In MHR Capital Partners v. Presstek, 12 N.Y. 3d 640, 884 N.Y.S. 2d 211 (2009), the New York Court of Appeals re-visited the law relating to conditions precedent, on the one hand, and the frustration of the occurrence of the condition, on the other. (Disclosure: My firm represented Presstek.)
In the intervening years, MHR has been regularly and routinely cited by our Courts, almost as “gospel”, on the state of the law on conditions precedent. A few recent New York appellate court examples follow.
But first – the MHR template from the decision in which the Court of Appeals concluded that: “In this breach of contract action, we conclude that defendant’s obligation to perform under a stock purchase agreement did not arise because an express condition precedent was not fulfilled” (Id. at 643).
In 2003, defendant Presstek, Inc. and its wholly owned subsidiary, defendant Silver Acquisitions Corp., entered into discussions to purchase A.B. Dick Company (ABD) a financially distressed graphic arts and printing supplier from its parent corporation, Paragon Corporate Holdings, Inc. The negotiations culminated in a June 2004 stock purchase agreement, which provided that Paragon would receive $24 million in cash and approximately $20 million worth of Presstek’s stock in exchange for ABD’s stock. Under an ancillary agreement incorporated into the stock purchase agreement, plaintiffs MHR Capital Partners LP and its affiliates (collectively, MHR) major creditors of ABD agreed to the terms of the stock purchase arrangement and waived their rights in return for the payment of over $10 million in cash and stock from Presstek. Id.
On June 16, 2004, Presstek, Silver, ABD, Paragon and MHR executed a separate escrow agreement that required the stock purchase agreement and related documents to be placed in escrow and released upon the occurrence of certain conditions. Specifically, the escrowed materials were not to be released “unless and until” Key Corporate Capital, Inc. (Key Bank), ABD’s lender, consented to the stock purchase transaction “on the terms and conditions contained herein.” Further, the escrow agreement obligated Paragon to obtain Key Bank’s approval before “the close of business on June 22, 2004,” together with the bank’s execution of a consent form annexed to the escrow agreement. The escrow agreement stated that Presstek was to destroy or return the escrowed documents deemed “null and void” if Key Bank did not sign the consent form by June 22. Id.
In the consent document, Presstek agreed to satisfy ABD’s outstanding indebtedness with a combination of cash and Presstek stock (rather than cash only) and Key Bank was required both to continue funding ABD “by increasing its total aggregate lending commitment to [Paragon] as necessary to ensure adequate funding for [ABD] through the closing” and forbear from declaring any default under its loan agreement with ABD until the deal closed. Key Bank, however, refused to execute the consent form. Instead, on June 22, 2004, Key Bank faxed a one-page letter to Presstek that “consent[ed]” to the transaction, but included terms that differed from some of the requirements in the consent form. In particular, Key Bank did not consent to fund ABD “as necessary,” nor did it agree not to declare a default. Presstek terminated the stock purchase transaction later that day. Id. at 643-644.
The following month, Presstek and Silver entered into a more lucrative asset purchase agreement with ABD and Paragon. The new agreement contained no provision for Presstek’s satisfaction of ABD’s outstanding indebtedness to MHR. As required by this new agreement, ABD filed for bankruptcy in Delaware. Paragon applied to the United States Bankruptcy Court for the District of Delaware for an order authorizing the sale of ABD’s assets to Presstek pursuant to an auction process that would allow third parties to offer higher bids. MHR filed objections to the auction sale of ABD’s assets on the basis that Presstek and Silver were not “good faith” purchasers within the meaning of 11 USC § 363 (m). Id.
After an evidentiary hearing, the Bankruptcy Court overruled MHR’s objections and approved the sale. The United States District Court for the District of Delaware dismissed MHR’s appeal as moot because MHR had failed to seek a stay. The District Court also noted that, in any event, Presstek’s pre-bankruptcy proceeding behavior had no bearing on whether it was a good faith purchaser under the Bankruptcy Code. Id.
The prior proceedings:
In February 2005, MHR commenced this action for breach of contract against Presstek and Silver, alleging that they improperly terminated the stock purchase agreement. The complaint seeks $14 million in damages. Following discovery, Presstek moved for summary judgment dismissing the complaint. Id.
