Author: Thomas S. Tripodianos

Question. Can a Contractor and manufacturer of equipment avoid liability by shortening the time frame within which the Owner may bring claims against them?

Answer. Yes but with a caveat. Consumer and Homeowner protection statutes may modify the general rule so be sure to go over your particular circumstances with counsel.

The Contract was signed in September, 2006.  The Contract was pre-printed and four pages long.  On the first page of the contract appear the following notice:

YOU ADMIT THAT YOU HAVE READ THIS PAGE IN ADDITION TO THE ATTACHMENT WHICH CONTAINS IMPORTANT TERMS AND CONDITIONS FOR THIS CONTRACT BEFORE SIGNING. YOU STATE THAT YOU UNDERSTAND ALL THE TERMS AND CONDITIONS OF THIS CONTRACT, INCLUDING, BUT NOT LIMITED TO, PARAGRAPHS 5, 6, 7, 8, 9, AND 10….
Paragraph 10 appears on the second page of the contract, and provides:
10. TIME TO FILE LAWSUIT OR OTHER ACTION. YOU AGREE TO FILE ANY LAWSUIT OR OTHER ACTION YOU MAY HAVE AGAINST U.S. OR OUR ASSIGNEES, AGENTS, EMPLOYEES, SUBSIDIARIES, AFFILIATES OR PARENT COMPANIES WITHIN ONE (1) YEAR FROM THE DATE OF THE EVENT THAT CAUSED THE LOSS, DAMAGE OR LIABILITY.

Question. Can Contractor
be disqualified from bidding for a contract to supply replacement parts
were the specifications are written such that there is only one viable
supplier?



Answer. YES.
The only acceptable bidder’s (“AB”) products bore a
trademark and thus could be marketed as “genuine,” where Contractor’s
could not. Having legally obtained the right to use the trademark, no
one could question AB had the right to reap the benefits of its bargain,
even if it meant AB had a competitive advantage in the marketplace over
other products that may be identical, or even superior, to its own.



There is an inherent rationality to the city’s decision to rely on the
presumed suitability of the genuine replacement parts “GRPs” sold by AB.
Hence, the decision to disqualify Contractor had a rational basis.



Contractor can be deemed a non-responsive bidder based on the
determination that the replacement parts Contractor supplied for these
engines were not “genuine” replacement parts (GRPs). Similarly AB may be
categorized as not only a supplier of GRPs but also as the original
equipment manufacturer of the engines. As a result of these
determinations, AB emerges from the competitive bidding process as the
only viable supplier of GRPs for the engines at issue.



It should be noted that the particular kind of engine at issue here is
no longer in production. According to Contractor, production of these
engines ceased in 1988. At about the same time, AB purchased certain
intellectual property and marketing rights relative to the engines from
the original manufacturer including design specifications and schematics
for various engines and replacement parts, as well as the trademark and
the right to market its replacement parts with the trademark.



Contractor is in the business of servicing the engines and sells its own
replacement parts for them. Although Contractor does not market its
parts as “genuine” replacement parts, Contractor claims that it actually
uses many of the same manufacturers as AB to produce its parts and that
the technical specifications and tolerances for its parts are virtually
identical to those sold by AB. The similarity between the companies’
replacement parts is claimed to be a result of several factors including
the fact that the specifications for many engine parts are well known
within the industry (or in the “public domain” as Contractor puts it)
and that the current design of many parts are different from the
original design specifications as a result of improvements and
modifications that have been made to the engines over time.



The City has apparently been purchasing replacement parts for its
engines from Contractor on an interim “purchase order” basis. More
recently, the City decided to abandon the competitive bidding process
entirely and enter into a “single-source contract” for replacement parts
with AB.



The City argues, and Contractor does not seriously dispute, that there
were good reasons to require that contract applicants in the competitive
bidding process be suppliers of genuine replacement parts, as opposed
to so-called “or equal parts.” These engines are not easily or
inexpensively replaced. In order to “ensure the safe, trouble free
operation” of these engines, the City rationally determined that it
would use only genuine replacement parts which presumably can be relied
upon to meet the original equipment manufacturer’s tolerances and
specifications. This constitutes a rational basis for the preliminary
determination by the City that a successful bidder for the subject
contract should be one who supplied GRPs for the City’s engines.



The more central dispute in this case, however, concerns the rationality
of the two related determinations by the City that Contractor was not a
supplier of GRPs and that AB was. The resolution of this dispute
ultimately determines whether Contractor can compete to supply
replacement parts for the engines on an equal footing with AB.



The thrust of Contractor’s argument is not that it should have been
deemed a supplier of GRP’s but rather that, in light of the similarities
between AB’s and Contractor’s replacement parts businesses, the
determination that only AB was a supplier of GRPs was arbitrary and
capricious. Thus, Contractor reasons, AB is no more a supplier of GRPs
than Contractor is and their respective bids should have been considered
as equals.



