Category Archives: breach of contract

Can An Agreement Be Fully Integrated If the Parties Also Agree To Execute A Long Form Agreement In the Future?

The Federal District Court for the Southern District of New York recently decided that a licensing agreement between a television broadcast company and the owner of an animated children’s television series was fully integrated, despite a provision in the agreement which stated that the parties would execute a more detailed long form agreement in the future. 4Kids Entm’t, Inc. v. Upper Deck Co., 2011 U.S. Dist. LEXIS 58669 (S.D.N.Y. May 31, 2011).

The plaintiff in the suit, 4Kids Entertainment (“4Kids”), sued the Upper Deck Company and Upper Deck Entertainment, LLC (collectively “Upper Deck”) for breach of contract. In 2008, the two parties entered into a two-year licensing and broadcasting agreement for an animated children’s television series called the Huntik Series (“Huntik”). The Term Sheet for this agreement was executed by Upper Deck on February 26, 2008 and by 4Kids on March 4, 2008.

The Term Sheet licensed to 4Kids the right to broadcast Huntik within the United States, requiring it to air 26 episodes. It also granted 4Kids an exclusive option to license the television rights to any additional episode during the contract period, with the contract term being automatically extended by one year each time this option was exercised. The Term Sheet also included details regarding payment that would be owed to 4Kids.

A particularly crucial provision included in the Term Sheet was that both parties agreed to be bound by it until a long form agreement could be reached. The relevant provision read that “[t]he parties agree to execute a long form agreement on or before April 15, 2008… [and until such time], this Deal Memo shall serve as the binding agreement of the parties.” Id. at 9. However, the two parties never executed a long form agreement.

The Term Sheet required Upper Deck to pay an advance of $30,000 in two installments. They made the first installment, but failed to pay the second when it was due. 4Kids sought summary judgment in their favor for the amount owed, claiming Upper Deck breached its contract with the plaintiffs. Upper Deck argued the Term Sheet was ambiguous and offered parol evidence to support its argument.      

The parol evidence rule is a common law rule that prevents parties from introducing additional evidence that seems to contradict or add to terms agreed to in a contract. In order to determine if the parole evidence rule applies, courts must determine if an agreement is integrated. Id. at 14. An agreement is integrated if its represents the entire understanding of the parties to the transaction. Id. Under New York law, a contract that appears complete on its face is an integrated agreement as a matter of law. Id.

In 4Kids, the Court found the Term Sheet to be fully integrated, holding that the agreement sets forth every material contract term. Id. at 16-17. Additionally, the Court found that nothing in the contract suggested that the defendants’ failure to pay any specific amount prior to the due date for the second payment would excuse the making of that payment. The Court also held that “the fact that the Term Sheet contemplates the possibility of a longer and more detailed agreement,” containing the terms set forth herein in more detail as well as such terms as may be agreed to in writing by the parties after good faith negotiation . . . does not call this conclusion into question.” Id. at 17-18.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Does a New York Contractor Need A License To Sue For Breach of Contract?

New York Contractors who perform work without the requisite license could find themselves lacking the necessary tools to bring legal action against residence owners they contract to do business with.

In a recent New York case, the parties entered into a written contract that required the plaintiff to renovate the defendant’s residence. This included, among other tasks, building a second-story addition to the master bedroom. Enko Const. Corp. v. Aronshtein, 2011 WL 5222881 (N.Y.A.D. 2 Dept.). The project became larger than originally planned, resulting in the demolition of most of the original structure of the defendant’s residence. After the plaintiff had performed extensive work but before he had completed the project, the defendant terminated his services. The plaintiff sued in New York Supreme Court to recover damages for breach of contract and in quantum meruit (the measure of value) for services performed. The defendant moved to dismiss the complaint, claiming the plaintiff was not a licensed home improvement contractor. The Court granted the defendant’s motion, and the plaintiff appealed.     

New York law provides that “no person shall own, maintain, operate, engage in or transact a home improvement business…unless he [or she] is licensed therefore.” Nassau County Administrative Code, § 21–11.2 CPLR 3015(e) states that a complaint that seeks to recover damages for breach of a home improvement contract or to recover quantum meruit for home improvement services is subject to dismissal if it does not allege compliance with the licensing requirement. “An unlicensed contractor may neither enforce a home improvement contract against an owner nor seek recovery in quantum meruit.” J.M. Bldrs. & Assoc., Inc. v. Linder¸ 67 A.D.3d 738, 741.      

The plaintiff conceded that it did not possess the requisite license. Instead, it argued that it did not need a license, due to a statutory exemption to the requirement that applies to the construction of new homes. However, the Appellate Division of the Second Department of the Supreme Court of New York concluded that “[t]he statutory exemption for ‘construction of a new home’ is limited to the creation of a structure, where none previously existed…Even if a dwelling is stripped to the frame and rebuilt, the work constitutes the renovation of an existing home, not the erection of a new one.” J.M. Bldrs. at 740. Because it was undisputed that there was an existing home on the property when the plaintiff began its work, the Court held that the plaintiff was engaged in “home improvement” and thus was required to have the requisite license for such work. Additionally, the Court held that the defendant’s home fell within the Code’s definition of buildings “used as a private residence or dwelling place” even though the homeowners moved out temporarily while the plaintiff performed the renovations. 

The Court’s decision highlights the importance that contractors engaged in “home improvement” in New York ensure that they have the requisite license to perform their work before taking on such tasks. Failure to do so might leave them without legal grounds to recover from parties who terminate their services while a project is ongoing.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC