You are here: / Contract Law
,

Criteria for Contractual Indemnification Explained

The Second Department determined plaintiff’s Labor Law 241(6) cause of action properly survived summary judgment and defendant was entitled to indemnification under the relevant contract.  The court explained the contractual indemnification criteria:

“While owners and general contractors owe nondelegable duties under the Labor Law to plaintiffs who are employed at their worksites, these defendants can recover in indemnity, either contractual or common-law, from those considered responsible for the accident” … . A party’s right to contractual indemnification depends upon the specific language of the relevant contract … . A promise to indemnify should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding circumstances … . In addition, “a party seeking contractual indemnification must prove itself free from negligence, because to the extent its negligence contributed to the accident, it cannot be indemnified therefor” (…see General Obligations Law § 5-322.1). Shea v Bloomberg LP, 2015 NY Slip OP 00353, 2015 NY Slip Op 00353, 2nd Dept 1-14-15

 

,

Conditions Spelled Out in an Irrevocable Stand-By Letter of Credit Had Been Complied With by the Defendant—Plaintiff’s Fraud Cause of Action Dismissed

The Second Department determined the defendant had properly sought (and been paid by the bank) funds pursuant to an irrevocable standby letter of credit (LOC) which was executed by the plaintiff in favor of defendant because the conditions spelled out in the LOC had been complied with. The court explained the relevant analytical criteria:

“Letters of credit are commercial instruments that provide a seller or lender (the beneficiary) with a guaranteed means of payment from a creditworthy third party (the issuer) in lieu of relying solely on the financial status of a buyer or borrower (the applicant). Historically, letters of credit have been used to assure predictability and stability in mercantile transactions by diminishing a seller’s risk of nonpayment and a buyer’s risk of nondelivery due to insufficient funds” … . “By issuing a letter of credit, the [bank] undertakes an obligation to pay the beneficiary, or his [or her] transferee if the letter is negotiable, from the account of its customer” … . Generally, stand-by letters of credit are “meant to be drawn upon only in the event that its applicant fails to make a direct payment to the beneficiary . . . For this reason, to collect upon a stand-by [letter of credit], the beneficiary . . . must present to the issuing bank a default letter stating that the debt had not been satisfied as of a specified date” … . However, “letters of credit must be strictly construed and performed in compliance with their stated terms” … . The rationale for this rule is rooted in the purpose of letters of credit: ” [b]y conditioning payment solely upon the terms set forth in the letter of credit, the justifications for an issuing bank’s refusal to honor the credit are severely restricted, thereby assuring the reliability of letters of credit as a payment mechanism'” … . Accordingly, “to make an issuing bank’s payment obligation conditional, the parties must clearly and explicitly set forth that requirement on the face of the letter of credit” … .

The … defendants demonstrated their prima facie entitlement to judgment as a matter of law dismissing the cause of action to recover damages for fraud, since in [defendant’s] letter to [the bank], it accurately and truthfully represented to [the bank] that [defendant] was the beneficiary of the LOC, and satisfied the two conditions set forth in the LOC pursuant to which payment would be made to it, to wit, by (1) referencing the LOC number, and (2) attaching the LOC. Weiss v Benetton USA Corp, 2015 NY Slip Op 00360, 2nd Dept 1-14-15

 

, ,

Questions of Fact Raised About Whether Sellers’ Representations on the Condition Disclosure Statement Claiming No Water-Related Problems on the Property Violated Real Property Law 462, 465, Constituted Fraud, and Constituted Breach of Contract

The Fourth Department determined the sellers’ representations on the condition disclosure statement created questions of fact about whether sellers violated Real Property Law 462 and 465, whether the sellers committed fraud, and whether the sellers breached the sales contract.  The sellers indicated on the condition disclosure statement that they had experienced no problems with standing water and water seeping into the basement.  There was evidence the sellers were aware of the existence of such water problems when they indicated on the form there had been none:

Real Property Law § 462 (1) requires sellers of residential real property to “complete and sign a property condition disclosure statement” and to provide such statement to a prospective buyer “prior to the signing by the buyer of a binding contract of sale.” Real Property Law § 462 sets forth the disclosure form, which instructs the seller to complete the form based upon his or her “ACTUAL KNOWLEDGE,” and contains the seller’s certification that “THE INFORMATION IN THIS PROPERTY CONDITION DISCLOSURE STATEMENT IS TRUE AND COMPLETE TO THE SELLER’S ACTUAL KNOWLEDGE AS OF THE DATE SIGNED BY THE SELLER.” Where a seller provides a property condition disclosure statement and “willful[ly] fail[s] to perform the requirements” set forth in article 14 of the Real Property Law “[such] seller shall be liable for the actual damages suffered by the buyer in addition to any other existing equitable or statutory remedy” (Real Property Law § 465 [2]). * * *

… [W]e conclude that plaintiff raised an issue of fact with respect to whether defendants knowingly misrepresented a material fact, i.e., the property’s history of flooding and standing water, on the property condition disclosure statement … . We likewise conclude that plaintiff raised an issue of fact with respect to whether he justifiably relied on defendants’ alleged misrepresentations … . * * *

Although the provisions of a contract for the sale of real property are generally merged in the deed and therefore extinguished upon the closing of title …, that rule does not apply ” where the parties have expressed their intention that [a] provision shall survive delivery of the deed’ ” … . Here, the contract provides that “[a]ny claim arising from failure to comply with Paragraph[] 5 [of the contract],” which encompasses defendants’ representations in the property condition disclosure statement, “shall survive for 2 years after the Closing or cancellation of this Contract” … . In any event, we note that “the merger doctrine [is] inapplicable where, as here, there exists a cause of action based upon fraud” … . Sicignano v Dixey, 2015 NY Slip Op 00054, 4th Dept 1-2-15

 

,

Release Which Specifically Refers to a Particular Incident Relates Solely to that Incident—Where Terms of the Release Are Unambiguous, Extrinsic Evidence Will Not Be Considered

The Fourth Department determined that a release unambiguously related solely to a particular slip and fall on a particular day and did not bar an action based upon a subsequent slip and fall:

…[T]he release stated that defendant, in exchange for providing plaintiff with the agreed-upon settlement amount, was “released and forever discharged . . . from all manner of actions, causes of action, suits, . . . claims and demands whatsoever” that plaintiff “ever had, now has or which [her] successors and assigns, heirs, executors or administrators, hereafter can, shall or may have for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of those present . . . More specifically, for injuries sustained in a slip and fall incident which occurred on June 3, 2009, in the City of Lackawanna, County of Erie and State of New York.” Defendant made payment on the settlement and filed a copy of the stipulation of discontinuance in November 2012.

“It is well settled that a general release is governed by principles of contract law’ … and that, where a release is unambiguous, the intent of the parties must be ascertained from the plain language of the agreement’ … . Moreover, “[i]t has long been the law that where a release contains a recital of a particular claim, obligation or controversy and there is nothing on the face of the instrument other than general words of release to show that anything more than the matters particularly specified was intended to be discharged, the general words of release are deemed to be limited thereby’ … . Thus, “[w]here, as here, [a] release . . . contain[s] specific recitals as to the claims being released, and yet [contains] . . . an omnibus clause to the effect that the releasor releases and discharges all claims and demands whatsoever which he [or she] . . . may have against the releasee . . . , the courts have often applied the rule of ejusdem generis[, i.e., “of the same kind or class” (Black’s Law Dictionary 594 [9th ed 2009])], and held that the general words of a release are limited by the recital of a particular claim” … .

Here, we conclude that the language of the release is unambiguous in specifying that the only claims discharged thereby are those arising from the injuries plaintiff allegedly sustained in the first slip and fall accident … . Contrary to defendant’s further contention that we should consider extrinsic evidence purportedly demonstrating that the parties intended the settlement to cover both matters, “[i]t is well settled that, where the language of a release is clear and unambiguous, effect will be given to the intention of the parties as indicated by the language employed and the fact that one of the parties may have intended something else is irrelevant” … . Abdulla v Gross, 2015 NY Slip Op 00036, 4th Dept 1-2-15

 

, ,

Supreme Court Properly Considered Documentary Evidence Re: a Motion to Dismiss for Failure to State a Cause of Action Pursuant to CPLR 3211(a)(7)—Limited Role of Such Evidence in this Context Clarified/Criteria for Specific Performance of a Real Estate Contract Explained

The Fourth Department, in a full-fledged opinion by Justice Whalen, clarified how a motion to dismiss for failure to state a cause of action (CPLR 3211(a)(7)) should be handled when documentary evidence is submitted by the defendant.  The case involved a real estate transaction which initially fell through when plaintiff was unable to finance it.  Years later, when plaintiff finally was able to obtain financing, it sought specific performance of the original contract. Documents tracing the history of the communications between plaintiff and defendant were submitted with the motion to dismiss.  Supreme Court considered the documents and dismissed the complaint.  The Fourth Department affirmed. In addition to an extensive discussion of the use of documentary evidence submitted in support of (and in opposition to) a motion to dismiss pursuant to CPLR 3211(a)(7), the Fourth Department explained the criteria for specific performance of a real estate contract and the role of a “time is of the essence” demand (which was not made here):

CPLR 3211 (a) (7) authorizes the summary dismissal of a complaint for failure to “state” a cause of action. Historically, “[a] motion to dismiss for failure to state a cause of action . . . was[] limited to the face of the complaint” (Rovello, 40 NY2d at 638 [Wachtler, J., dissenting]), but the Legislature enlarged the scope of facial sufficiency motions by enacting subdivision (c) of CPLR 3211, which permits “trial court[s to] use affidavits in its consideration of a pleading motion to dismiss” (id. at 635 …). The Court in Rovello held that the plain text of CPLR 3211 (c) “leaves this question,” i.e., the admissibility of affidavits on a motion pursuant to CPLR 3211 (a) (7), “free from doubt” (id. at 635). The 1st Department recently explained that Rovello’s reference to “affidavits” is merely shorthand for “evidentiary submissions” … .

As noted in Rovello, however, CPLR 3211 does not specify “what effect shall be given the contents of affidavits submitted on a motion to dismiss when the motion has not been converted to a motion for summary judgment” (id.). The Court noted that “[m]odern pleading rules are designed to focus attention on whether the pleader has a cause of action rather than on whether he has properly stated one’ ” and held that evidentiary submissions may only be considered for a “limited purpose” in assessing the facial sufficiency of a civil complaint (id. at 636). This “limited purpose,” Rovello explained, is two-fold. On the one hand, “affidavits submitted by the defendant [as movant] will seldom if ever warrant the relief” sought under CPLR 3211 (a) (7) “unless too the affidavits establish conclusively that plaintiff has no cause of action” (id. [emphasis added]). On the other hand, the nonmoving party may “freely” submit evidentiary materials “to preserve inartfully pleaded, but potentially meritorious, claims” (id. at 635).

The “limited purpose” to be accorded evidentiary submissions on a motion to dismiss has been consistently reiterated by the Court of Appeals since Rovello … . Indeed, in Guggenheimer v Ginzburg (43 NY2d 268, 275), the Ct. of Appeals noted that “dismissal should . . . eventuate” only when the defendant’s evidentiary affidavits “show[] that a material fact as claimed by the pleader to be one is not a fact at all and . . . that no significant dispute exists regarding it” … . * * *

We therefore conclude that the court properly considered defendant’s evidentiary submissions in evaluating the motion to dismiss at bar. Liberty Affordable Hous Inc v Maple Ct Apts, 2015 NY Slip Op 0003, 4th Dept 1-2-15

 

, ,

Supreme Court Should Not Have Denied Motion to Set Aside a Stipulation of Settlement Without a Hearing, Criteria Explained/Lower Court Properly Considered Issues Raised for the First Time in Plaintiff’s Reply Papers Because Defendant Availed Himself of the Opportunity to Oppose the Contentions at Oral Argument

The Second Department determined Supreme Court should not have denied plaintiff's motion to set aside the stipulation of settlement without a hearing.  The court explained the analytical criteria.  (It is worth noting that the Second Department found that Supreme Court properly considered matters raised for the first time in plaintiff's reply papers because the defendant availed himself of the opportunity to oppose the contentions at oral argument.):

“Marital settlement agreements are judicially favored and are not to be easily set aside” … . However, because of the fiduciary relationship existing between spouses, ” [a] stipulation of settlement should be closely scrutinized and may be set aside upon a showing that it is unconscionable or the result of fraud, or where it is shown to be manifestly unjust because of the other spouse's overreaching'” … .