Additionally, Contractor asserts that the designation of AB as the
original equipment manufacturer (OEM) of the engines — which lies at the
core of AB’s ability to market its replacement parts as genuine parts —
was also arbitrary and capricious considering that AB has never
actually manufactured an engine. In Contractor’s view, AB’s only claim
to OEM status arises from its purchase of the trademark and other
intellectual property during the 1980’s after the engines went out of
production. Thus, according to Contractor, AB’s designation as OEM and
the related designation as a supplier of GRPs which flows from it is the
result of a legal fiction.



While the Contractor’s replacement parts may be functionally identical
to those supplied by AB, even if that assertion were found to be true,
there still remains a rational basis upon which to conclude that the
replacement parts marketed by AB are “genuine” parts while the parts
sold by Contractor are not. Therefore the decision to disqualify
Contractor from the competitive bidding process and the concomitant
decision to classify AB as the original equipment manufacturer and a
provider of GRPs had a rational basis.

Question. The parties are
involved in a dispute over defects and delays in the construction of a
very large commercial project. The Owner of the project retained a
consulting firm under two different contracts to perform two different
services: (a) to provide construction management services, and (b) to
assist counsel by reviewing and analyzing claims submitted by various
contractors. Are the documents relating to the latter “privileged” so
that in the context of litigation they need not be produced to the
contractors making claims?



Answer. YES.
The two groups of documents were created by different
entities operating under different contracts and performing different
services. Documents created at the request of Owner’s counsel for claims
analysis and possible litigation position are protected under the
work-product doctrine.



The Owner’s construction management contract with the consultant charged
the consultant with implementing and enforcing the Owner’s procedure
for the processing of Change Orders and analyzing and evaluating all
claims for contract time extension or cost adjustment and making
recommendations for resolution, approval, or disapproval.



The Owner’s claims analysis contract charges the “Claims Analysis Group”
to perform “claims analysis.” The contract requires that the Claims
Group provide Owner with a preliminary claims analysis in order to
identify project delays and damage claims.



The work product doctrine, provides that a party may not discover
documents and tangible things that are prepared in anticipation of
litigation or for trial by or for another party or its representative
(including the other party’s attorney, consultant, surety, indemnitor,
insurer, or agent) unless it can demonstrate a substantial need for the
materials to prepare its case and cannot, without undue hardship, obtain
their substantial equivalent by other means.



The most contested condition necessary for work product protection is
that the material at issue was prepared “in anticipation of litigation.”
A document is prepared “in anticipation of litigation” if in light of
the nature of the document and the factual situation in the particular
case, the document can fairly be said to have been prepared or obtained
because of the prospect of litigation. Under the work product doctrine,
if a document is created because of the prospect of litigation,
analyzing the likely outcome of that litigation, it does not lose
protection merely because it is created in order to assist with a
business decision. However, there is no work product protection for
documents that are prepared in the ordinary course of business or that
would have been created in essentially similar form irrespective of the
litigation. Even if such documents might also help in preparation for
litigation, they do not qualify for protection because it could not
fairly be said that they were created “because of” actual or impending
litigation.



Work product protection may be waived by the conduct of a party. Courts
applying this “fairness doctrine” have found, that for example, where a
party selectively discloses certain privileged or work product material,
but withholds similar (potentially less favorable) material, principles
of fairness may require a more complete disclosure.



The Consultant Claims Group and the Consultant Construction Management
Group performed different services. The ordinary review of contractor
payment requests performed by the Consultant Construction Management
Group involved contact with the contractors. By contrast, the claims
analysis performed by the Consultant Claims Group involved no
construction management work and no contact with contractors. Unlike
the Consultant Construction Management Group, the Consultant Claims
Analysis Group’s analysis was provided directly to Owner’s general
counsel. The Consultant Construction Management Group performed services
that were ongoing for the duration of the construction project; by
contrast, the Consultant Claims Group’s work involved a short-term
assignment. The documents at issue are the result of requests by
Owner’s attorneys for claims analysis including a particular possible
litigation position.

Question. As spring
approaches and many residential projects break ground a fairly common
fact pattern emerges. Homeowners were involved in the basic planning and
coordination of their home renovation project. Their participation was
however, not so significant that they could be considered serving as
their own general contractor. The Homeowners hired a construction
company to perform the work and the worker received direction regarding
the method and manner of his work from company representatives. In
addition, a company representative recruited and coordinated the work of
subcontractors, even though one of the homeowners was primarily
responsible for making sure that the subcontractors were paid and
documented their working hours. There is no evidence that Homeowners
had either actual or constructive knowledge of any alleged dangerous
condition regarding the property conditions.



Are Homeowners liable to a construction worker who was injured while working on their home renovation project?



Answer. NO.
The analysis (and the outcome) relies heavily on the
particular factual situation. This is certainly one situation where the
old adage “If you want something done right, do it yourself” does not
apply.



Construction Worker was employed by Contractor, which was hired by
Homeowners to perform renovation work at a lake house they owned. While
Construction Worker was digging holes to install concrete footers near a
retaining wall, the retaining wall collapsed onto him, causing personal
injuries. Seeking to recover damages for those injuries, Construction
Worker sued Homeowners.



With respect to Homeowners, it is well established that “[a]n owner of a
one- or two-family dwelling is exempt from liability under Labor Law §§
240 and 241 unless he or she directed or controlled the work being
performed.” As there is no dispute that Homeowners are owners of the
house, the relevant inquiry is whether they directed or controlled the
work that was performed there. In that regard, “[t]he phrase ‚Äòdirect or
control’ … is construed strictly and refers to the situation where the
owner supervises the method and manner of the work”.



Although Homeowners were involved in the basic planning and coordination
of the renovation project, their participation was not so significant
as to support a finding that they essentially served as their own
general contractor. Specifically, Homeowners hired Contractor to perform
the work at their house and Construction Worker received direction
regarding the method and manner in which he was to perform his work
directly from Contractor. Although Homeowners were primarily responsible
for making sure that the subcontractors were paid and they documented
when each was present and how many hours they worked, it was Contractor
who recruited them and coordinated their work. Despite Homeowners
completing the building permit application themselves, provided sketches
of the work that they wanted done and making payments for the work
directly to the subcontractors rather than through Contractor the result
is no different.



Homeowner’s actions however did not cross the line from being a
legitimately concerned homeowner to a de facto supervisor. That being
said homeowner’s should allow the construction professionals they hired
to do their job and contractors should strictly enforce the channels of
communication to prevent future disputes and minimize injuries, delays
and cost.

Question. Under these
harsh economic times many companies are being forced to reduce the size
of their workforce in an effort to reduce expenses. While studies have
shown that such downsizing only works in the short term one of the
effects of reducing the number of workers may be an increased work load
for those that remain.



Employers must not only be vigilant to make sure that they follow
the law with regards to terminating employees but must also be vigilant
to ensure a proper workplace environment is maintained for those who
remain.



In this month’s column we explore the latter issue. The assignment of
more work however, was not a result of layoffs but came about after a
co-worker left. The remaining employee claims that the assignment of
more work is an “adverse employment action,” and a clear case of
retaliation for having reported alleged acts of harassment. The
employee in question complained immediately about the extra work load,
and her workload was reduced as a result.



Is the assignment to employee of additional work after a co-worker left
an “adverse employment action,” for the employee to create a case of
retaliation under both Title VII and New York Human Rights Law?



Answer. NO.
To prove that she suffered an adverse action, Employee
must show that she “endure[d] a materially adverse change in the terms
and conditions of employment,” which “might be indicated by a
termination of employment, a demotion evidenced by a decrease in wage or
salary, a less distinguished title, a material loss of benefits,
significantly diminished material responsibilities, or other indices
unique to a particular situation. This requirement stems from the effort
to “protect[ ] individuals from actions injurious to current employment
or the ability to secure future employment.”



Employee claims that Employer’s actions against her amounted to unlawful
retaliation in violation of Title VII and state law. To make out a
showing of retaliation, Employee must offer evidence (1) that she was
engaged in a protected activity, (2) that Employer was aware of this
activity, (3) that she suffered an adverse employment action, and (4)
that there was a causal connection between her protected activity and
the adverse action. Title VII’s “anti-retaliation provision protects an
individual not from all retaliation, but from retaliation that produces
an injury or harm.” This is an objective standard: “a plaintiff must
show that a reasonable employee would have found the challenged action
materially adverse, which in this context means it well might have
dissuaded a reasonable worker from making or supporting a charge of
discrimination.”. Furthermore, “normally petty slights, minor
annoyances, and simple lack of good manners” in the workplace fall short
of this standard. If an employee meets her minimal burden and the
employer counters with legitimate justifications for its actions, then
the employee must show that the proffered reasons are merely pretextual.




Employee contends that employer retaliated against her for complaining
about harassment by assigning her more work following another employee’s
departure. Under the circumstances, however, this was not a
sufficiently adverse action. Employee has not shown that this falls
within the category of actionable harm. Moreover, she complained almost
immediately about the additional accounts, and her workload was reduced.
There is also no evidence causally linking the increase in workload to
her harassment complaint, nor has she established a basis on which to
conclude that employer’s explanation for the reassignment-other
employee’s departure-is pretextual.

Question. Owner issued a request for proposal (“RFP”) to various potential suppliers for the design, manufacture and installation of a geothermal heating system at Owner’s New York facility. In response to the RFP, Contractor offered to design, manufacture, inspect, test and install a solar system. Owner informed Contractor of the energy savings it expected to realize at the facility. Contractor represented to Owner that it could design, manufacture, inspect, test and install a solar system that would perform in a superior manner compared to a geothermal system. Contractor also represented several times in writing that it had manufactured several solar systems of the size and type contained in Owner’s RFP.

As a result of their negotiations, Contractor prepared a final quotation for the design, manufacture, inspection, testing and installation of a solar system. In reliance on the representations and warranties contained in Contractor’ final quotation, Owner agreed to purchase a solar system from Contractor. Owner and Contractor executed an equipment purchase agreement (“Purchase Agreement”) for the solar system (“Equipment”); the Purchase Agreement incorporated the final quotation that Contractor had prepared and required that time was of the essence for the delivery of the Equipment.