Supreme Court granted the motion and dismissed the complaint, concluding that the Bankruptcy Court’s approval of the sale of ABD’s assets over MHR’s objections precluded this breach of contract action under principles of res judicata and collateral estoppel (see 2007 NY Slip Op 32322[U]). The Appellate Division, with two Justices dissenting, affirmed, albeit on a different ground (55 AD3d 12 [1st Dept 2008]). The majority held that Key Bank’s failure to sign the consent form by June 22, 2004, which it characterized as a condition precedent, relieved Presstek of any obligation to close under the stock purchase agreement. The dissent would have reinstated the complaint, finding an issue of fact as to whether Presstek had improperly prevented Key Bank from executing the consent form. MHR appeals as of right based on the two-Justice dissent pursuant to CPLR 5601 (a). Id. at 644-645.
The ground asserted for reversal:
MHR urges three grounds for reversal and reinstatement of its breach of contract claim. First, MHR contends that the escrow agreement is ambiguous and that Key Bank’s approval was not a condition precedent. In a related vein, MHR argues that Key Bank’s June 22 fax was an adequate approval and that any differences in terms between the consent form and fax are immaterial. Second, MHR submits that the consent form improperly added conditions not contemplated by the stock purchase agreement. Third, MHR asserts that, even if Key Bank’s approval of the transaction was a condition precedent, a question of fact exists as to whether Presstek actively interfered with Key Bank’s execution of the consent form. Id. at 645.
And the “condition precedent” legal analysis:
It is well settled that a contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself. Consequently, “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” (Greenfield v. Philles Records, 98 NY2d 562, 569 ). Furthermore, a condition precedent is “an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises” (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690  [internal quotation marks and citations omitted]). We have recognized that the use of terms such as “if,” “unless” and “until” constitutes “unmistakable language of condition” (Id. at 691). Express conditions must be literally performed; substantial performance will not suffice. Id.
Here, pursuant to the escrow agreement, the contract documents were not to be released “unless and until” Key Bank consented to the deal “on the terms and conditions” outlined in the agreement. Among those terms and conditions was the requirement that Key Bank manifest its approval through its execution of the accompanying consent form by June 22, 2004. Upon the failure of Key Bank to accept the terms of the consent form by that date, Presstek was authorized to destroy or return the stock purchase agreement and annexed documents, all of which then became “null and void.” Based on this clear and unambiguous language, we conclude that Key Bank’s approval of the stock purchase transaction by the fixed date through its execution of the consent form was an express condition precedent. Id. at 645-646.
It is uncontested that Key Bank did not sign the consent form. Moreover, Key Bank’s June 22 fax, presenting a more limited acceptance, did not fulfill the explicit requirement that Key Bank execute and agree to all of the terms contained in the consent form, as required by the escrow agreement. Hence, Key Bank did not perform the express condition. Id. at 646.
To the extent MHR complains that the consent form imposed additional burdens on Key Bank not originally contemplated by the stock purchase agreement, we concur with the Appellate Division majority’s view that MHR’s time to voice its displeasure with the wording and requirements of the documents expired when it accepted and signed the escrow agreement. Each of the parties to the escrow agreement, including MHR, was a sophisticated business entity represented by counsel, and the agreement, negotiated at arm’s length, incorporated the annexed consent form and plainly required Key Bank to sign it (see generally Innophos, Inc. v. Rhodia, S.A., 10 NY3d 25, 29 ). That the consent form obligated Key Bank to refrain from declaring a default and increase its lending commitment to Paragon “as necessary to ensure adequate funding” – requirements viewed in hindsight as overly burdensome by MHR – is therefore irrelevant. Id. at 646.
Finally, MHR correctly observes that a “party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” (ADC Orange, Inc. v. Coyote Acres, Inc., 7 NY3d 484, 490  [internal quotation marks and citation omitted]). But MHR failed to raise a question of fact in this regard. Critically, the escrow agreement placed the burden on Paragon – not Presstek – to obtain Key Bank’s consent by June 22. Nevertheless, Presstek met with Key Bank’s representative before that date and at that time Key Bank had the consent form in its possession, but refused to sign it on the basis that it considered its terms too onerous. The fact that Presstek entered into a more favorable arrangement to buy ABD’s assets shortly after the stock purchase transaction fell apart does not, by itself, raise an issue of fact as to whether it prevented Key Bank from signing the consent form. Id. at 646-647.
