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Do You Know the Terms of Your Contract

Do You Know the Terms of Your Contract

When basing a lawsuit on a contract, the written agreement is very important. When you go to court with a written contract, it becomes difficult to introduce any additional evidence that contradicts its terms, unless it is also written out and signed, or initialed, by the involved parties.

Take for example the case of 1526 Central Avenue Associates (“CAA”), which sued The New York Mortgage Company (“NYMC”) for breaching a loan agreement. Daryl Green, on behalf of CAA, negotiated a contract to purchase a building which CAA planned to rent out. Once an agreement was formed, Daryl Green assigned his rights to CAA, so fulfilling the terms contract became CAA’s responsibility.

CAA applied for a loan through NYMC to cover the costs of purchasing the building. As part of a loan commitment letter, NYMC required that the property be free of encumbrances and violations before it would supply the loan. After the letter was signed, the parties discussed the state of the property. NYMC mentioned various violations it believed to be unresolved and decided to find the loan, which led CAA to sue it.

CAA felt that strictly following the commitment letter was unfair because it had evidence that NYMC had completed loan agreements with other parties despite violations. CAA tried to argue that because NYMC gave loans with other parties in similar situations, NYMC should have given it a loan as well. CAA considered NYMC’s actions a breach.

Under New York law, it is generally held, that if there is a written agreement, it should be enforced according to its terms. Courts do not like to use outside information to give meaning to a contract unless it is found to be ambiguous or incomplete. It is not enough for one party to claim the contract is incomplete. If a party takes issue with a term of the contract that is clearly written using common or defined terminology, it will rule.

The court did not want to include CAA evidence regarding other NYMC loan contracts for two additional reasons. First, the court felt that CAA did not provide enough information regarding the other contracts. CAA did not introduce copies of other NYMC agreements. It just had a deposition from an NYMC employee, admitting that there were other completed agreements where the other party was missing information. Therefore there was no way for the court to compare accepted agreements to CAA’s rejected one. Without knowing the specific terms and issues, it is impossible to know if CAA was in a the same situation as those that were accepted. Second, the court found that even with that information, the other contracts did not apply because the loan seeking parties in those contracts were not a part of this case. That makes their contracts irrelevant. At no point did CAA deny having violations on the property. Since it was clearly stated in the contract that violations had to be cleared before the loan would be given, the court found that NYMC did not breach the contract for refusing to give CAA a loan.

You are bound my the terms of any contract you sign. Reading a contract in entirety and knowing the obligations of all parties is important. An attorney can help you understand your rights and options under a contract before or after you sign it. If you have any contract questions, consider calling our Long Island business lawyer for assistance.

See Related Blog Posts:

Is Your Contract a Binding One?

When Does Talking to Someone's Competitors Become a Breach of Contract?

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