The Purchase Agreement contained implied warranties of merchantability, fitness for a particular purpose and warranties arising from course of dealing or usage of trade. The Purchase Agreement also contained several express warranties, including a performance warranty that the Equipment would perform in accordance with the performance requirements as set forth in the specifications, that the Equipment would be designed and manufactured to conform to the specifications, and that the Equipment would be merchantable, of good material and workmanship, free from defects and fit and sufficient for the intended purpose.

Due to Contractor’ fault, the delivery and installation of the system fell behind the schedule set forth in the Purchase Agreement.

Since its installation, the solar system has never functioned according to the terms of the Purchase Agreement and has been shut down on numerous occasions for repair. The system failed within the first eleven months of operation and had to be shut down for repairs. Contractor has undertaken several repair attempts on a number of occasions. Since it installed the system Contractor has replaced several parts of the system. Defendant Contractor paid for the replacement parts and repairs, acknowledging that the problems were due to its conduct and were its responsibility.

On repeated occasions Contractor admitted that the system was manufactured in a defective manner and that it could not function for its intended and/or particular purpose. On several occasions Owner requested that Contractor replace the system.

Contractor modified the Purchase Agreement and provided an additional warranty of future performance for one year that, if the system failed within one year, Contractor would replace the system. The system failed shortly thereafter and Owner asked Contractor to manufacture and deliver a new system.

Owner and Contractor had several meetings regarding the design, manufacture, inspection, testing, installation and operation of a replacement system to be supplied at Contractor’ cost. Owner and Defendant Contractor came to an agreement relating to the replacement system (“Replacement Agreement”). The Replacement Agreement provided that Contractor would design, manufacture, inspect, test and install a replacement solar system with what Contractor described as “better technology” and continue to repair the existing system until the replacement system could be installed.

The Replacement Agreement also provided that, in exchange for Contractor’ agreement to provide a new solar system and for continuing to repair the existing one, Owner would award Contractor and certain of its affiliates preferred vendor status for identified projects.

Owner and Contractor had several meetings about the design, manufacture, inspection, testing, installation and operation of the replacement system under the terms of the Replacement Agreement; Contractor began performance under the terms of the Replacement Agreement; and Owner awarded certain projects to Contractor and/or certain of its affiliates pursuant to the preferred vendor status arrangement. Sometime thereafter Contractor requested an inspection of the existing system at the facility. Contractor conducted an inspection of the existing system at the Facility. Contractor’ repair crew arrived at the Facility to begin a round of repairs, which Contractor had estimated would take four to five weeks to complete.

At approximately the same time Owner met with Contractor. At that meeting, Contractor took the position, for the first time, that Owner was at fault for the performance failures because of misuse of the system. These were the same performance failures that Contractor had previously admitted were due solely to its defective manufacturing. After the meeting, Contractor refused to design, manufacture, inspect and test the replacement system and refused to continue to repair the existing system as required under the terms of the Replacement Agreement.

Question. With respect to the Replacement Agreement, there are three issues that the parties dispute:

(1) whether the Replacement Agreement was a new agreement or was a modification of the Purchase Agreement;
(2) whether a written Replacement Agreement exists and; if not,
(3) whether there is an enforceable oral Replacement Agreement based on the doctrine of partial performance.

1. New agreement or modification of the Purchase Agreement?
Owner contends that the Replacement Agreement is a new agreement, not a modification of the Purchase Agreement. Contractor, on the other hand, contends that the Replacement Agreement is a modification of the Purchase Agreement. The characterization of the Replacement Agreement is only important if the Replacement Agreement is an oral agreement.

If the Replacement Agreement was an oral agreement and that the Replacement Agreement was a modification of the Purchase Agreement, then Owner’s claim would fail. Pursuant to the Purchase Agreement, “[n]o amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties.” Therefore, under this paragraph, no oral modification of the Purchase Agreement would be enforceable. For purposes of discussion let’s accept Owner’s assertion that the Replacement Agreement is a new agreement and not merely a modification of the Purchase Agreement.

2. Written or oral agreement?
Assuming that the Replacement Agreement is a new agreement, separate and distinct from the Purchase Agreement, there is a question whether the e-mail exchange between the parties is sufficient to create a written agreement. Under ¬ß 2-201(1) of New York’s Uniform Commercial Code, “a contract for the sale of goods for the price of $500.00 or more is not enforceable an authorized agent of the defendant has signed a writing indicating the existence of the contract.” Owner asserts that the Contractor’s e-mail of to Owner constitutes the Replacement Agreement. That e-mail states as follows:

John,
This is to confirm that we have reached an agreement combining Contractor’s commitment to replace the solar system with Owner’s commitment to award business to Contractor.
1. Contractor to repair the existing system,-allowing Owner to operate the system. Owner will bear 50% of the repair cost including testing.
2. Contractor will fabricate a new system. Contractor will bear the cost of the new system- Owner will bear the cost of removing the existing system [f]rom its location and installing the new system in that location.

Owner will commit to award the following business to Contractor:
{LISTING OF FUTURE PROJECTS OMITTED}

For this business Contractor would have a ‚ÄòPreferred Vendor Status’ = Rights of first refusal.
Precondition:
Contractor must be technically qualified and competitive.
You and I will have to work out the contract and submit it to the respective management for approval and signature.

Agreements to agree are not recognized as binding obligations under New York law. There is a strong presumption against finding binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents. There is an established a framework for analyzing whether a written instrument constitutes a binding preliminary agreement or an unenforceable agreement to agree.

Ordinarily, where the parties contemplate further negotiations and the execution of a formal instrument, a preliminary agreement does not create a binding contract. Under some circumstances, however, preliminary agreements can generate contractual obligations. One example of such an agreement is where the parties have agreed on all points that require negotiation including whether to be bound, but agree to memorialize their agreement in a more formal document. Such an agreement is fully binding; it is preliminary only in form-only in the sense that the parties desire a more elaborate formalization of the agreement.

Furthermore, there is a four-part test for determining whether the parties intended their written statements to constitute a binding contract. These factors are: (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.

The first factor, the language of the agreement, is the most important. In this case, the language of Contractor’s e-mail to Owner demonstrates that his e-mail was not a fully binding preliminary agreement. Although Contractor used the word “Agreement” in the subject line of his e-mail and noted that this e-mail “confirm[s] that we have reached an agreement,” it is clear that, when read in its entirety, this e-mail does not constitute an agreement under New York law. Most particularly, the last line of the e-mail, in which Contractor stated that he and Owner would have to “work out the contract and submit it to the respective management for approval and signature[,]”makes clear that this e-mail is not a formal memorialization of an intent to be bound. To the contrary, this email indicates that the parties still have to “work out the contract” and that, before the parties are bound, they have to submit the contract to management for approval.

Furthermore, it is clear from subsequent e-mails in this exchange between Contractor and Owner that the parties had not agreed to all of the terms of the alleged contract. In a subsequent e-mail Owner wrote to Contractor that, although Owner is “in agreement to move forward” as Contractor proposed, there were “two clarifications” that he “planned to include on the proposal,” and he indicated that he would begin to work with Owner’s legal counsel to formalize Contractor’s proposals and that he would call later “to confirm that Owner was “ready to move forward as [he had] outlined.”

One month later, in an e-mail Owner wrote to Contractor that he was forwarding “the current draft of the formal agreement” and informed him that “[t]his draft is still being reviewed internally at Owner, so [Owner] may make some changes as well….” He also asked Contractor to “review [the draft] and send [him] any comments that [he might] have.” In addition, he stated that he would set up a call with Contractor and others “to go through a detailed review of any questions, additions or changes that [Contractor might] have.” Finally, Owner stated that he thought the parties were “moving forward to a successful closure of this issue, but want[ed] to make sure [the parties] close on the formal contract as soon as possible.”

Given the strong presumption against finding binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents, it is clear that the e-mail exchange between Contractor and Owner does not constitute a written contract.

3. Applicability of partial performance exception to § 2-201(1)
Since we have concluded that the e-mail exchange does not constitute a written Replacement Agreement, we must next determine whether the “partial performance” exception to ¬ß 2-201(1)’s writing requirement applies to this case.

Section 2-201(3), which allows for this exception, provides that
[a] contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2-606).

Owner contends that, under the terms of the Replacement Agreement, Contractor agreed to “design, manufacture, inspect, test and install a replacement solar system at the Facility … [and] agreed to repair the existing solar system at the Facility until the replacement solar system was delivered.” Owner also claims that “[t]he Replacement Agreement … provided that, in exchange for Contractor’s agreement to provide a new solar system and for continuing to repair the existing Equipment, Contractor would be awarded preferred vendor status for identified Owner projects.” Finally, Owner asserts that Contractor began performance under the terms of the Replacement Agreement, and in reliance thereon, Owner awarded certain projects to Contractor to their preferred vendor status arrangement.

Partial performance’ as a substitute for the required writing can validate the contract only for the goods which have been accepted or for which payment has been made and accepted. The reasoning is that if the subject of a contract is an indivisible unit, even part performance under the contract tends to prove the existence of the entire contract.

In this case, there is no doubt that the replacement solar system is a single indivisible unit. What is at issue, however, is whether both parties partially performed under the Replacement Agreement. Owner alleges that Contractor began performance under the terms of the Replacement Agreement and that, “in reliance [on Contractor performance, Owner awarded certain projects to Contractor pursuant to their preferred vendor status arrangement.

These allegations when accepted as true support a claim for breach of the Replacement Agreement and defeat the argument that the Replacement Agreement is unenforceable under the Statute of Frauds

Question. Second Mortgage Bank seeks to foreclose on a second mortgage, arguing the conveyance of the premises from Owners to Buyers was void. Buyer and Buyer’s Bank seek to vacate and remove Second Mortgage Bank’s mortgage from the public records. Buyer argues Owner never informed him of the existence of the second mortgage (i.e. lack of actual notice) and point to an undisputed error in indexing to prove they were not on constructive notice. Second Mortgage Bank argued it was entitled to equitable subrogation, contending its predecessor in interest, paid off and satisfied at least $78,275 of prior liens. Does equitable subrogation apply or did the second mortgage cease to be a valid lien so that it may be canceled as a cloud on title?