DirectTV. Latin America, LLC v. RCTV. International Corp., 115 A.D. 3d. 539, 982 N.Y.S. 2d 96 (1st Dept. 2014)
The Appellate Division affirmed the Order of Supreme Court (Kornreich, J.) that granted DTV’s motion to dismiss RCTV’s counterclaims in an action in which the “[p]rovider of a subscription television services in Latin America [sued a] television broadcaster, seeking a declaration that the [broadcaster] appropriately terminated a license and transport agreement, and [the] broadcaster counterclaimed for breach of the agreement and [other relief].” (Disclosure: My firm represented RCTV.) Id.
The Court summarized the basis of the suit:
This declaratory judgment action arises out of a contract, entered into effective July 1, 2007 (the Transport Agreement), pursuant to which, among other things, plaintiff (DTV) was to distribute defendant’s (RCTV) programming, in exchange for a license to distribute RCTV’s programming in Latin America. The parties entered into the agreement after the Venezuelan government declined to renew RCTV’s license to broadcast television programs, an action alleged to have been politically motivated. This dispute arises out of DTV’s suspension and/or termination of distribution of RCTV’s signal. Id.
And summarily affirmed on the ground of the “absence” of a condition precedent:
The court properly dismissed RCTV’s counterclaims for, among other things, breach of contract and breach of the covenant of good faith and fair dealing, with regard to both the Transport Agreement and an agreement referred to as the Restoration Memorandum. DTV’s exercise of its discretionary right to suspend and/or terminate the broadcast of RCTV’s signal, in the face of allegations that RCTV violated Venezuelan law, was not invalidated by the failure to provide prior written notice. Section 7(a) of the Transport Agreement provided that “[i]f,” among other things, DTV determined that distribution of RCTV’s signal may violate the law or be politically inadvisable, “then…immediately following written notice,” DTV could cease distributing the signal or terminate the agreement. Id.
Given the absence of clear language indicating the parties’ unmistakable intent to make the provision of written notice a condition precedent to DTV’s exercise of its rights under section 7(a) of the Transport Agreement, no such duty will be construed (see Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 691 ; Unigard Sec. Ins. Co., Inc. v. North River Ins. Co., 79 NY2d 576, 581 ). Indeed, the notice requirement is not preceded by the tell-tale signs of a condition precedent, such as the words “if,” “until,” and “unless” (see MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 ; 401 W. 14th St. Fee LLC v. Mer Du Nord Noordzee, LLC, 34 AD3d 294 [1st Dept 2006]). Although the words “if” and “then” appear in the termination clause, they refer to the conditions under which DTV. may terminate or suspend performance of the agreement and the consequences of the existence of such conditions. At most, the use of the words “if” and “then” is ambiguous and therefore insufficient to create a condition precedent. Id.
Accadia Site Contracting, Inc. v. Erie County Water Authority, 115 A.D. 3d 1351, 983 N.Y.S. 2d 387 (4th Dept. 2014)
In a breach of contract action, the Appellate Division affirmed the Order of Supreme Court (Michalek, J.) that dismissed Accadia’s claim that the Water Authority “failed to compensate the contractor for additional work performed under the parties’ construction contract” (Id. at 1351).
The Appellate Division found that Accadia had failed to satisfy a condition precedent:
Contrary to plaintiff’s further contention, the court properly granted defendant’s motion on the ground that plaintiff failed to satisfy a condition precedent. “[A] condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises” (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645, quoting Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690). Here, paragraph 10.05 of the contract mandated that plaintiff provide the project engineer with “[w]ritten notice stating the general nature of each claim, dispute, or other matter” within 20 days of the event giving rise to the claim. It is well settled that “[c]ontract clauses that ‘require the contractor to promptly notice and document its claims made under the provisions of the contract governing the substantive rights and liabilities of the parties…are… conditions precedent to suit or recovery’” (Rifenburg Constr., Inc. v. State of New York, 90 AD3d 1498, 1498, quoting A.H.A. Gen. Constr. v. New York City Hous. Auth., 92 NY2d 20, 30-31, rearg. denied 92 NY2d 920). We conclude that “defendant established as a matter of law that plaintiff was obligated to seek compensation for the extra work pursuant to the terms of the contract when it learned that the [relocation of the lateral lines] constituted extra work and that plaintiff failed to do so in a timely manner” (Adonis Constr., LLC v. Battle Constr., Inc., 103 AD3d 1209, 1210). Consequently, defendant met its burden on the motion by establishing that plaintiff did not timely comply with the notice and reporting requirements of the contract, and plaintiff failed to raise a triable issue of fact in opposition (see generally Zuckerman v. City of New York, 49 NY2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718). Id.