“To rescind a separation agreement on the ground of overreaching, a plaintiff must demonstrate both overreaching and unfairness” … . ” [N]o actual fraud need be shown, for relief will be granted if the settlement is manifestly unfair to a spouse because of the other's overreaching . . . in its execution'” … . “[C]ourts may examine the terms of the agreement as well as the surrounding circumstances to ascertain whether there has been overreaching” … . However, generally, if the execution of the agreement is fair, no further inquiry will be made … . “[W]hile evidence that one spouse was not represented by counsel is insufficient, standing alone, to find overreaching, it is a significant consideration when determining whether the parties entered into the stipulation freely and fairly” … . “[C]ourts have thrown their cloak of protection [over] separation agreements and made it their business, when confronted, to see to it that they are arrived at fairly and equitably, in a manner so as to be free from the taint of fraud and duress, and to set aside or refuse to enforce those born of and subsisting in inequity” … . Jon v Jon, 2014 NY Slip Op 08961, 2nd Dept 12-24-14

 

,

Although the Landlord Can Sue Pursuant to the Accelerated Rent Clause and Is Not Under a Duty to Mitigate, the Out-of-Possession Tenant Should Be Afforded a Hearing On Whether the Accelerated Rent/Liquidated Damages Clause, Under the Facts, Constitutes an Unenforceable Penalty Because It Results In Recovery Grossly Disproportionate to the Landlord’s Actual Damages

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined that, where the tenant has breached the lease and left the premises, the landlord can sue to enforce the rent acceleration clause and is under no duty to mitigate.  However, under the facts here, the tenant was entitled to a hearing to address whether the acceleration clause allows liquidated damages which are grossly disproportionate to the actual losses, and therefore constitutes an unenforceable penalty:

As a general matter parties are free to agree to a liquidated damages clause “provided that the clause is neither unconscionable nor contrary to public policy” … . Liquidated damages that constitute a penalty, however, violate public policy, and are unenforceable … . A provision which requires damages “grossly disproportionate to the amount of actual damages provides for a penalty and is unenforceable” … .

Whether a provision in an agreement is “an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances” … . “The burden is on the party seeking to avoid liquidated damages[] to show that the stated liquidated damages are, in fact a penalty” … . Where a party establishes a penalty, the proper recovery is the amount of actual damages established by the party … .

Defendants claim that because the acceleration clause permits [the landlord] to hold possession and immediately collect all rent due, the damages are grossly disproportionate to the landowner's actual damages. They contend this is a windfall that allows [the landlord] to double dip—–get the full rent now and hold the property. On its face this argument is compelling because arguably the ability to obtain all future rent due in one lump sum, undiscounted to present-day value, and also enjoy uninterrupted possession of the property provides the landowner with more than the compensation attendant to the losses flowing from the breach—–even though such compensation is the recognized purpose of a liquidated damages provision … . 172 Van Duzer Realty Corp v Globe Alumni Student Assistance Assn Inc, 2014 NY Slip Op 08872, CtApp 12-18-14

 

Breach of Contract Lawsuit Precluded by Claimant’s Failure to Comply With Notice Requirements Which Were Conditions Precedent—Alleged Misconduct by Defendant Did Not Prevent Compliance with Conditions Precedent—Conditions Precedent Not Waived by Defendant’s Participation In an Attempt to Resolve the Dispute

The Third Department noted that, absent any claim that defendant's misconduct prevented claimant from fulfilling the notice requirements in the contract, the notice requirements were conditions precedent which, because they were not met, precluded the breach of contract lawsuit:

Claimant alleged seven specific items of damages, each of which was subject to contract provisions requiring that notice be provided to defendant within 10 work days and that certain records be kept and submitted to defendant. The contract provided that “[t]he notification and record-keeping provisions of this Contract shall be strictly complied with for disputes of any nature and are a condition precedent to any recovery” … . No party can prevail on a breach of contract claim if that party has failed to perform a specified condition precedent … . According to the contract, the contractor's failure to supply the required notice and submit the required records is deemed a waiver of any related claim by the contractor, “notwithstanding the fact that [defendant] may have actual notice of the facts and circumstances which comprise such dispute and is not prejudiced by said failure.”

Defendant established its entitlement to summary judgment by submitting proof that claimant did not comply with the condition precedent, in that claimant did not provide timely notice for the alleged items of damages and did not timely submit the required records … . In response, claimant did not provide proof that it complied with the notice and record-keeping requirements, but argued that defendant waived noncompliance, had actual knowledge of the disputed items and prevented claimant from complying with those requirements. Those arguments are unavailing. Fahs Constr Group Inc v State of New York, 2014 NY Slip Op 0885, 3rd Dept 12-18-14

 

,

Contract Giving Plaintiff Option to Sell the Property Back to the Defendants If Rezoning Not Obtained Was Ambiguous About When the Option Must Be Exercised Raising a Question of Fact About the Timeliness of Plaintiff’s Exercise of the Option

The Second Department determined the contract rider which allowed plaintiff-purchaser to sell the property back to the defendants-sellers if rezoning and subdivision approvals were not obtained within 15 months was an option contract.  The defendants argued that the option must be exercised within a reasonable time and the plaintiff’s failure to do so entitled defendants to summary judgment.  Supreme Court disagreed and granted plaintiff summary judgment (specific performance). The Second Department found that the contract was ambiguous concerning the time within which the option must be exercised, raising a triable question of fact:

An option contract is an agreement to hold an offer open; it confers upon the optionee, for consideration paid, the right to purchase–—or, less commonly, to sell –at a later date … . Whether an agreement is an option contract or a bilateral contract is determined by reference to its various terms … .

Here, as the defendants correctly contend, section 8(a) of the rider to the subject contract giving the plaintiff the right to sell the property back to [the defendants if plaintiff] failed to obtain certain rezoning and subdivision approvals was an option contract, as it conferred upon the plaintiff the right to sell the property back to Fairview at a later date.

However, in order for there to be an enforceable contract for the sale of land upon which an action for specific performance can be based, an optionee must exercise an option in accordance with its terms, within the time and the manner specified in the option … .

Here, the plaintiff interprets the option contained in section 8(a) of the rider as providing it with an open-ended right to exercise same, and the Supreme Court agreed. The defendants, however, interpret the same provision as limiting the plaintiff’s time to exercise the option to “a reasonable time” after the expiration of the aforementioned 15-month period in which to obtain the specified rezoning and subdivision approvals, and contend that the plaintiff failed to timely exercise its rights.

“Contract language which is clear and unambiguous must be enforced according to its terms” … . However, ambiguity in a written agreement exists if there is more than one reasonable interpretation of the language at issue … . The test for determining whether contract language is ambiguous is “whether the agreement on its face is reasonably susceptible of more than one interpretation” … . Whether an agreement is ambiguous is a question of law to be resolved by the court … . Here, we conclude that section 8(a) of the rider is ambiguous and subject to more than one interpretation regarding the time within which the plaintiff had to exercise the option. Since a triable issue of fact exists as to the intention of the parties, the Supreme Court erred in granting the plaintiff’s motion for summary judgment on the cause of action for specific performance … . IPE Asset Mgt LLC v Fairview Block & Supply Corp, 2014 NY Slip Op 08811, 2nd Dept 12-17-14

 

,

Question of Fact Raised About Whether Contract for the Installation of Marble Staircase Landings Gave Rise to Tort Liability to Third Party (Plaintiff) Stemming from the Collapse of a Landing

The Second Department determined a question of fact had been raised about whether a contract for the installation of marble staircase landings (by defendant Suli) gave rise to tort liability for injury to plaintiff resulting from the collapse of the landing:

Ordinarily, the breach of a contractual obligation is not sufficient in and of itself to impose tort liability upon the promisor to noncontracting parties … . However, a party who enters into a contract to render services may be said to have assumed a duty of care and, thus, would be potentially liable in tort to third persons when the contracting party, in failing to exercise reasonable care in the performance of its duties, launches an instrument of harm or creates or exacerbates a hazardous condition … . Here, Suli demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that it properly installed the marble slab, that it never received any complaints about the work prior to the accident, and that no defects in the marble were observed prior to the accident. However, in opposition, the plaintiff and the building defendants raised a triable issue of fact as to whether Suli created the hazardous condition that caused the accident through the affidavit of an experienced marble setter and installer. That expert explained that marble could weaken over time due to stress fractures, and opined that Suli should have supported the marble slab with an additional “angle iron” in the center of the slab, and that Suli’s failure to do so was a substantial contributing factor in the happening of the accident … . Torres v 63 Perry Realty LLC, 2014 NY Slip Op 08830, 2nd Dept 12-17-14

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy