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Agreeing to Agree: Commercial Division Rules Twice that Term Sheets Were Not Binding Agreements

In two recent decisions, Justices Charles E. Ramos and Saliann Scarpulla of the New York Commercial Division ruled that term sheets were not binding agreements. Keitel v. E*Trade Fin. Corp., No. 652220/2015, 2017 BL 131532 (N.Y. Sup. Ct. Apr. 17, 2017); JTS Trading Ltd. v. Trinity White City Ventures Ltd., No. 651936/2015, 2017 BL 131820 (N.Y. Sup. Ct. Apr. 17, 2017). These cases serve as reminders to contracting parties to use unequivocal terms to reflect the creation of binding obligations when memorializing their agreements.

In Keitel, Justice Ramos held that there was no meeting of the minds between Harvey Keitel—a film actor known for his roles in Taxi Driver and Pulp Fiction—and E*Trade Financial Corporation (“E*Trade”)—an online brokerage firm—when they exchanged a term sheet regarding the production of a series of commercials.[1]

E*Trade retained an advertising firm, which in turn retained a talent agency, to find a star for E*Trade’s ad campaign.  Keitel’s agent informed the talent agency that Keitel was interested in the spot.[2] The next day, the talent agency sent Keitel’s agent an e-mail attaching an unsigned term sheet that contained many blanks, and whose filename contained the phrase, “non-binding-Term-Sheet.” The term sheet provided, in relevant part:

This letter sets forth the general intent of the parties to discuss in good faith the terms and conditions of Artist’s potential participation in E*Trade’s advertising, providing that neither party shall be bound until the parties execute a more formal written agreement, which shall include terms and conditions standard for agreements of this type. . . .[3]

Three days later, and upon Keitel’s agent’s request, the talent agency resent the term sheet, this time indicating that it was a “firm and binding offer . . . contingent upon the result of the background check, and of course coming to terms on scripts, compensation, etc.”[4]

The following day, Keitel’s agent notified the talent agency that E*Trade and Keitel “ha[d] a deal and were all good,” to which the talent agency responded, “great.” Keitel’s agent told the talent agency to “expect back a redline” that would show edits to the term sheet. Later that day, Keitel’s agent notified the talent agency that Keitel had “agreed to do the 3 commercials for E Trade. Per our conversations, can you please get us the Long Form contract as soon as possible . . . .”[5]

One day later, the talent agency responded that E*Trade was no longer interested in working with Keitel. The talent agency offered a “kill fee” of $150,000, which Keitel’s agent declined.[6]

Keitel sued E*Trade in the New York Commercial Division alleging breach of contract. E*Trade moved to dismiss Keitel’s complaint on the ground that the parties did not enter into a binding contract.[7]

The issue, according to Justice Ramos, was “whether the Term Sheet constitutes a binding contract or merely an agreement to agree.” E*Trade argued that there was no binding contract because the term sheet stated that “neither party shall be bound until the parties execute a more formal written agreement.” E*Trade also argued that the term sheet could not be a contract because it lacked material terms (e.g., scheduling, location, and director), and that, even if the term sheet constituted an offer, Keitel and his agent failed to clearly and unequivocally accept its terms. Keitel countered that the totality of E*Trade’s conduct demonstrated an intent to be bound, as evidenced by the e-mails exchanged between Keitel’s agent and the talent agency.  Keitel also argued that the parties had a meeting of the minds on all material terms, including hours, compensation, and the number and duration of commercials to be produced.[8]

Justice Ramos found that the term sheet’s proviso that “neither party shall be bound” was unambiguous, and that the court did not need to consider extrinsic evidence of the parties’ conduct to determine whether there was a binding agreement. Since the parties failed to execute a formal written agreement, there was no contract. But even if the court were to look to the parties’ conduct, Justice Ramos continued, the evidence was insufficient to show a meeting of the minds as to material terms, including termination, ownership, and confidentiality. Finally, Justice Ramos held that, even if the term sheet constituted an offer, Keitel “failed to establish an unqualified acceptance of” that offer because Keitel’s agent’s asked for more information about material terms and stated that she would send a redline memorializing additional terms.  Finding that there was no agreement between the parties, the Commercial Division dismissed Keitel’s complaint and closed the case.[9]

Similarly, in JTS Trading Ltd., Justice Scarpulla dismissed a breach of contract claim because the parties’ Memorandum of Understanding (“MOU”) was not a binding agreement.[10]

In that case, JTS Trading Ltd. (“JTS”), a Hong Kong corporation, entered into a MOU with Trinity WCV Ventures Limited (“Trinity”), a United Arab Emirates private trust. The purpose of the MOU was to set out terms and conditions under which JTS and Trinity would create a fund to invest in certain commercial real estate.  The MOU appointed JTS as the “exclusive arranger” of the fund. It also stated that JTS and Trintiy were “prepared to cooperate” and that the MOU would be followed by “definitive agreements.”[11]

After signing the MOU, Trinity and a third party entered into a financing arrangement under which loans were extended to the companies that owned the target properties, and Trinity obtained a right of first refusal to buy the properties. JTS alleged that this arrangement was a “loan to own” transaction intended to transfer ownership of the properties to Trinity, and that Trinity had therefore breached the MOU.[12]

Justice Scarpulla found that “the specific language of the MOU provides ample evidence that the parties did not intend to be bound contractually to each other in a partnership relationship until more formal contracts were executed.” That language included statements that the parties were “prepared to cooperate,” that legal counsel were to draft “definitive” partnership agreements, and that the parties would exchange initial drafts of those agreements and satisfy “[o]ther [c]onditions precedent.” Justice Scarpulla thus found that the MOU was an “agreement to agree” and did not create a binding contract between the parties.[13]

These cases caution parties dealing with terms sheets, letters of intent, and memoranda of understanding to consider carefully whether the language used in such documents evidences their intent to be bound. If parties do intend to be bound, they should ensure that their offers and acceptances are unequivocal, and should memorialize their final agreements in a way that makes clear they are binding commitments.


[1] Keitel, 2017 BL 131532, at *5.

[2] Id. at *1.

[3] Id. at *1-2 (emphasis added).

[4] Id. at *2.

[5] Id. at *3.

[6] Id.

[7] Id. at *3-4.

[8] Id. at *4-5.

[9] Id. at *5-6.

[10] JTS Trading Ltd., 2017 BL 131820, at *4-5.

[11] Id. at *1-2.

[12] Id. at *2.

[13] Id. at *4-5.