Answer. NO Equitable subrogation does not apply. The second mortgage ceased to be a valid lien. The Second Mortgage may be canceled as a cloud on title.

On June 2, the Owner purchased the subject real property and their deed to the premises was recorded on June 16 with the proper tax map designation. The Owner made this purchase using a $96,000 loan giving in return a mortgage on the premises. The mortgage through a series of transactions was eventually assigned to Second Mortgage Bank. The assignment was recorded twenty eight years after the mortgage loan was originally made.

In year 16 Owner, as borrower, executed a note with Second Mortgage Bank, for $152,000. To secure this loan, the Owner executed a $152,000 mortgage on the premises in favor of Second Mortgage Bank. The Second Mortgage was recorded in March in year 17, but with the incorrect lot designation.

In June, a year later, Buyer purchased the premises from the Owner for $225,000, taking out a loan from Buyers’ Bank for $202,000, and giving in exchange a mortgage on the premises for that amount (Mortgage Three).

In August of year 23, Second Mortgage Bank sought to foreclose on Mortgage Two. Buyer and Buyer’s Bank, assert improper indexing of Mortgage Two and seek to vacate and remove Mortgage Two from record. Second Mortgage Bank replies that the conveyance of the premises from the Owner to Buyer is void, being a fraudulent conveyance for the purpose of avoiding claims and liens of creditors, including those of Second Mortgage Bank and its predecessors in interest, and that Second Mortgage Bank is entitled to equitable subrogation.

Buyer states that the Owner never informed him of the existence of Mortgage Two, and that he lacked actual notice of Mortgage Two. Buyer’s Bank, states Buyer’s Bank had no actual notice of Mortgage Two at the time it loaned the funds to Buyer to purchase the premises from the Owner.

The unchallenged claim of Buyer and Buyer’s Bank are proof that they were not on actual notice of Mortgage Two, and the undisputed error in indexing proves they were not on constructive notice, either. Buyers and Buyer’s Bank have, thus, established entitlement to judgment as a matter of law (see Real Property Law ¬ß291).

Second Mortgage Bank asserts, in opposition, that it is entitled to equitable subrogation. The doctrine of equitable subrogation applies where the funds of a mortgagee are used to satisfy the lien of an existing, known encumbrance when, unbeknown to the mortgagee, another lien on the property exists which is senior to his but junior to the one satisfied with his funds. In order to avoid the unjust enrichment of the intervening, unknown lienor, the mortgagee is entitled to be subrogated to the rights of the senior encumbrance.

Second Mortgage Bank states that it paid off and satisfied at least $78,274.50 of prior liens on the premises in year 23. At the time these payments were made, Mortgage Three (year 24) did not yet exist. Equitable subrogation, thus, does not apply in this case. Moreover, Second Mortgage Bank did not become the assignee of Mortgage Two until year 28, the date of the assignment from Accredited, and, thus, was on notice of Mortgage Three, which had been recorded in year 27, and which should have led Second Mortgage Bank to conduct further inquiry.

As Mortgage Two has ceased to be a valid lien on the premises, it may be canceled as a cloud on title.

Question. Second Mortgage Bank seeks to foreclose on a second mortgage, arguing the conveyance of the premises from Owners to Buyers was void. Buyer and Buyer’s Bank seek to vacate and remove Second Mortgage Bank’s mortgage from the public records. Buyer argues Owner never informed him of the existence of the second mortgage (i.e. lack of actual notice) and point to an undisputed error in indexing to prove they were not on constructive notice. Second Mortgage Bank argued it was entitled to equitable subrogation, contending its predecessor in interest, paid off and satisfied at least $78,275 of prior liens. Does equitable subrogation apply or did the second mortgage cease to be a valid lien so that it may be canceled as a cloud on title?

Answer. NO. Equitable subrogation does not apply. The second mortgage ceased to be a valid lien. The Second Mortgage may be canceled as a cloud on title.

On June 2, the Owner purchased the subject real property and their deed to the premises was recorded on June 16 with the proper tax map designation. The Owner made this purchase using a $96,000 loan giving in return a mortgage on the premises. The mortgage through a series of transactions was eventually assigned to Second Mortgage Bank. The assignment was recorded twenty eight years after the mortgage loan was originally made.

In year 16 Owner, as borrower, executed a note with Second Mortgage Bank, for $152,000. To secure this loan, the Owner executed a $152,000 mortgage on the premises in favor of Second Mortgage Bank. The Second Mortgage was recorded in March in year 17, but with the incorrect lot designation.

In June, a year later, Buyer purchased the premises from the Owner for $225,000, taking out a loan from Buyers’ Bank for $202,000, and giving in exchange a mortgage on the premises for that amount (Mortgage Three).

