The Appellate Division, First Department, in PMJ Capital v. PAF Capital1 addressed whether dismissal of a breach of contract claim at the pleading stage was appropriate when the parties had agreed in writing that they would have no contractual obligations unless and until a written agreement was executed and delivered by both parties and the defendant never executed or delivered the agreement. In a 3-2 decision, the First Department in PMJ Capital reversed the Supreme Court’s dismissal of plaintiff’s complaint and allowed plaintiff to proceed with its breach of contract claim.

The dissent (David B. Saxe, joined by Rolando T. Acosta) would have affirmed the dismissal on the basis of the First Department’s decision in Jordan Panel Sys. v. Turner Constr.,2 where the court had affirmed dismissal of a breach of contract claim with somewhat similar facts and quoted the language of the Court of Appeals in Scheck v. Francis3 that “[i]t is well settled that, if the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it is written out and signed.”


Plaintiff PMJ Capital submitted a bid to purchase $2.2 million in mortgage loans from defendant PAF Capital. The bid form provided that “Lender/Seller and Proposed Purchaser shall have no contractual or other obligations with respect to the proposed purchase of the Loans unless and until a loan sale agreement prepared by Lender’s legal counsel has been executed and delivered by both parties.”

Defendant notified the plaintiff by email that plaintiff’s bid had been accepted. Defendant’s attorney tendered a draft loan sale agreement. After various negotiations and communications, defendant’s attorney notified plaintiff’s attorney by email that the agreement had been finalized and was ready for execution. The email stated the revised agreement was attached and, if the revisions were acceptable to the plaintiff, the plaintiff should execute the document and return it for countersignature by defendant. Plaintiff also was instructed to wire the down payment of $220,000—10 percent of the purchase price.

Plaintiff’s president signed the agreement and, as requested, sent it to defendant’s counsel. Plaintiff’s president also emailed a copy of the executed agreement to defendant’s president stating that he had signed it and would be wiring the down payment. Defendant’s president sent an email in response that stated: “I will countersign upon receipt. Here’s to a smooth and successful completion of the transaction.”

Plaintiff made the down payment and defendant acknowledged and retained it. Defendant, however, never delivered the countersigned agreement. Approximately two weeks after plaintiff delivered its signed agreement, defendant informed plaintiff that it would not be going forward with the sale of the loans. Defendant had sold the loans to another entity.

Plaintiff sued for breach of contract. Defendant moved to dismiss for failure to state a claim and a defense founded upon documentary evidence. Defendant argued that because the bid form clearly and unambiguously provided that there would be no binding agreement unless and until each party executed and delivered the loan sale agreement, and defendant had neither executed nor delivered that agreement, the complaint must be dismissed since there could be no binding agreement. In opposition, plaintiff contended that because the conduct of the parties subsequent to the submission of the bid form manifested an intent to be bound, an enforceable contract existed notwithstanding the language of the bid form and even though defendant had neither executed nor delivered the loan sale agreement.

The Supreme Court granted defendant’s motion to dismiss. The First Department reversed.

The Decision

The First Department viewed the issue before it as whether the language of the bid form conclusively established that there could be no binding agreement between the parties such that plaintiff’s breach of contract claim could not have merit and should be dismissed at the pleading stage. The majority opinion cited Brown Bros. Elec. Contrs. v. Beam Constr.4 where the Court of Appeals stated that in determining whether to dismiss a breach of contract claim on the ground that the parties had not agreed to be bound, a court should not put disproportionate emphasis on any single act, phrase or other expression, but must look at the totality of circumstances and determine whether a finding could be made that the parties had objectively manifested an intent to be bound.

The majority believed the totality of circumstances raised a question of fact concerning the intent of the parties and this issue precluded dismissal of plaintiff’s breach of contract claim at the pleading stage. The majority noted that defendant’s counsel had negotiated the loan sale agreement to the point where all terms had been agreed upon; defendant’s president said he would countersign the loan sale agreement executed by plaintiff; defendant acknowledged the receipt of the down payment; for some two weeks, defendant retained possession of the down payment; and defendant’s president told plaintiff that he looked forward to a smooth and successful completion of thetransaction.

The majority believed that the court below erred in granting a pre-answer motion to dismiss because the expression in the bid form of an intent not to be bound until execution and delivery of the loan sale agreement did not preclude the parties from later manifesting an intention to be bound without such execution or delivery. The majority believed that a court, at the pleading stage, should not rule that an expression of an intention not to be bound until satisfaction of a condition (signature and delivery) precluded a finding that the parties, by their subsequent conduct, later manifested an assent to be bound even though the condition was not satisfied.

The dissent in PMJ Capital believed that the bid form had created a “definitive condition” to the existence of a contract and, since this condition (the execution and delivery of the loan sale agreement by both parties) had not been satisfied, there could be no binding agreement. The dissent believed that the First Department’s 2007 decision in Jordan Panel required it to affirm the dismissal of plaintiff’s complaint.

In Jordan Panel plaintiff subcontractor and defendant contractor agreed to all terms, except price, for the contractor to retain the subcontractor. The contractor and subcontractor executed a term sheet containing the agreed upon terms. The term sheet stated that unless and until the contractor executed the written agreement, the contractor would not be bound by any of the terms and conditions in the term sheet.

