Opinion ID: 790690
Heading Depth: 2
Heading Rank: 4

Heading: Breach of the Third Agreement

Text: 33 Although Dalal cannot proceed as a third-party beneficiary, he also sought recovery on another theory that the District Court did not fully reach. Dalal argues that, in violation of New York law, EasyLink wrongfully breached the Third Agreement by terminating the SPA for the purpose of avoiding payment of his commission. 34 The Third Agreement provided that EasyLink was to pay Dalal a fee of 12.5% of the Aggregate Consideration received from [BI] pursuant to [the SPA]. EasyLink argued below that this constituted a closing-of-title condition. As a general matter, under such a condition, no fee is earned unless the deal is consummated. See Nuvest, S.A. v. Gulf & Western Indus., Inc., 649 F.2d 943, 947 (2d Cir.1981). We believe that this condition in the Third Agreement is properly read as a closing-of-title condition. 35 However, under New York law, closing-of-title conditions are not controlling where the condition's non-fulfillment is wrongfully caused by one of the parties. Id. at 949; Levy v. Lacey, 22 N.Y.2d 271, 276, 292 N.Y.S.2d 455, 239 N.E.2d 378 (1968). Under both contract and agency law, a broker and a principal owe each other a duty of good faith. Nuvest, 649 F.2d at 947. 4 As a result, even where the broker and seller expressly provide that there shall be no right to a commission unless some condition is fulfilled, and the condition is not performed, the seller will nevertheless be liable if he is responsible for the failure to perform the condition. Lane—the Real Estate Dep't Store, Inc. v. Lawlet Corp., 28 N.Y.2d 36, 43, 319 N.Y.S.2d 836, 268 N.E.2d 635 (1971). 36 In its first and second decisions the District Court concluded that Dalal had failed to establish a breach of the terms of the Third Agreement, but did not fully address whether EasyLink, in bad faith, caused the SPA not to close, for the purpose of depriving Dalal of his commission. See, e.g., India. Com II at -6 (the third broker contract required a closing of the transaction [but] the transaction had not in fact closed pursuant to the SPA.). In its third opinion, because the District Court found Dalal to be a third-party beneficiary, it did not reach Dalal's alternative theories of recovery. India. Com III at . 37 Although the District Court noted that the Third Agreement had a closing-of-title provision, in its first opinion the District Court also found that EasyLink had improperly terminated and prematurely and wrongfully breached the SPA. The District Court did not reach the question of whether EasyLink's behavior constituted a wrongful termination of the Third Agreement standing alone. 38 In this case, the SPA had already been executed when EasyLink failed to pay its legal fees. Generally, once negotiations have progressed to the point where agreement on essential terms ha[s] either been reached or [is] imminent, the likelihood of finding a wrongful obstruction of negotiations increases with the completeness of the principals' understanding and with the arbitrariness of the purported grounds for the seller's withdrawal. Nuvest, 649 F.2d at 949. 39 Dalal presented evidence that he worked full-time without compensation for more than six months to find a buyer for ICI and to facilitate the sale. Dalal alleged below that EasyLink intended to negotiate with BI after the breach of the SPA, in order to avoid paying him a commission. Since the issue of whether EasyLink breached the SPA for the express purpose of avoiding Dalal's commission was not fully resolved by the District Court, we remand for further consideration. We intimate no view whatever about the ultimate resolution of this issue.