Not all agreements need to be in writing to be enforced. Indeed, unless there is an applicable Statute of Frauds, oral agreements are enforceable. But what if the parties to an agreement — a formal contract — don’t sign? Is it enforceable? Maybe.
We last wrote about a case enforcing an unsigned agreement in our blog back in May 2018. This time, the Appellate Division, First Department, recently held in Lerner v. Newmark & Co. Real Estate, Inc., that an unsigned Termination Agreement between a licensed real estate broker and Newmark was enforceable even though it was never signed. The court focused its analysis on two questions: is there evidence supporting a finding of an intent to be bound?, and if so, is there evidence that the parties “positive[ly] agree[d] that it should not be binding until so reduced to writing and formally executed”?
In considering these factors, the court looked to a separate agreement that the parties had executed that contained language to the effect that an unsigned form could not form an agreement. The court then concluded that “defendants knew how to draft an agreement that could be accepted only by signature, but they did not so draft the Termination Agreement”. The court also looked to the “months-long email exchanges” among the parties which supported a finding that the parties indeed had the intent to be bound, whether or not the Termination Agreement was ultimately signed.
The takeaway? The Appellate Division is reminding us all once again that written agreements without the “not bound until signed or executed” clause is risky business. A pitfall easily avoided by careful drafting. A further caution lies in the parties’ conduct and exchanges, as the court there looked to emails seemingly confirming the intent to be bound. To the extent there are exchanges following negotiation of an agreement not yet signed, those too should indicate that all rights are reserved and that there is no agreement until formally executed.