Agreement Setting Price Term by Reference to Commercial Practice or Trade Usage Valid

On May 17, 2016, the First Department issued a decision in Cowen & Co., LLC v. Fiserv, Inc., 2016 NY Slip Op. 03840, holding that an agreement that set its price term by reference to commercial practice or usage was sufficiently definite to be enforceable, explaining:

The parties did not define the "Transaction Fee" by a dollar amount or percentage value. Instead, they agreed to a provision which referenced investment banking industry practice for comparable transactions. The provision required the parties to work in good faith to determine the amount of the Transaction Fee to be paid to plaintiff after reviewing additional information about the potential transaction, and they agreed that such Transaction Fee shall be consistent with investment banking industry practice for transactions of comparable complexity, level of analysis and size.

. . .

The doctrine of definiteness assures that courts will not impose contractual obligations when the parties did not intend to conclude a binding agreement. It is to be sparingly used, as a last resort, and only when an agreement cannot be rendered reasonably certain by reference to an extrinsic standard that makes its meaning clear. . . .

The "Transaction Fee" provision explicitly references the type of commercial practice, or trade usage New York courts routinely rely upon to render a price term sufficiently definite. The fee [is] enforceable inasmuch as it may be ascertained from public price indices and industry practice, i.e., the Thomson Reuters surveys.

Where, as here, the record demonstrates that sophisticated parties intended to be bound by an agreement, the doctrine of definiteness should not be used to defeat the bargain of the parties.

(Internal quotations and citations omitted).