It is not unusual for parties negotiating a transaction to state that a binding agreement is “subject to” the execution of a final, written contract.
The recent New York Court of Appeals decision in Stonehill Capital Management v. Bank of theWest carries a message of caution for negotiating parties who rely on such language to defer any binding obligations until the parties have signed a final, written agreement. Where the totality of the circumstances demonstrates the parties’ intent to be bound, simply stating that an agreement is “subject to” the execution of a written contract may not prevent a finding that the parties have entered into a binding agreement, even if no such final, signed contract exists.
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