In August of year 23, Second Mortgage Bank sought to foreclose on Mortgage Two. Buyer and Buyer’s Bank, assert improper indexing of Mortgage Two and seek to vacate and remove Mortgage Two from record. Second Mortgage Bank replies that the conveyance of the premises from the Owner to Buyer is void, being a fraudulent conveyance for the purpose of avoiding claims and liens of creditors, including those of Second Mortgage Bank and its predecessors in interest, and that Second Mortgage Bank is entitled to equitable subrogation.
Buyer states that the Owner never informed him of the existence of Mortgage Two, and that he lacked actual notice of Mortgage Two. Buyer’s Bank, states Buyer’s Bank had no actual notice of Mortgage Two at the time it loaned the funds to Buyer to purchase the premises from the Owner.

The unchallenged claim of Buyer and Buyer’s Bank are proof that they were not on actual notice of Mortgage Two, and the undisputed error in indexing proves they were not on constructive notice, either. Buyers and Buyer’s Bank have, thus, established entitlement to judgment as a matter of law (see Real Property Law ¬ß291).

Second Mortgage Bank asserts, in opposition, that it is entitled to equitable subrogation. The doctrine of equitable subrogation applies where the funds of a mortgagee are used to satisfy the lien of an existing, known encumbrance when, unbeknown to the mortgagee, another lien on the property exists which is senior to his but junior to the one satisfied with his funds. In order to avoid the unjust enrichment of the intervening, unknown lienor, the mortgagee is entitled to be subrogated to the rights of the senior encumbrance.
Second Mortgage Bank states that it paid off and satisfied at least $78,274.50 of prior liens on the premises in year 23. At the time these payments were made, Mortgage Three (year 24) did not yet exist. Equitable subrogation, thus, does not apply in this case. Moreover, Second Mortgage Bank did not become the assignee of Mortgage Two until year 28, the date of the assignment from Accredited, and, thus, was on notice of Mortgage Three, which had been recorded in year 27, and which should have led Second Mortgage Bank to conduct further inquiry.

As Mortgage Two has ceased to be a valid lien on the premises, it may be canceled as a cloud on title.

Question. Contractor alleges Subcontractor’ union harassed and defamed him regarding a project. Contractor alleges Subcontractor erected a 12-foot inflatable rat in front of his offices and at a charity event, as well as handed out allegedly defamatory leaflets alleging Contractor exploited workers. Contractor filed an unfair labor practice complaint with the National Labor Relations Board against the union arising from the same conduct. May the Contractor also recover under a tortious interference claim?

Answer. NO. The claim is preempted by the National Labor Relations Act as Where the consequences of peaceful and violent conduct were separable, recovery may only be had for the latter. The Contractor did not allege any violence or threats of violence, thus, Contractor’s tortious interference claim was preempted by federal law.

Contractor alleges that the Union erected a 12-foot inflatable rat in front of Contractor’s offices. According to Contractor, The Union’s representatives shouted that Contractor exploits workers, and distributed allegedly defamatory leaflets which stated as follows:

SHAME!ON [CONTRACTOR] for allowing workers to be exploited.
Allowing contractors who pay workers in a fashion which permits them to bypass the City, State and Federal tax structure is not only against the law, it costs taxpayers millions of dollars in lost tax revenue.
Untrained and unskilled workers will always lead to an unsafe work-place, shoddy workmanship and a lower quality finished product.
While New York City construction workers rebuild our city, help show your support for their desire to work in a safe environment, receive a living wage, and be treated with the dignity and respect that they deserve.
Does [CONTRACTOR] think it’s worthwhile to exploit workers just so he can save a little money?
Call [CONTRACTOR] at [555-555-5555] and tell him that all workers deserve a living wage.

Contractor alleges that Subcontractor set up an inflatable rat in front of the building at an event where the Contractor was being honored and that Subcontractor’s representatives allegedly yelled that Contractor was a #&!* and a rat, exploits workers, and that he should be arrested. When Contractor arrived at the event, they allegedly surrounded Contractor and screamed #&!* and obscenities.

Later that month, Subcontractor allegedly appeared outside Contractor’s residence, where they again shouted that he exploits workers. On the same day, Subcontractor threatened to follow Contractor to California in order to disrupt an event at which Contractor would be addressing a large audience. Contractor also alleges that Subcontractor made telephone calls to Contractor’s receptionist in which they stated that Contractor exploits workers by paying below minimum wage and hiring non-union workers, and that on other occasions, Subcontractor called to imply that Contractor was in physical danger, because the speaker stated that he better watch his back. According to Contractor, Subcontractor threatened to go to Contractor’s son’s school, in order to humiliate and intimidate Contractor and his son. Contractor thereafter filed a criminal complaint against The Union and one of its members. It appears that the New York Police Department saw no criminal conduct and did not make any arrests.