The subcontractor did not dispute the contractor’s contention that the term sheet stated that the contractor would not be bound until it executed a written subcontract. The subcontractor argued that the language of the term sheet had been superseded by the contractor’s subsequent statements and conduct. The subcontractor claimed that subsequent to creating the term sheet, the parties agreed on a price; two purchasing agents of the contractor advised it that it had been awarded the subcontract; these agents told it to proceed with its design development work to accommodate the contract’s “fast track” schedule; the contractor began to prepare a formal, written contract which, in conformance with past dealings between the parties, would incorporate the subcontractor’s project-specific modifications to the contractor’s standard form contract; and the subcontractor attended a “kick off” meeting for the project. The subcontractor contended this subsequent conduct gave rise to a binding agreement notwithstanding the language of the term sheet.

The Supreme Court in Jordan Panel, like the Supreme Court in PMJ Capital, dismissed the breach of contract claim on a pre-answer motion. The First Department in Jordan Panel, in contrast to its decision in the PMJ Capital case, affirmed the dismissal.

The Jordan Panel majority viewed the term sheet as the contractor’s notice of what would constitute its manifestation of assent to a binding agreement such that its assent could not be based on other factors. Unlike the majority in PMJ Capital, the Jordan Panel majority did not look to the totality of circumstances to consider whether the parties intended to be bound. Rather, the Jordan Panel majority ruled that once a party stated the condition necessary for it to be bound, that condition had to be either satisfied or waived. The Jordan Panel court believed dismissal of the breach of contract claim at the pleading stage was appropriate because the subcontractor had not come forward with any allegation of conduct by the contractor that would constitute the contractor’s waiver of its stated intention not to be bound until it executed the subcontract.

The PMJ Capital majority attempted to distinguish Jordan Panel. The majority opinion noted Jordan Panel was distinguishable because the plaintiff in that case did not allege the type of words or conduct by the contractor that would have been inconsistent with the exercise of the contractor’s expressly reserved right to withdraw plaintiff’s designation as a subcontractor. The majority opinion, however, never explained how the facts in PMJ Capital differed from the facts in Jordan Panel such that a different result was required, and a finding that a binding agreement had been created would be allowed even though the specified condition (execution and delivery by both parties) had not been satisfied.

Jordan Panel, and the Scheck decision upon which Jordan Panel relied, set a bright line rule: A party’s statement that it will not be bound until its execution of a written agreement allows a breach of contract claim to be dismissed at the pleading stage absent sufficient allegations that the party waived compliance with the provision. Because a waiver must be unmistakably manifested and may not be inferred from doubtful or equivocal conduct,5 a party seeking to avoid a provision that there will be no contract until execution and delivery of an agreement because the provision had been waived has a greater burden than a party seeking to prove that the parties’ subsequent conduct manifested their assent to an agreement.

The PMJ Capital decision does not explain how a court will determine whether allegations of subsequent conduct are sufficient to allow a plaintiff to proceed with a breach of contract claim in the face of a statement that there would be no binding obligation until execution and delivery of a written agreement that would be prepared. The analysis in PMJ Capital not only appears inconsistent with the Jordan Panel decision and the decision of the Court of Appeals in Scheck, it also appears at odds with other First Department decisions, including Amcan Holdings v. Canadian Imperial Bank of Commerce6 (“Generally, where the parties anticipate that a signed writing is required, there is no contract until one is delivered”); Metropolitan Steel Industries v. Citnalta Const.7 (“Plaintiff’s breach of contract claim was properly dismissed since it is undisputed that the parties were aware that there would be no binding agreement until execution of a written subcontract, which never occurred”); and Prestige Foods v. Whole Securities8 (breach of contract claim was dismissed because the parties’ writing, “which expressly stated neither party had any obligations to the other until both had executed and delivered” the agreement, flatly contradicted the existence of a contract).


The Court of Appeals has noted that in contract matters, courts should seek to further clarity, predictability, stability and adherence to precedent.9 In departing from the established principle that an expressed intention of when a party will be bound will be controlling absent a waiver, the PMJ decision may have undercut those goals. In light of the decision in PMJ, a party should no longer assume a statement of when it would become bound will be controlling. The party should be careful concerning its subsequent conduct to ensure that it cannot be viewed as an assent to be bound. The party also should recognize that it would benefit from periodically repeating its expression of when it would become bound.

Glen Banks, a partner at Fulbright & Jaworski, is the author of “New York Contract Law,” a Thomson Reuters publication.


1. 2012 WL 3288722 (1st Dept. Aug. 14, 2012).

2. 45 A.D.3d 165, 166, 841 N.Y.S. 2d 561 (1st Dept. 2007).

3. 26 N.Y.2d 466, 311 N.Y.S.2d 841 (1970).

4. 41 N.Y.2d 397, 399400, 393 N.Y.S.2d 350 (1977).

5. Nautilus Title v. Turner Const., 2 A.D.3d 209, 770 N.Y.S.2d 3 (1st Dept. 2003).

6. 70 A.D.3d 423, 894 N.Y.S.2d 47 (1st Dept.), lv. denied, 15 N.Y.3d 704, 907 N.Y.S.2d 752 (2010).

7. 302 A.D.2d 233, 754 N.Y.S.2d 278 (1st Dept. 2003).

8. 243 A.D.2d 281, 663 N.Y.S.2d 14 (1st Dept. 1997).

9. Moran v. Erk, 11 N.Y.3d 452, 872 N.Y.S.2d 696 (2008).