It Ain't Over 'Till the Fat Lady Sings - Party's Contractual Obligations Continue In Agreement To Negotiate

by Sheppard Mullin Richter & Hampton LLP

In IDT Corp. v Tyco Group, S.A.R.L., 2012 NY Slip Op 09190 (1st Dept. Dec. 27, 2012) the Appellate Division held that if you sign a binding agreement that includes an obligation to negotiate, the obligation to negotiate is not extinguished even if the parties sue for other breaches of that agreement.

In 2000, the parties entered into a settlement agreement under which plaintiffs would have the right to use an undersea fiber optic telecommunications networks owned by defendants. However under the settlement agreement, the plaintiff’s so-called “indefeasible right to use” (“IRU”) the network, as well as network operations, administration and management (“OAM”), were not fully explicated. The IRU and OAM issues would be further documented in “definitive agreements to be mutually agreed upon,” that would contain terms and conditions “consistent with those described” in the settlement agreement.

By 2004, there were still no “definitive agreements” in place, and plaintiffs sued, claiming that the defendants had breached the settlement agreement by failing to provide the IRU and OAM The trial court found for the plaintiffs and granted summary judgment. The Appellate Division reversed and the Court of Appeals affirmed the First Department’s reversal, finding that, although the settlement agreement was a valid contract, the defendants’ “obligation to furnish capacity never became enforceable because agreed-upon conditions were not met.” IDT Corp. v. Tyco Group, S.A.R.L., 13 NY3d 209, 214 (2009). Further, the Court of Appeals found that defendants had not breached the settlement agreement “by merely proposing an IRU which allegedly contained terms inconsistent with settlement,” since the settlement agreement required negotiation and did not specify the terms that would be included in the further “definitive agreements.”

Following the 2004 case, the parties resumed negotiations but soon found themselves again at an impasse. In 2010, plaintiffs commenced the instant action in the Supreme Court Commercial Division, alleging that the defendants had breached the settlement agreement and their duty to negotiate in good faith. The defendants moved to dismiss the complaint, arguing that their obligations under the settlement agreement were extinguished by the Court of Appeals decision.

The trial court (Schweitzer, J.) granted the defendants’ motion based on the Court of Appeals’ decision that the defendants’ obligations “never became enforceable because agreed-upon conditions were not met.” The First Department reversed, finding that the motion court misinterpreted this language. Specifically, the Court of Appeals dismissed plaintiffs’ 2004 complaint not because defendants’ obligations under the settlement agreement had been extinguished, but because “the allegations specified in the plaintiffs’ first complaint did not articulate a breach at the time the action was commenced given the non-occurrence of a condition precedent: namely, the parties had not yet entered into final agreements, and the defendants had not otherwise breached their duty to negotiate.” Further, there was no res judicata or collateral estoppel bar because the “plaintiffs’ current claims arise from the alleged actions and omissions of the defendants after the Court of Appeals decision.”

The Appellate Division reiterated that the parties’ obligation to negotiate survived “until either side insisted that the open terms be as set forth in the defendants’ standard agreements. Since there was no evidence that either party insisted on this provision, the parties remained obligated to continue negotiations subsequent to the Court of Appeals decision.” Thus, defendants’ statements that they had no further obligations to negotiate, if proven, would constitute an anticipatory breach of the settlement agreement. The Appellate Division rejected the Defendants’ argument that its contractual obligations had expired “through the mere passage of time.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.