On September 26, 2017, the Supreme Court of New York unanimously affirmed a judgment dismissing the complaint in Harvey Keitel v. E*Trade Financial Corporation. Keitel had brought his lawsuit against E*Trade alleging that the online brokerage company had made a “firm and binding offer” to hire him for a celebrity spokesperson advertising campaign and subsequently backed out of the deal.
Keitel’s claims of a binding contract having been formed relied upon the fact that his agent had requested that any offer be “firm and binding,” and that E*Trade’s agent acknowledged this request, which was evidenced by internal communications between E*Trade and its agents that revealed an intention to make a firm offer, as well as the fact that the cover e-mail transmitting the term sheet labeled the offer “firm and binding.” Keitel also raised the fact that E*Trade had later offered a fee to “kill” the contract.
However, the term sheet that was transmitted and relied upon by Keitel specifically states that it “sets forth the general intent of the parties to discuss in good faith the terms and conditions” of the deal, and more importantly, that “neither party shall be bound until the parties execute a more formal written agreement.” The NY Supreme Court did not find that any of the facts relied upon by Keitel were “sufficient to negate or demonstrate a waiver of the provision that the parties would not be bound until they executed a formal written agreement.” In making its decision, the Court stated that “Plaintiff’s agent’s demand for a firm offer and defendant’s agent’s acknowledgment of this request, before consulting with her client, prove nothing about what was ultimately agreed.”
Further, the Court noted that “waiver of a contractual provision ‘should not be lightly presumed,’ ‘must be unmistakably manifested, and is not to be inferred from a doubtful or equivocal act.’” (Quoting Ess & Vee Acoustical & Lathing Contrs. v. Prato Verde, Inc., 268 AD 2d 332 (1st Dept 2000)). Moreover, in discussing a case relied upon by Keitel in which an unsigned term sheet was held to be enforceable, the Court specifically noted that in that case “the agreement sought to be enforced did not contain any language requiring that it be fully executed,” and that some of the terms, including a wire transfer of funds, had already been completed.
CONCLUSION – In light of this decision, given the common custom and practice in the entertainment industry of relying upon unsigned term sheets and “hand shake” deals, parties who wish to ensure that such unsigned term sheets are enforceable need to be careful and make sure that the other side does not include any specific language requiring the parties to execute a more formal written agreement before they become bound. Conversely, parties who wish to ensure they are not bound to any deals prior to executing a formal written agreement, should be certain to include “not bound until executed” language in all of their term sheets.