And rejected Accadia’s claim that the Water Authority had “prevented or hindered” performance:
Plaintiff further contends that it was excused from compliance with the notice and reporting requirements of paragraph 10.05 based on defendant’s breach of the contract; that such compliance was prevented or hindered because of misconduct by defendant; and that such compliance would have been futile. Those contentions are unavailing. First, it is well settled that a “party’s obligation to perform under a contract is only excused where the other party’s breach of the contract is so substantial that it defeats the object of the parties in making the contract” (Frank Felix Assoc., Ltd. v. Austin Drugs, Inc., 111 F3d 284, 289; see Robert Cohn Assoc., Inc. v. Kosich, 63 AD3d 1388, 1389), and plaintiff failed to raise a triable issue of fact whether defendant’s actions defeated the parties’ objectives in entering into the contract. With respect to plaintiff’s remaining two contentions, we conclude that “there is no evidence to support [plaintiff]’s contention[s] that [defendant’s misconduct] frustrated its ability to comply with the applicable notice provision or that notice to [the engineer] would have been futile” (Matter of Brenda DeLuca Trust [Elhannon, LLC], 108 AD3d 902, 904). We note in any event with respect to plaintiff’s second contention that, although “it is undisputedly the rule that one who frustrates another’s performance cannot hold that party in breach” (Water St. Dev. Corp. v. City of New York, 220 AD2d 289, 290, lv. denied 88 NY2d 809; see Young v. Hunter, 6 NY 203, 207), plaintiff failed to raise a triable issue of fact whether its performance with the notice and reporting requirements was prevented or hindered by defendant’s alleged misconduct (see A.H.A. Gen. Constr., 92 NY2d at 34; DiPizio Constr. Co., Inc. v. Niagara Frontier Transp. Auth., 107 AD3d 1565, 1566 Id.
Leonardi International Corporation v. Altamar Brands, LLC, 106 A.D. 3d 661, 965 N.Y.S. 2d 725 (1st Dept. 2013)
The Appellate Division summarily reversed Supreme Court (Kenney, J.) and dismissed Altamar’s first counterclaim:
The parties’ lease provides that neither party can institute legal action with respect to an act of default under any provision of the lease without first giving the other a notice of default that complies with certain specified conditions. Plaintiff never gave defendant notice of the default on which its first cause of action is predicated (see MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 ). Defendant provided a notice of default to plaintiff with respect to its first counterclaim, but the notice did not satisfy all the stated conditions. Among other things, it did not describe “the action to be taken or performed by [plaintiff] in order to cure the alleged default.” Id.
Squire McBeasley, Inc. v. 36th Str, LLC, 93 A.D. 3d 1123, 941 N.Y.S.2d 328 (3d Dept. 2012)
In an action by a tenant alleging breach of a building modification agreement by the landlord, Supreme Court (McGrath, J.) denied McBeasley’s motion for summary judgment and awarded summary judgment to 36th Str.; and the Appellate Division modified by reversing summary judgment in favor of 36th Str.
The Court summarized the facts:
In June 2007, plaintiff Squire McBeasley, Inc. and defendant entered into a commercial lease agreement whereby defendant agreed to lease its premises in the Town of Colonie, Albany County to Squire for the purposes of operating a dog kennel franchise. Contemporaneously, defendant and plaintiff Spencer Foisy, Squire’s principal, executed a building modification agreement whereby defendant agreed to build an addition to its existing building to accommodate plaintiffs’ business. Issues thereafter arose with respect to defendant’s compliance with various municipal codes and regulations, which delayed the construction of the addition. When the addition was not constructed within the time period set forth in the building modification agreement, plaintiffs declared defendant to have breached the agreement, terminated the lease and commenced this breach of contract action and, subsequently, moved for partial summary judgment. Finding that the parties’ respective compliance with applicable municipal codes and regulations was a condition precedent to defendant’s obligation to perform under the building modification agreement — and that such condition had not been satisfied — Supreme Court denied plaintiffs’ motion and, sua sponte, awarded summary judgment dismissing the complaint to defendant. Plaintiffs appeal. Id.
