An extract from The Complex Commercial Litigation Law Review, 2nd Edition
i Basic elements
The elements of an enforceable contract in New York are 'an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound'. A binding contract exists where 'there is a sufficiently definite offer such that its unequivocal acceptance will give rise to an enforceable contract'. 'An offer not given for consideration may be revoked at any time'. The price itself is also considered a key term of the contract.
Acceptance must track the offer's terms and be 'clear, unambiguous and unequivocal'. An acceptance that is 'qualified with conditions' constitutes a rejection. Although silence is not sufficient to indicate acceptance, a counter-offer can be accepted by a party's conduct. Thus, a party that, upon receiving a counter-offer, begins performing in accordance with that counter-offer, may be found to have demonstrated its intent to accept the terms of that counter-offer. Moreover, where a party has an 'opportunity and duty to speak, failure to speak may constitute an assent'.
Consideration must support all contracts. New York law requires either a benefit to the promisor or a detriment to the promisee, although the consideration does not necessarily have to be provided contemporaneously. Consideration is a benefit and forms the primary reason for a party's entrance into a contract. At the same time, a mere promise to perform some action can form the basis of consideration. However, the promise by a party to perform some action must entail some kind of detriment to that party. New York courts have found that contracts that offer consideration while also maintaining a way to escape detriment do not qualify as consideration.
An option contract 'is an agreement to hold an offer open', and grants the optionee the right to purchase or sell at a later date. The party exercising the option must act in the 'manner specified in the option'. Options, such as a right of first offer and right of first refusal, are enforceable under New York law.
ii Oral contracts
Contracts can be formed orally, but will not be enforced if they violate the statute of frauds. Under New York law, a writing is required for any agreement that '[b]y its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime'. However, 'New York courts generally construe the statute of frauds narrowly', only voiding oral contracts for which full performance cannot be completed within one year. If an agreement falls under the statute of frauds, the writing must contain the agreement's material terms, such as the agreement's duration. New York law recognises that electronic signatures and emails may constitute a writing sufficient to satisfy the statute of frauds. New York courts often find that emails form enforceable agreements, provided that the emails include all of the agreements' essential terms.
Although New York courts have traditionally accepted promissory estoppel as an alternative contract theory, the Court of Appeals (New York's highest court) recently limited the theory by invoking the statute of frauds. The Court of Appeals held that, where an agreement would be subject to the statute of frauds, in addition to the elements of promissory estoppel, a plaintiff would also have to show that enforcing the statute of frauds would result in an 'unconscionable' injury. The court clarified that the standard for unconscionability in this context was the same used to declare a contract void. However, the parties wishing to ensure they have an enforceable agreement should normally reduce their agreement to writing whenever possible.
Generally, New York law will enforce written modifications to a contract that are executed by both parties. However, New York law enforces 'no oral modification' clauses in contracts more strictly than many other jurisdictions in the United States. New York statutorily mandates that no-oral-modification clauses in contracts must be enforced, and contract terms generally cannot be modified unless the parties' performance unequivocally demonstrates their assent to the alleged oral modification. One New York appellate court recently explained that it faced situations wherein 'one party to a contract wrongly presumes, based on past practice, that an oral modification will be sufficient [to modify the contract]'. That court held that, for the real estate contract at issue, the seller was entitled to terminate the contract after the buyer missed the closing date, incorrectly relying on an alleged oral modification to adjourn.