Thursday, October 08, 2015

A “memorandum of understanding” that is characterized as an “agreement to agree” is not an enforceable contract


A “memorandum of understanding” that is characterized as an “agreement to agree” is not an enforceable contract
Offit v Herman, 2015 NY Slip Op 07056, Appellate Division, First Department

Michael Offit contended that a memorandum of understanding [MOU] that the parties had signed was a "Type II" agreement under federal case law,* requiring Julian M. Herman to negotiate in good faith to finalize a settlement of various lawsuits among the parties.

Citing IDT Corp. v Tyco Group, 13 NY3d 209, the Appellate Division said the New York Court of Appeals has rejected "the rigid classification into Types'" in favor of asking "whether the agreement contemplated the negotiation of later agreements and if the consummation of those agreements was a precondition to a party's performance."

The MOU at issue stated that the parties had reached an "agreement in principle, subject to documentation acceptable to the parties and court approval." However, noted the Appellate Division, in prior motion practice, counsel for Offit admitted that the MOU was merely "an agreement to agree."

* The differences between Type I preliminary agreements and Type II preliminary agreements as applied by the federal courts is considered at:

The decision is posted on the Internet at:

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