“[A] contractual duty ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition” (Mullany v. Munchkin Enters., Ltd., 69 AD3d 1271, 1274  [internal quotation marks and citations omitted]). The building modification agreement, which is referred to in paragraph 11 of the lease, provides that plaintiffs were required to pay defendant $25,000 at the start of construction, which funds were to be used by defendant to cover expenses such as building permits, architectural drawings and legal fees, and that the construction would “take approximately three to four months” to complete. There are no express conditions precedent contained in the building modification agreement, and we are not persuaded that a reading of the “four corners of the document” (MHR Capital Partners, LP v. Presstek, Inc., 12 NY3d 640, 645 ) leads to the conclusion that the parties intended for paragraphs 6 and 7 of the lease agreement — which expressly condition the effectiveness of the lease on plaintiffs’ ability to secure the applicable governmental approval of its use and occupancy of the premises — to place any conditions on defendant’s obligation to perform under the building modification agreement. Id. at 1123-1124.
And applied the law to the facts:
Here, there being no clear language expressing an intent to condition defendant’s obligation to perform upon its securing a building permit, plaintiffs’ evidence that the work was not complete within the time period specified in the agreement satisfied their initial burden, as movants for partial summary judgment, that defendant was in breach of the contract. However, in opposing plaintiffs’ motion for summary judgment, defendant presented evidence that its inability to complete the modifications within the time period set forth in the building modification agreement was due to circumstances beyond its control, including allegations that its inability to immediately secure a building permit was despite its diligent efforts (see Bast Hatfield, Inc. v. Joseph R. Wunderlich, Inc., 78 AD3d 1270, 1275-1276 ). This evidence was sufficient to demonstrate that issues of fact exist as to, among other things, whether defendant’s failure to complete the building modifications within the specified time period is excusable. Thus, Supreme Court erred in sua sponte granting summary judgment to defendant. Id. at 1124.
River Street Realty Corp. v. N.R. Automotive, Inc., 94 A.D. 3d 848, 942 N.Y.S. 2d 163 (2d Dep. 2012)
River Street (landlord) sued N.R. Automotive (tenant) for breach of a commercial lease; and N.R. Automotive counterclaimed. Supreme Court (Colabella, J.) granted summary judgment to River Street on the claim and counterclaim. The Appellate Division affirmed.
The Second Department summarized the facts:
The plaintiff alleges that the parties entered into a commercial lease whereby the plaintiff agreed to lease certain real property to the defendant for use as an automobile dealership. The lease expressly provided that it was contingent upon the issuance of a special use permit to the defendant by the City of New Rochelle to use the premises as an automobile dealership. If a special use permit were not obtained within a certain time period, the defendant could elect to terminate the lease and recover the first month’s paid rent, or it could extend the time period to obtain a special use permit for an additional 30 days. If the permit had not been obtained after the end of the extended 30-day period, the lease automatically terminated and the defendant forfeited the first month’s rent as liquidated damages. Id. at 849.
After the defendant’s application for a special use permit was denied by the City, the defendant informed the plaintiff that it elected to terminate the lease and requested, inter alia, a return of the first month’s rent. The plaintiff then commenced this action, alleging that the defendant breached the lease by, among other things, failing to make a proper application for a special use permit as required by the lease. The defendant counterclaimed for, inter alia, a return of the first month’s rent. The defendant moved for summary judgment dismissing the complaint and on its counterclaims. The Supreme Court, among other things, granted those branches of the defendant’s motion which were for summary judgment dismissing the complaint and on so much of its second and third counterclaims as sought to recover the first month’s rent. The plaintiff appeals. We affirm the order insofar as appealed from. Id.
