Clients Must Obtain a Fully Executed Copy of their Agreement to Avoid a Challenge of Unenforceability
When a client, typically either an owner or contractor, does not insist on obtaining a fully executed copy of an agreement with an entity it retains to perform work, an issue as to its validity can be presented. Maybe the agreement contains favorable indemnification language or insurance procurement coverage that benefits the owner/contractor. If the owner/contractor claims that indemnity or insurance coverage is owed to them and the resisting party claims that the agreement is unenforceable because it was not signed, proof must be presented to establish the intent of the parties to be bound to the terms of the agreement and any ambiguity will result in a question of fact and a jury trial to resolve the issue.
Generally speaking, to determine whether parties agree to be bound to an unsigned agreement, courts will look to the objective manifestations of their intent as gathered from their express words and deeds. Gallagher v. Long Island Plastic Surgical Group, P.C., 113 A.D.3d 652 (2nd Dept. 2014). The Court of Appeals, in Flores v. Lower East Side Service Center, Inc., 795 N.Y.S.2d 491 (2005) held that, barring a statutory requirement (such as the statute of frauds), a contract need not be signed to be enforceable.
The recent First Department Appellate Division case of Aguilar v. City of New York, 2018 NY Slip Op 04838 (1st Dept. 2018) reiterated this principal when it was presented with evidence of an unsigned written indemnification agreement and found conflicting testimony regarding the intent of the parties to be bound to the terms of indemnification. Specifically, the court looked to evidence of the parties’ previous intent to be bound (on at least one prior arrangement); the contractor’s performance of the project at issue and its receipt of payment in the amount reflected in the agreement at issue. Nevertheless, the Appellate Division found that due to the conflicting testimony of the parties, whether the parties intended to be bound to the indemnity language was unclear and accordingly, denied summary judgment to the movant.
To avoid this problem, owners and contractors must obtain a copy of the fully executed agreement (evidencing both parties’ signatures). This exercise will solidify the intent of the parties to be bound to the terms contained within the agreement and can avoid litigating this relatively straightforward issue in the future.
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