Chemical Bank v. Weiss, 393 N.Y.S.2d 1026 (1977)
A written guarantee containing a ‘no oral modification’ clause is enforceable, and an alleged oral agreement to terminate the guarantee is ineffective under New York General Obligations Law § 15-301.
Summary
This case addresses the enforceability of a written guarantee with a clause requiring written notice for termination. Weiss guaranteed a loan to a corporation from Chemical Bank. The guarantee covered subsequent loans and required written notice for termination. Weiss claimed an oral agreement with a bank officer terminated her obligations after the initial loan was satisfied. The court held that the alleged oral agreement was ineffective due to the ‘no oral modification’ clause in the written guarantee and General Obligations Law § 15-301, which requires modifications or terminations to be in writing when the agreement stipulates such.
Facts
In December 1967, Chemical Bank loaned money to a corporation, with Weiss guaranteeing the loan. The guarantee was continuing, covering subsequent loans. It also stipulated that Weiss could only terminate her liability with written notice to the bank. In January 1970, the corporation repaid the 1967 loan. In November 1970, the bank extended a second loan to the corporation, which later defaulted. Weiss claimed an oral agreement with a bank officer in 1970 terminated her obligations under the guarantee.
Procedural History
Chemical Bank sued Weiss to enforce the guarantee after the corporation defaulted on the second loan. The lower court initially ruled in favor of Chemical Bank. The Appellate Division affirmed the lower court’s decision, granting summary judgment to Chemical Bank, finding no triable issue of fact existed because of the ‘no oral modification’ clause. Weiss appealed to the New York Court of Appeals.
Issue(s)
Whether an alleged oral agreement can effectively terminate a written guarantee that requires written notice for termination, especially when the guarantee contains a ‘no oral modification’ clause in light of General Obligations Law § 15-301.
Holding
No, because General Obligations Law § 15-301 renders oral modifications or terminations ineffective if the written agreement stipulates that changes must be in writing. The oral agreement alleged by Weiss is insufficient to terminate her obligations under the written guarantee.
Court’s Reasoning
The Court of Appeals affirmed the Appellate Division’s decision, emphasizing the ‘no oral modification’ clause in the guarantee and the applicability of General Obligations Law § 15-301. The court stated that the alleged oral notice was “completely ineffectual to terminate appellant’s obligations under the written guarantee which here specifically provided that it could not be modified or terminated, unless such modification or termination was communicated to the respondent in writing.” The court distinguished the case from Green v. Doniger, clarifying that while Green addressed the abandonment of an agreement through oral understanding under the former Personal Property Law, § 15-301 now precludes both oral modifications and terminations. The court reinforced the importance of upholding written agreements and preventing parties from circumventing clear contractual terms through unsubstantiated oral claims. The court cited several prior cases including Rothschild v Manufacturers Trust Co., Mount Vernon Trust Co. v Bergoff, and Bay Parkway Nat. Bank v Shalom to support the enforcement of the written agreement.