This post was written by Abbey Mansfield and David Kochman.
In a recent decision, the New York Appellate Division, Second Department, confirmed that in the context of a litigation, an email can be a binding agreement under CPLR 2104. While this particular decision is limited to the litigation arena, the logic could easily be applied to emails in other contexts. As a result, lenders and their counsel should take care in extending or accepting offers over email as further described below.
In the Litigation Context
New York courts encourage litigants and their attorneys to reach settlements or other agreements on pending litigation matters; however, New York’s Civil Practice Law and Rules (“CPLR”) require that these agreements be made “in a writing subscribed” by a party to his or her attorney (see CPLR section 2104). Recently, the New York Appellate Division, Second Department, in Forcelli v. Gelco Corporation, 2013 N.Y. Slip Op. 05437, 2013 WL 3812103 (2d Dep’t 2013), held that emails may satisfy the CPLR’s writing requirement so long as:
- The email contains the material terms of the agreement
- The email reflects a “manifestation of mutual accord”
- The email is “signed” by a party or his attorney (or other agent)
In Forcelli, the parties negotiated a complete settlement during the time that a motion for summary judgment was pending decision before the court. Defendants’ counsel sent plaintiff’s counsel an email confirming the precise settlement offer and the releases that would be given in exchange for that payment. Plaintiff signed a release the next day but, six days later, the court granted the defendants’ motion for summary judgment. Defendants tried to back out of the settlement, arguing that no formal agreement had been executed. Yet, the court held that “where, as here, an email message contains all material terms of a settlement and a manifestation of mutual accord, and the party to be charged, or his or her agent, types his or her name under circumstances manifesting an intent that the name be treated as a signature, such an email message may be deemed a subscribed writing within the meaning of CPLR 2104 so as to constitute an enforceable agreement.” Id. at *6. The non-ministerial nature of the email, coupled with its purported settlement of the entire case, were emphasized by the Appellate Division in affirming the settlement agreement’s enforcement.
Application for Lenders and Their Lawyers
Lenders take great care to negotiate commitment and engagement letters limiting their commitments to provide financing to the circumstances described in those letters. However, lenders often also communicate business agreements with borrowers in informal emails. While CPLR section 2104 is only applicable in the litigation arena, the New York court in Forcelli also considered general principles of contract law in reaching its decision that emails can be enforceable agreements in New York. As a result, lenders and their counsel should beware when sending emails that contain business terms or agreements, that they make clear that the deal remains subject to conditions (including the execution of a formal commitment or engagement letter). If not, they run the risk of being bound by the terms of their emails!