93 N.Y.2d 584 (1999)

For a contract to be enforceable, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are in agreement with respect to all material terms; a contract is unenforceable if it contains open material terms demonstrating that the parties did not have a meeting of the minds.

Summary

Express Industries sought to enforce a lease agreement with the New York State Department of Transportation (DOT) for a pier. The permit, which DOT characterized as its final determination, contained blanks for the security deposit date, the date DOT could exercise an option to redeem space, and the corresponding rent reduction. Express executed the permit but questioned these terms in a cover letter. DOT then entertained another offer. The New York Court of Appeals held that no binding contract existed because the permit omitted material terms, indicating a lack of mutual assent on those terms. Thus, DOT’s permit was not a sufficiently definite offer that Express could accept to create a contract.

Facts

Express Industries had been leasing part of a pier from the Port Authority, a lease assumed by DOT in 1981 and set to expire December 31, 1996. In early 1996, DOT discussed extending the lease and having Express lease the entire pier. Negotiations continued, but by fall, no final agreement was reached, especially regarding the price. On November 15, 1996, DOT sent Express a “permit” with terms for leasing the pier, including rental payments and space, calling Express’s execution of the document an “acceptance” and stating that the permit contained DOT’s “final determination.” However, the permit omitted the date for DOT’s receipt of a security deposit, the date DOT could exercise an option to redeem space for a recreation field, and the rent reduction amount if DOT exercised that option.

Procedural History

Express filed a CPLR article 78 proceeding seeking to compel DOT to execute the permit. The Supreme Court denied Express’s request for a preliminary injunction and dismissed the petition, holding that the parties did not reach a meeting of the minds on essential terms. The Appellate Division reversed, concluding that Express had accepted DOT’s offer and that ambiguities existed only regarding the option. The Court of Appeals granted leave to appeal and reversed the Appellate Division’s order.

Issue(s)

Whether a binding contract for the lease of a pier existed between Express Industries and the New York State Department of Transportation when the “permit” contained open terms regarding the security deposit date, the date DOT could exercise a redemption option, and the rent reduction associated with that option.

Holding

No, because the permit omitted material terms, indicating a lack of mutual assent necessary to form a binding contract.

Court’s Reasoning

The Court of Appeals reasoned that a binding contract requires a manifestation of mutual assent on all material terms. The court stated, “[d]efiniteness as to material matters is of the very essence of contract law. Impenetrable vagueness and uncertainty will not do.” While not every term needs absolute certainty, there must be mutual assent to essential terms. Here, the blanks in the permit regarding the security deposit, option exercise date, and rent reduction rendered those terms “impenetrably vague and uncertain” and were deemed material. The court noted that there was no objective way to determine how the parties intended to establish the option exercise date or the rent reduction amount. Furthermore, Express itself highlighted the materiality of the option provision in its cover letter, noting that exercising the option would cause “loss of jobs and value of the Pier” and “would cause loss of tenants that require [the truck turnaround] in order to conduct their business.” Thus, because material terms were left open and no objective evidence existed to determine the parties’ intent, the court concluded that the permit was not a sufficiently definite offer capable of giving rise to an enforceable agreement. The court distinguished UCC 2-305(1), which allows contracts with open price terms, because there was no objective evidence that both parties intended that DOT be allowed to fill in these blanks with any reasonable terms they chose.