THE FACT THAT THE AMOUNT TO BE USED TO CALCULATE DEFENDANT’S COMPENSATION WAS NOT SET IN THE CONTRACT, BUT RATHER WAS TO BE ESTABLISHED AND AGREED TO, DID NOT INVALIDATE THE CONTRACT AS A MERE AGREEMENT TO AGREE; THE AMOUNT COULD BE DETERMINED BY EXTRINSIC INFORMATION.
The Third Department, reversing (modifying Supreme Court) determined a material term of a contract could be adequately fleshed out by extrinsic evidence. Therefore the contract should not have been invalidated as a mere “agreement to agree.” Defendant was hired as a consultant by plaintiff, the parent company of a number of banks, to maximize income from overdrafts. Defendant’s fee was to be based on plaintiff’s income over a “baseline” amount to be established by defendant (and agreed to by plaintiff):
Supreme Court determined that, because the baseline was an indefinite material term, the agreement was unenforceable as a “mere agreement to agree” … . We do not agree. “[W]here it is clear from the language of an agreement that the parties intended to be bound and there exists an objective method for supplying a missing term, the court should endeavor to hold the parties to their bargain. Striking down a contract as indefinite and in essence meaningless is at best a last resort” … . If, “at the time of agreement the parties have manifested their intent to be bound, a price term may be sufficiently definite if the amount can be determined objectively without the need for new expressions by the parties; . . . for example, [the price term might] be . . . ascertained by reference to an extrinsic event” … . Here, the parties’ conduct evinced that they intended to be bound by the agreement and, in our view, the baseline could be ascertained with reference to an extrinsic event, that is, defendant’s calculation derived from the existing historical data … . Accordingly, we find that the agreement was enforceable. Tompkins Fin. Corp. v John M. Floyd & Assoc., Inc., 2016 NY Slip Op 07252, 3rd Dept 11-3-16
CONTRACT LAW (THE FACT THAT THE AMOUNT TO BE USED TO CALCULATE DEFENDANT’S COMPENSATION WAS NOT SET IN THE CONTRACT, BUT RATHER WAS TO BE ESTABLISHED AND AGREED TO LATER, DID NOT INVALIDATE THE CONTRACT AS A MERE AGREEMENT TO AGREE; THE AMOUNT COULD BE DETERMINED BY EXTRINSIC INFORMATION)