The Court of Appeals, in a full-fledged opinion by Judge Rivera, reversing the Appellate Division, determined plaintiff (Stonehill) was entitled to summary judgment against defendant Bank of the West (BOTW) in this breach of contract action. BOTW offered for sale a syndicated loan at auction. Plaintiff bid on the loan and BOTW accepted the bid. The acceptance e-mail indicated it was “subject to” an executed agreement and a 10% deposit. BOTW argued that the “subject to” conditions were not met and a contract was never formed. The Court of Appeals disagreed noting a difference between conditions precedent to performance and conditions prefatory to the formation of a binding agreement:
In determining whether the parties intended to enter a contract, and the nature of the contract’s material terms, we look to the “objective manifestations of the intent of the parties as gathered by their expressed words and deeds” … . “[D]isproportionate emphasis is not to be put on any single act, phrase or other expression, but, instead on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain” … . With respect to auctions, the general rule is that a seller’s acceptance of an auction bid forms a binding contract, unless the bid is contingent on future conduct … . While an auction can be conditional, meaning property can be withdrawn after the close of bidding, it will not be deemed conditional absent explicit terms … . * * *
… [The acceptance] email stated that closure of the transaction required execution of a signed document and Stonehill’s tender of the 10% deposit. That, however, is not the same as a clear expression that the parties were not bound to consummate the sale and that BOTW could withdraw at any time, for any reason. Nor did BOTW make known its desire for an unrestricted exit from the deal before accepting Stonehill’s bid or anytime before it withdrew from the transaction. … There is a difference between conditions precedent to performance and those prefatory to the formation of a binding agreement. Stonehill Capital Mgt., LLC v Bank of the W., 2016 NY Slip Op 08481, CtApp 12-20-16
CONTRACT LAW (FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)/AUCTIONS (CONTRACT LAW, FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)/BID AND ACCEPTANCE (AUCTIONS, CONTRACT LAW, FORMULAIC LANGUAGE INDICATING THE ACCEPTANCE OF A BID WAS SUBJECT TO A WRITTEN AGREEMENT AND DEPOSIT DID NOT NEGATE THE FORMATION OF A BINDING CONTRACT UPON ACCEPTANCE)