“[A] contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself” (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645). Accordingly, “when parties set down their agreement in a clear, complete document, their writing should…be enforced according to its terms” (Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 NY3d 470, 475, quoting W.W.W. Assoc. v. Giancontieri, 77 NY2d 157, 162). Furthermore, “[a] condition precedent is ‘an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises”’ (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690, quoting Calamari and Perillo, Contracts § 11-2, at 438 [3d ed]; see IDT Corp. v. Tyco Group, S.A.R.L., 13 NY3d 209, 214). “Express conditions are those agreed to and imposed by the parties themselves,” and they “must be literally performed” (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d at 690; see MHR Capital Partners LP v. Presstek, Inc., 12 NY3d at 645, 884 N.Y.S.2d 211, 912 N.E.2d 43). Id. at 849-850.
And applied the law to the facts:
Here, the defendant established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that it performed its obligations under the lease with respect to pursuing a special use permit for use of the premises as an automobile dealership. In opposition, the plaintiff failed to raise a triable issue of fact as to whether the defendant breached its obligations under the lease. Thus, under the express terms of the contingency provision, once the special use permit was not obtained within the specified time period, and the defendant elected to terminate the lease rather than extend the time period for an additional 30 days, the lease terminated and the defendant was entitled to a return of the first month’s rent. Accordingly, the Supreme Court properly granted those branches of the defendant’s motion which were for summary judgment dismissing the complaint and on so much of its second and third counterclaims as sought to recover the first month’s rent. Id. at 850.
Latham Land I, LLC v. TGI Friday’s, Inc., 96 A.D. 3d 1327, 948 N.Y.S. 2d 147 (3d Dept. 2012)
Latham Land/landlord sued TGI Friday’s/ tenant “alleging breach of [a] contract that [TGIF] to build and operate a restaurant” on the leased property (Id.) After a bench trial, Supreme Court found that TGIF had breached the lease and the Latham had failed to establish damages. The Third Department affirmed on the issue of breach and modified on the question of damages.
As to the breach, the Appellate Division summarized the pleadings and prior proceedings:
Plaintiff commenced this action alleging that defendant breached a May 24, 2007 contract whereby defendant, as lessee, agreed to, among other things, build and operate a restaurant on a portion of plaintiff’s real property in the Town of Colonie, Albany County (hereinafter the contract). The contract contemplated an initial lease term of ten years, with five-year renewal options and, at the end of the lease, that plaintiff would take ownership of the building. Defendant, however, never commenced construction and instead, in March 2008, notified plaintiff that it was terminating the contract. Thereafter, plaintiff commenced this action and, after failing to find another tenant, ultimately sold to a third party both the property designated to be leased to defendant and an adjacent parcel improved by a lease with Chipotle Mexican Grill of Colorado, LLC. During a nonjury trial, plaintiff submitted evidence of damages based on the difference between the estimated value of the property had defendant performed under the contract, and the actual sale price that plaintiff received for the land alone. Supreme Court held that defendant had breached the contract but, finding that plaintiff had failed to establish damages, dismissed the action. Id. at 1327.
The facts supporting a finding of breach:
We concur with Supreme Court that defendant breached the contract. The contract contemplated a time line by which the parties would simultaneously make efforts to procure the necessary approvals to proceed with the project. Specifically, plaintiff agreed to seek site plan approval at the same time that defendant would “diligently pursue” its obligation to obtain the necessary building permits. Section 2.07 (a) of the contract required defendant to submit its building plans and specifications to plaintiff for approval “no later than” 90 days after its receipt from plaintiff of, among other things, written notice that a meeting between plaintiff and the Town of Colonie’s Development Coordination Committee (hereinafter DCC meeting) had occurred. After plaintiff approved its building plans, defendant then had ten days to apply for its building permits. Although the DCC meeting occurred in July 2007, plaintiff did not then send written notice to defendant. Supreme Court found, however, that defendant had actual notice that the DCC meeting had occurred no later than the end of August 2007. Nevertheless, defendant did not submit building plans to plaintiff. By late 2007, defendant was experiencing financial difficulties and began negotiations with plaintiff to modify and postpone the contract, but the parties did not reach any new agreement and, on February 28, 2008, plaintiff sent formal written notice of the DCC meeting to defendant. Id. at 1328.
