Cobble Hill Nursing Home, Inc. v. Henry and Warren Corp., 74 N.Y.2d 475 (1989)
An agreement to negotiate the terms of a future contract is unenforceable under the Statute of Frauds if it lacks material terms and provides no objective method for determining those terms.
Summary
Cobble Hill Nursing Home sued Henry and Warren Corporation, alleging breach of a termination agreement. The defendants moved to dismiss, arguing that the alleged agreement was unenforceable under the Statute of Frauds. The New York Court of Appeals affirmed the dismissal, holding that the letter agreement between the parties was merely an agreement to negotiate future terms and lacked essential terms necessary for enforcement, especially regarding the division of commissions. The court emphasized that it could not supply the missing terms, as there were no objective criteria for determining the parties’ intent.
Facts
Plaintiff joined HBS, Ltd., an agency, and brought personal clients with him. A letter agreement dated January 31, 1963, outlined terms regarding these clients and commissions should the plaintiff leave HBS, Ltd. The letter stated that clients signed by plaintiff could request release upon his departure. Commissions from contracts negotiated for plaintiff’s clients would go to HBS, Ltd., with the extent of sharing to be negotiated upon his departure, with HBS, Ltd. receiving a minimum of 5%. If deals were in progress when plaintiff left, an arrangement would be made regarding commissions. Plaintiff left in 1972 and sued, alleging breach of the termination agreement.
Procedural History
The trial court initially heard the case. The defendants moved to dismiss the complaint based on the Statute of Frauds. The Appellate Division affirmed the lower court’s decision to dismiss the claims against the individual defendants (corporate officers), and the Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
Whether the letter of January 31, 1963, constituted an enforceable agreement regarding the division of commissions upon the plaintiff’s departure from HBS, Ltd., or merely an unenforceable agreement to negotiate future terms.
Holding
No, because the letter agreement lacked material terms, specifically regarding the division of commissions, and provided no objective method for determining those terms, rendering it an unenforceable agreement to negotiate.
Court’s Reasoning
The court reasoned that the letter expressly contemplated future negotiations to determine the division of termination commissions. Paragraph 2 required agreement on the plaintiff’s share of commissions on contracts already negotiated (ranging from 0% to 50%), while paragraph 3 required agreement on commissions from ongoing negotiations (ranging from 0% to 100%). The court found that the letter failed to include a material element—the extent of the plaintiff’s right to commissions. The court could not fill this void because there were no objective criteria to determine the intended fraction, amount, or payment period. “At best there is but an agreement to negotiate at some future date.” Even if a 50% division was allegedly negotiated orally, the Statute of Frauds bars adding such oral understandings to the written letter to create an enforceable contract. The court emphasized that without written proof of a negotiated division, there was no enforceable obligation. The absence of key terms prevents the enforcement of the alleged agreement.