When it is clear or may fairly be assumed that the activities which a State purports to regulate are protected by ¬ß7 of the National Labor Relations Act, or constitute an unfair labor practice under ¬ß8, due regard for the federal enactment requires that state jurisdiction must yield. Therefore, state regulations and causes of action are presumptively preempted if they concern conduct that is actually or arguably either prohibited or protected by the Act. The purpose of the preemption is to prevent conflict between, on the one hand, state and local regulation and, on the other, Congress’ integrated scheme of regulation, embodied in ¬ß¬ß7 and 8 of the NLRA, which includes the choice of the NLRB, rather than state or federal courts, as the appropriate body to implement the Act.

Consequently, we must look at whether Subcontractor’ alleged conduct is arguably prohibited by federal labor law. Contractor alleges that Subcontractor tortiously interfered with Contractor’s prospective business relations. This conduct is arguably prohibited by the NLRA. Section 8 (b) (4) (B) of the NLRA provides that it shall be an unlawful labor practice for a labor organization or its agents to force or require any person to cease doing business with any other person (29 USC ¬ß158 [b] [4] [B]). Section 8 (b) (4) (D) states that it is unlawful to engage in forcing or requiring an employer to assign particular work to employees in a particular labor organization (29 USC ¬ß158 [b] [4] [D]). Section 8 (b) (4) (7) states that it is unlawful for a labor organization to picket any employer where any object thereof is to force or require the employer to bargain with the labor organization (29 USC ¬ß158 [b] [4] [7]).

However, the preemption does not apply where the activity: (1) touches interests so deeply rooted in local feeling and responsibility that, in the absence of compelling congressional direction, we could not infer that Congress had deprived the States of the power to act, or (2) involves conduct that would only peripherally implicate the concerns underlying the federal labor laws . Where the consequences of peaceful and violent conduct are separable, recovery may only be had for the latter. Where the consequences cannot be separated, recovery may only be had if the violent conduct was so pervasive that the proof might support that the conclusion that all damages resulting from the picketing were proximately caused by its violent component or by the fear which that violence engendered.

Applying the above principles to this case, the purported tortious interference with prospective business relations claim lacks merit. Contractor does not allege any violence or even threats of violence in connection with this alleged conduct. The sole basis for this claim is that The Union’s representatives erected an inflatable rat outside a hotel, and distributed allegedly defamatory leaflets in a restroom of the hotel. Therefore, Contractor’s tortious interference with prospective business relations claim is preempted by federal labor law.

Question. Bank seeks to collect on a note (the Note) executed by Borrower, guaranteed by the Guarantors. Pursuant to provisions set forth in the Loan Agreement executed at even date with the Note, Borrower was granted the option to extend the maturity date upon the existence of certain conditions. By amendment to the Loan Agreement, Bank and Borrower agreed that notwithstanding the failure of all conditions specified the maturity date would be extended. When payment was not made as promised, Bank sent Borrower and the Guarantors a notice of default.

Bank seeks a judgment against Borrower for the principal amount of the Note plus interest, and judgment against the Guarantors.

Guarantor asserts that the vice-president of Bank, told him that “we didn’t need to worry about the pending maturity of the notes (and) that the Bank would extend the loan on commercially reasonable terms for an additional year.”

Can a bank official orally agree to an extension of the maturity date of a note?

Answer. YES, but not under these facts.

The vice-president of Bank does not specifically deny the oral promises allegedly made by him, but refers to his letters to Borrower in which he advised Borrower that it was not entitled to rely on any oral statements purportedly made by Bank to refrain from exercising any of its rights under the Loan Agreement, the Notes, the Mortgages or any other Loan Documents. Bank acknowledges that after declaring the Note in default it did engage in negotiations relating to a possible extension of the Note, and that the parties entered into what Bank refers to as a Pre-Negotiation Agreement. Therein the parties agreed that no modification of the loan shall constitute a legally binding agreement until reduced to written documentation which is signed by all necessary parties and that Bank may terminate the negotiations for any reason or no reason, and defendants acknowledged that none of them has any defense, setoff, claim, counterclaim or cause of any kind or nature whatsoever with respect to the Loan Documents.

With respect to the claim of an oral modification of the maturity date of the Note, it specifically provides that Bank shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies, and no waiver of any kind shall be valid unless in writing and signed by Bank. Also, as noted above, the Pre-Negotiation Agreement similarly bars an oral modification of the loan documents.

When an agreement contains a clause requiring any modification of the terms of such (agreement) to be in a writing signed by the (Bank), an oral modification is generally unenforceable. Exceptions to the foregoing principle will be applied in situations where a party can show partial performance…unequivocally referrable to the oral modification, as well as when the Bank has induced another’s significant and substantial reliance upon an oral modification, in which case an estoppel may be invoked to bar a party from enforcing the no oral modification clause.

The purpose of estoppel is to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought and who, while justifiably relying on the opposing party’s actions, has been misled into a detrimental change of position. Here, in light of the facts asserted, including the letters and the provisions of the Pre-Negotiation Agreement, Borrowers have not shown that they were misled or that they significantly and justifiably relied on (the alleged oral promise to their) disadvantage, and thus an essential element of estoppel is lacking.