In Stonehill Capital Management v. Bank of the West, 28 NY3d 439 (2016), the New York Court of Appeals held that an agreement to sell a distressed loan, in the auction loan trading market, was enforceable without the execution of a formal written contract. While Stonehill may simply reflect the court’s pragmatic acknowledgement of the trading practices that prevail in fast-paced loan trading, there has been concern expressed by some real estate attorneys that the decision may adversely impact longstanding practices in the negotiation of real estate contracts. The authors of this article do not share that concern, but we do believe that the decision does highlight points that real estate attorneys should consider when advising their clients. This article discusses when emails will be deemed a real estate contract and how to prevent or create such a binding contract.
‘Stonehill’s’ Holdings
Stonehill held that, in an auction sale of a syndicated distress loan, the parties entered into an enforceable contract when the seller “agreed” to accept the auction bidder’s bid in an email that set forth all material terms of the deal (i.e., the sale price, the specific loan to be sold, the timing of the closing, and the manner of payment and wire transfer information), despite seller stating that its acceptance was “subject to mutual execution of an acceptable [loan sale agreement]” which was never executed.
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