On March 24, 2008, defendant informed plaintiff that it was terminating the contract pursuant to § 2.08 (e), which provides that either party may terminate the contract if, despite the exercise of due diligence, defendant had been unable to satisfy a set of enumerated conditions — including obtaining necessary building permits — within one year from the date the contract was executed. May 24, 2008 represented the end of the one-year period and defendant terminated the lease in March 2008, two months prior to that date, arguing that plaintiff’s delay in sending written notice of the DCC meeting left defendant with insufficient time within which to obtain building permits prior to the May 24, 2008 deadline. Id.
The record amply supports Supreme Court’s finding that plaintiff substantially complied with its obligation to notify defendant of the DCC meeting in August 2007, triggering defendant’s obligation to submit building plans thereafter. Defendant’s director of development, who was the individual who negotiated for the language regarding the DCC meeting to be included in the contract, was copied in a series of e-mails between plaintiff and defendant in late August 2007 indicating that the DCC meeting had occurred. One of defendant’s design project managers in its architectural department was also included in these e-mails. Hence, although plaintiff never sent formal written notice of the DCC meeting as set forth in the contract, the record supports the court’s conclusion that defendant had actual notice by the end of August 2007. Further, evidence at trial indicated that, at defendant’s urging, the parties had engaged in unsuccessful negotiations to delay defendant’s performance until 2009. In addition, plaintiff submitted uncontradicted testimony that defendant made little perceivable effort to finalize building plans or apply for building permits. According appropriate deference to the trial court’s credibility determinations (see Richmor Aviation, Inc. v. Sportsflight Air, Inc., 82 AD3d 1423, 1424 ), we hold that plaintiff substantially complied with the requirements of § 2.07 (a) and that defendant thereafter breached the contract by terminating the contract rather than making diligent efforts to complete building plans and acquire permits. Id. at 1328-1329.
And rejected the claim that Latham failed to comply with a condition precedent:
Defendant contends, nevertheless, that § 2.07 (a) — “[t]enant shall submit its plans and specifications to Landlord for approval no later than ninety (90) days after (i) Landlord sends written notice” — constituted a condition precedent to its obligation to submit building plans and, as such, had to be “literally performed” as opposed to being satisfied by substantial compliance (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 ). Because plaintiff failed to send written notice until February 28, 2008, defendant argues that it had until after the May 24, 2008 deadline (i.e., May 28, 2008) to tender its plans, hence triggering the option to terminate the contract pursuant to § 2.08 (e) of the lease. We do not agree. “A condition precedent is ‘an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises” (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d at 690, quoting Calamari and Perillo, Contracts § 11-2, at 438 [3d ed] [citations omitted]; accord MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645 ). Notably, § 2.07 (a) does not employ clearly conditional terms such as “if,” “unless” or “until” (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d at 645; see Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d at 691; Restaurant Creative Concepts Mgt., LLC v. Northeast Rest. Dev., LLC, 83 AD3d 1189, 1191 ; Su Mei, Inc. v. Kudo, 302 AD2d 740, 741 ). Further, read in the context of the parties’ contract as a whole, it is clear that the parties contemplated reciprocal good faith efforts to move the project forward, and this specific notice provision was intended as a means to impose a time limit on defendant’s performance, rather than a basis for conditioning that performance. Thus, Supreme Court properly held that written notice of the DCC meeting was not a condition precedent to defendant’s obligation to submit building plans and specifications to plaintiff, but rather that the language created a constructive condition, which could be — and was here — satisfied by substantial compliance (see Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d at 691; Restaurant Creative Concepts Mgt., LLC v. Northeast Rest. Dev., LLC, 83 AD3d at 1191; Rooney v. Slomowitz, 11 AD3d 864, 865-866 ). Id. at 1329-1330.
