JFK International Air Cargocentre LLC v. The Port Authority of New York and New Jersey, New York County Supreme Court, Index No. 650345/2008
As most New York real estate lawyers know, the Statute of Frauds requires that leases for terms of longer than one year be written. General Obligations Law § 5-703(a)(1). But what kind of “writing” does the Statute of Frauds require?
In Air Cargocentre, the plaintiff contended that a memorandum of understanding, which expressly stated it was non-binding, a term sheet and a resolution of the Port Authority’s Board of Directors authorizing its Executive Director to enter into a 27 year lease (subject to the approval of the Board’s General Counsel) constituted a sufficient writing to defeat the Port Authority’s Statute of Frauds defense.
The court rejected this argument. Instead, the Court held that the writings did not contain “substantially the whole agreement, and all its material terms and conditions.” The court further wrote that the draft lease agreements that were exchanged, but not signed went “well beyond those terms and conditions that were outlined in the Board resolutions and minutes, even when read in conjunction with the executive term sheet.”
The court further held that a lease could not be found because the Port Authority’s request for proposal, and the draft lease agreements themselves expressly provided that the Port Authority would not be bound until a lease was executed by a Port Authority officer and delivered to the lessee.
The lesson of Air Cargocentre is that when sophisticated parties negotiate complicated lease agreements and include the correct protections in the drafts, courts will not find binding agreements unless the lease is reduced to a fully executed agreement containing all material terms.