MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640 (2009)
An express condition precedent in a contract must be literally performed, and failure to fulfill the condition excuses the obligated party’s duty to perform.
Summary
MHR Capital Partners sued Presstek for breach of contract after Presstek terminated a stock purchase agreement. The agreement required a third-party bank, Key Bank, to consent to the transaction by signing a specific consent form by a set date. Key Bank provided a qualified consent via fax but did not sign the required form. The New York Court of Appeals held that Key Bank’s signed consent was an express condition precedent to Presstek’s obligation to close the deal. Since the condition was not met, Presstek was excused from performance, even though it later entered a more favorable agreement. The court emphasized that express conditions must be strictly performed.
Facts
Presstek agreed to purchase A.B. Dick Company (ABD) from Paragon Corporate Holdings. MHR, a major creditor of ABD, agreed to waive its rights in exchange for payment from Presstek. An escrow agreement stipulated that the stock purchase would be released only if Key Bank, ABD’s lender, consented by signing a specific consent form by June 22, 2004. The consent form required Key Bank to continue funding ABD and forbear from declaring any default. Key Bank sent a fax consenting to the deal but did not sign the required form and included different terms. Presstek then terminated the stock purchase agreement and later acquired ABD’s assets through a bankruptcy sale.
Procedural History
MHR sued Presstek for breach of contract in New York Supreme Court. The Supreme Court granted Presstek’s motion for summary judgment, which was affirmed by the Appellate Division, although on different grounds (condition precedent). MHR appealed to the New York Court of Appeals based on a two-Justice dissent at the Appellate Division.
Issue(s)
Whether Key Bank’s execution of the consent form by the specified date was an express condition precedent to Presstek’s obligation to perform under the stock purchase agreement.
Holding
Yes, because the escrow agreement clearly stated that the release of the contract documents was contingent upon Key Bank’s execution of the consent form by June 22, 2004; failure to meet this condition rendered the agreement null and void.
Court’s Reasoning
The Court of Appeals determined that the escrow agreement’s language – using the terms “unless and until” – created an unambiguous express condition precedent. The court cited Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 (1995), noting that such terms constitute “unmistakable language of condition.” Key Bank’s faxed consent did not satisfy the requirement of a signed consent form with all the specified terms. MHR’s argument that the consent form added new conditions was rejected because MHR, a sophisticated party represented by counsel, had agreed to the terms of the escrow agreement, including the consent form. The court also addressed MHR’s argument that Presstek prevented Key Bank from signing the consent form, stating that the burden was on Paragon, not Presstek, to obtain the consent. The court found that Presstek meeting with Key Bank and Key Bank refusing to sign was not interference, particularly since Key Bank possessed the form and refused to sign it before the deadline. The court stated, “a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” (citing ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484, 490 (2006)), but that this did not occur here.