Comment: Which is to be the Master?
Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’“
“But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”
--Lewis Carroll, Through the Looking Glass
When is a contract a contract? Well, only when its words mean what they say they mean, of course! In the recently-decided Philip v. G.O.L.A., Inc., 187 A.D.3d 652 (1st Dep’t 2020), the Appellate Division reviewed a contract of sale for 10 Andy Warhol Campbell’s Soup Can screen prints, which required a “Nonrefundable Deposit” of $75,000. With the deposit, the seller promised to hold the prints until April 9, 2015, at which point the remaining balance became due. On June 11, 2015--two months after the deadline--the buyer tried to tender the balance. The seller notified the buyer that the artwork had already been sold. The buyer sued for a return of the Nonrefundable Deposit.
Siding with the seller, the Court held the phrase ‘non-refundable’ to be unambiguous (even in the art world!) The Court rejected the buyer’s argument that the deposit was non-refundable only in the situation where the buyer wanted to cancel the purchase, not, as here, when the buyer sought an extension of time to complete the purchase. Notably, the Court held that “when the term in question is capable of being understood by its plain meaning, there is no need to look further.”
On the other hand, sometimes a contract doesn’t mean what it says! In another recent ruling, Turner Constr. Co. v. Nastasi & Assocs., Inc., No. 12593 (1st Dep’t 2020), the Court considered a clear, one-year contractual limitation on claims for payment. There, the Court held the one-year limitation unenforceable—despite the provisions being “reasonable on their face” and unambiguous—because conditions precedent to the limitation (i.e., that payments by the owner, to the contractor, were conditions of any payment to the subcontractors) were “neither fair nor reasonable,” and because the parties had been engaged in active settlement negotiations for more than a year before the suit was brought, creating questions of fact concerning the performance of the payment provisions. The Court held that enforcing the clear and unambiguous condition would unfairly create an obstacle, “not in [claimant’s] control,” and give the other party “the capability of nullifying [claimant’s] claim.”
As Humpty Dumpty says, the question in a contract dispute is which lawyer will be the master of the words. Even when the contracts are clear, a skilled lawyer may be able to avoid contractual provisions, by showing (among other things), that they are (i) unconscionable, i.e., the absence of meaningful choice on the part of one party, together with terms that grossly favor the other party. See Krodel v. Amalgamated Dwellings Inc., 166 A.D.3d 412 (1st Dep’t 2018); (ii) illegal, i.e., that enforcement would lead to a violation of applicable law. See TC Tradeco, LLC v. Karmaloop Europe, AG, 177 A.D.3d 436 (1st Dep’t 2019); or (iii) punitive, e.g., disproportionate liquidated damage clauses. See Trustees of Columbia Univ. in City of New York v. D’Agostino Supermarkets, Inc., 168 A.D.3d 594. The contract is the beginning for determining the parties' rights--but not necessarily the end!
“The face is what one goes by, generally,” Alice remarked in a thoughtful tone.
“That is just what I complain of,” said Humpty Dumpty. “Your face is the same as everybody has – two eyes, --” (marking their places in the air with his thumb) “nose in the middle, mouth under. It’s always the same. Now if you had the two eyes on the same side of the nose, for instance—or a mouth at the top—that would be some help.”
We look for the nose at the top.