Changing a Draft Contract Proffered by Counterparty Extinguishes Offered Contract and Represents a Counteroffer

On June 13, 2019, the First Department issued a decision in Brown v. Cerberus Capital Mgt., L.P., 2019 NY Slip Op. 04772, holding that changing a draft contract proffered by a counterparty extinguishes the offered contract and only represents a counteroffer, explaining:

Contrary to defendants' contention, Brown did not release her claims. The purported release appears in a Repurchase Agreement that defendants Covis Pharmaceuticals, Inc. (CPI), Covis Management Investors US LLC (Management Investors US), and Covis US Holdings, LLC (Covis US) sent Brown. These defendants had not yet signed it when they sent it to her. Brown signed it but made a handwritten change. Hence, the document that she returned was a counteroffer and a rejection of the offer made by these defendants. None of the defendants signed the Repurchase Agreement as modified by Brown, so it was not a binding contract.

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Sometimes in commercial litigation, the parties cannot even decide whether a contract was formed. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the formation of a contract under New York law.