause and included a provision that "[n]either this Contract nor any provision hereof may be waived, modified, amended, discharged or terminated except by an instrument signed by the party against whom the enforcement of such waiver modification, amendment, discharge or termination is sought, and then only to the extent set forth in such instrument."
The contract provided for the closing to occur on August 30, 2007, but gave plaintiff the right, upon timely written notice, to extend the closing date to October 10, 2007, and declared time of the essence with respect to that date. It further specified that "[f]ailure of the Purchaser or Seller to strictly comply with the terms of this Section shall be deemed in material default under this Contract."
Simultaneously with the execution of the contract of sale, the parties entered into a separate handwritten agreement regarding development air rights to be purchased from the owners of the adjacent condominium property at 25 Ann Street; the seller agreed to purchase those rights by August 24, 2007 and to promptly deliver the resulting agreement to plaintiff and assign plaintiff those rights. Once an agreement with the condominium owners was executed and delivered, a default by any party under that agreement would be deemed a default by that party under the contract of sale. This agreement initially permitted defendant to spend up to $1.3 million to acquire those development air rights, which maximum price was later increased to $1.55 million by a written modification. Importantly, the parties' agreement regarding those development rights provided that if the rights were not obtained from the condominium owners, defendant would have no liability to plaintiff, and that its failure to deliver those rights would not affect the contract of sale.
The closing date for the contract of sale was rescheduled multiple times by written amendments to the contract. It is plaintiff's contention that it was a standard practice of the parties to orally adjourn the closing date and then later to finalize a written amendment with a new closing date. In the first written amendment to the contract, the closing date was extended to November 7, 2007, with the ability to further extend it to November 21, 2007. In consideration for that extension, plaintiff paid an additional deposit of $2.5 million. Then, on November 21, 2007, the parties executed a second amendment, extending the closing to November 27, 2007 but noting that time was of the essence. On November 27, 2007, the parties again executed an amendment extending the closing date to February 14, 2008, but permitting the closing to take place no later than March 14, 2008. This amendment also required plaintiff to pay an additional deposit of $2.5 million, although in fact plaintiff paid only $1.5 million of that amount. On March 5, 2008, the parties executed the fourth amendment to the contract, providing for an outside closing date of April 4, 2008, with time of the essence. This amendment also reduced the total purchase price to $51,030,000, and defendant waived plaintiff's outstanding obligation to pay an additional $1 million deposit.
The closing did not take place on or before April 4, 2008, nor was it adjourned by a written amendment to the contract. However, rather than terminate the contract based on the failure to close, on July 25, 2008 defendant unilaterally sent plaintiff a "time of the ...