Erickson Air-Crane Incorporated v. EAC Holdings, L.L.C., 84 A.D. 3d 464, 927 N.Y.S. 2d 320 (1st Dept. 2011)
Erikson sued EAC for indemnification under a stock purchase agreement. Supreme Court (Schweitzer, J.) granted EAC’s motion to dismiss the complaint. The Appellate Division summarily affirmed:
The relationship of the parties was controlled by a stock purchase agreement, which provided that the exclusive remedy of either party alleging a breach of warranty would be indemnification. The procedure set forth in Article 9 of the stock purchase agreement makes any demand for indemnification for payment made on third-party claims “contingent” upon the demanding party’s compliance with the notice and consent to settlement provisions therein. These provisions give the potential indemnifying party the right to receive timely notice of the third-party claim, to participate in the settlement negotiations or assume the defense of the claim, and to consent to a settlement of the claim. Plaintiff’s conceded failure to comply with these express conditions when it unilaterally settled certain third-party claims is fatal to its demand for indemnification (see MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645  [“Express conditions must be literally performed”]; see e.g. Merchants Bank of N.Y. v. Israel Discount Bank of N.Y., 200 AD2d 540 607 N.Y.S.2d 20 ; see also Admiral Ins. Co. v. Marriott Intl., Inc., 79 AD3d 572, 573, 915 N.Y.S.2d 31 ). Id. at 465.
Rifenburg Construction, Inc. v. State of New York, 90 A.D. 3d 1498, 935 N.Y.S. 2d 406 (1st Dept. 2011)
Rifenberg sued the State for compensation for extra work. The Court of Claims (Minarik, J.) denied the State’s motion for summary judgment. The Fourth Department modified, finding that “[the State] established that [Rifenberg] did not comply with the notice and reporting requirement of the contract[.]”
Finding as a matter of fact that:
With respect to the first through fourth causes of action, defendant contends that it is entitled to judgment as a matter of law based on the strict notice and reporting requirements contained in the construction contract. Those contract provisions require claimant, inter alia, to provide prompt notice to DOT of any request for payment for “extra work” that it performs and to submit “a daily summary of FORCE ACCOUNT WORK done on the contract.” The contract requires “[s]trict compliance” with the notice provisions and “compliance” with the record-keeping provisions. Contract clauses that “require the contractor to promptly notice and document its claims made under the provisions of the contract governing the substantive rights and liabilities of the parties…are…conditions precedent to suit or recovery” (A.H.A. Gen. Constr. v. New York City Hous. Auth., 92 NY2d 20, 30-31, rearg denied 92 NY2d 920; see Sicoli & Massaro v. Niagara Falls Hous. Auth., 281 AD2d 966; Tug Hill Constr. v. County of Broome, 270 AD2d 755, 756). “[A] condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises” (MHR Capital Partners LP v. Presstek, Inc., 12 NY3d 640, 645, quoting Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690). “Express conditions must be literally performed; substantial performance will not suffice” (MHR Capital Partners LP, 12 NY3d at 645). “Failure to strictly comply with such provisions generally constitutes waiver of a claim for additional compensation” (Fahs Rolston Paving Corp. v. County of Chemung, 43 AD3d 1192, 1194, 841 N.Y.S.2d 404; see also Bat-Jac Contr. v. New York City Hous. Auth., 1 AD3d 128, 766 N.Y.S.2d 352). Id. at 1498.
Based upon the applicable law:
We agree with defendant that the Court of Claims erred in denying those parts of its motion with respect to the third and fourth causes of action. We therefore modify the order accordingly. Those causes of action seek compensation for extra work performed for controlling and protecting traffic during the project and for performing survey work, respectively. According to claimant, the extra work was necessitated by the numerous changes made by DOT during the project. The traffic control and survey work were fixed cost items under the contract for which claimant was entitled to extra compensation only where additions to the project exceeded 25% of the original bid price. In support of its motion, defendant established that claimant did not comply with the notice and reporting requirements of the contract, and claimant failed to raise a triable issue of fact in opposition (see generally Zuckerman v. City of New York, 49 NY2d 557, 562). Claimant’s assertion that the numerous changes made by DOT during the project made it extremely difficult to calculate the extra traffic control and survey costs does not justify claimant’s failure to comply with the notice and reporting requirements of the contract. Those requirements are expressly designed to alert defendant to cost over-runs at the earliest possible time in order to allow it to take steps to avoid such extra expenses in the interest of protecting the public fisc (see A.H.A. Gen. Constr., 92 NY2d at 33-34, 677 N.Y.S.2d 9, 699 N.E.3d 368). Id. at 1499.
“Condition precedent” disputes provide a fertile field for commercial litigation. The takeaway: “conditions precedent” provisions in business contracts should (must!) be carefully designed and meticulously drafted.