Piller v. Marsam Realty 13th Avenue, LLC, Kings County Supreme Court Index No. 500141/2013
Kings County Commercial Division Justice Carolyn Demarest recently wrestled with a question that continues to confront New York real estate lawyers frequently, namely: when is a Letter of Intent a binding contract? In this case Justice Demarest held that the parties had not made a contract.
Piller involved the acquisition of real property in Kings County. On December 3, 2012, the parties signed a seventeen-page letter of intent that contemplated the purchase of the property for $14,250,000. The sale was to be a contract-close. That is the contract of sale would be signed and the closing would occur on the sale day. The letter of intent provided that closing was to be not later than December 31, 2012. (Recall that in late 2012, fears of the so-called fiscal cliff created pressure to close transactions before the 2012 year-end.)
On summary judgment, Justice Demarest held the Letter of Intent was not a binding contract and granted defendants summary judgment dismissing the complaint. A significant fact influencing Justice Demarest’s opinion was that the plaintiff had not paid a contract deposit. In fact, at one point during the negotiations, the defendants sought to obtain a contract deposit, which the plaintiff refused to provide. Indeed the plaintiff’s rationale for refusing to provide a contract deposit was that doing so would create a contract. Thus, the plaintiff was trapped by his own words and Justice Demarest granted Defendant’s motion to dismiss.
The lesson of Piller is that if it walks like a letter of intent and talks like a letter of intent and is not accompanied by a contract deposit; it isn’t a contract.