Thompson & Skrabanek
Will The Court Enforce My Contract?
Updated: Apr 9, 2021
In this article, we answer the following questions: 1) What qualifies the government to determine and enforce the nature of the agreements we make? 2) How does it go about doing so when private disputes arise?
Our ability to freely bargain and negotiate the terms of contracts, free from unreasonable government influence, remains one of the great pillars of our democracy. The freedom to contract is a fundamental right that is crucial to maintaining the balance between the rights of the individual in pursuit of their own interests and government restriction when it comes to business and private enterprises.
The State of New York highly values the “freedom to contract.” Generally, this means sophisticated parties may contract as they see fit. When the parties enter into an agreement after independent, arms-length negotiations, courts will enforce their unambiguous agreements per the agreement’s plain meanings. “Freedom of contract” means the intentions of the parties are enforceable so long as their agreement is neither illegal nor offends public policy. The court is concerned with the parties' intent when they enter into their contract and not later on.The shared intention of the parties is what matters. A party's subjective intent is generally irrelevant if not known to the other contracting party. Competent parties will be held to the terms of their agreements they make with open eyes. Courts will generally find that if a party is unhappy with the results of its agreement, it should have bargained better.
The most concrete evidence of the parties’ intent is their written contract. Courts usually ignore the parties’ intent when it is not embodied in writing. The court will examine the writing to see if it clearly and unambiguously states the parties' intent. If so, the court will probably look no further and enforce the agreement by the plain meaning of its language. The parties are presumed to have understood the meaning of the words they used. That plain meaning may not be changed by “parol,” or outside evidence. Natural justice and the stability of society require enforcement of clear and unambiguous contracts as they are written. A clear and unambiguous contract is to be interpreted by its own language to give effect to the intention of the parties as expressed in their own language. When the language of the writing is intelligible and not illegal, the court's role essentially is merely to enforce what the parties wrote.
New York courts will evaluate the parties' intent based on their whole contract and not any one portion of it. Courts consider contracts in their entirety, without any emphasis on particular words. Despite courts’ inclination to sometimes take a broader view in deciding whether the intent in the written agreement is plain and unambiguous, courts generally focus solely on the written contract and not outside circumstances. The intention and reasoning for the agreement, what both parties hope to gain through the contract, as well as all reasonable expectations will be considered by the court only if the agreement is deemed ambiguous. The agreement should be read in light of the current conditions that existed during its creation, including the objectives the parties had in view and the external motives that influenced their choice of words, as those conditions may inform meanings of words or phrases that are different from the chief meaning of the word as it is used in the contract. The language of the contract will be read through the lens of colloquial speech, each party’s reasonable expectations and respective intentions, and the scope of the business acuity of the respective parties. The court not only takes into consideration the language of the document verbatim when ascertaining the parties’ respective reasonable expectations but also what could be implicit in the language as well. This intent is determined by both the reasonable expectations of the parties as well as the standard motive of the average business person when entering into an agreement.
New York law may tend to enforce the primary and plain meaning of the language used in a comprehensible contract, but the court retains the authority and jurisdiction in particular circumstances to stray from literally interpreting the explicit language in the document. When applicable and appropriate, the court should avoid any appearance of favor towards either party by their interpretation of the language. Circumstances and conditions during the writing of the contract, as well as the intent, should always be taken into consideration by the court in order to avoid giving strict meaning to general phrases used throughout the document. The reading of the contract should not thwart the clear and detailed purpose of the agreement but instead should attain the agreed-upon purpose by the parties when entering the agreement. The words should be defined by the meaning in which they would be understood by a common layperson. In the rare case in which the primary reading of the wording of the document is irrational, the court can supply or alter wording to clarify and refine the intended meaning of the agreement.
However, if an agreement at face value is not susceptible to more than a single meaning, the court cannot modify the contract to reflect its own notions of what is fair or just, nor can it change the words of an unambiguous contract to have it reflect what the court believes is most likely the true intention of the parties if that would explicitly contradict the terms of the agreement. A written contract that is negotiated at arm’s length between private parties and that is both clear and unambiguous is to be enforced in accordance with the plain and primary meaning of its terms. The court’s role is to simply enforce the agreement already made by the parties, not to change or distort the parties’ terms to its will.
There are usually two central questions when examining the parties’ intent:
1) What does the court focus on, or look to, within the written contract to distinguish the intent of the parties?
Previous New York court decisions have established the precedent that when contract language is both easily perceivable and unambiguous, the court will look solely to the words and phrases expressed within the document.
2) From what point of view is the court examining the language of the document?
When inspecting a written contract to discover whether or not there is room for other interpretations, the court should consider the contract in its entirety and consider the relationship between the parties and the conditions under which the contract was enacted.
The wording and language of the agreement is conducted from the point of view of a common, but intelligible person, who understands the entirety of the context and conditions in which the parties entered the contract, and is aware of the common practices and language used in the applicable trade or area of business.
In addition, the freedom of contract in the State of New York dictates that either of the parties are able, at any time, to terminate their negotiation of the agreement as long as it fulfills the agreed upon consequences of doing so. The reasoning for doing so could include the pursuit of a more lucrative agreement or the avoidance of an inconvenient deal, as long as the severance of ties complies with the repercussions, or liability for damages, outlined in the contract. When granting damages in the realm of contract law, rather than tort or civil, to the party that chooses to breach the agreement consciously, any negligence in performing their contractual obligations should not affect the consideration of damages.
The freedom of contract also encompasses the power to outline the consequences for any violation of or breach of the contract. The contract can specify the singular resolution for any breach of the contract and also set contingencies and arrangements that outline each party’s liabilities when dissolving the agreement. Parties can also identify when they will be confined by the conditions of an agreement, allowing the parties to ensure that they will not be held to conversations held during negotiation periods but solely what is defined in the final, conclusive agreement. Thus, the court cannot hold parties to any incomplete agreement presented prior to the final contract. This allows for frank and personal negotiation periods, with the underlying agreement that neither party will be held or bound to the terms discussed until a final contract is mutually agreed upon and implemented. However, if it can be proven that both parties agreed to be held to an agreement before the definitive contract was implemented, any expression of intention to not be held until a final agreement can be waived if particular conduct by the party shows that a prior agreement was made.
Disclaimer: The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal advice. This article includes general information that may not reflect current legal developments or address your specific situation. No attorney-client relationship between you and Thompson & Skrabanek, PLLC is created by your use of the information contained herein.