A CONTRACT DOES NOT HAVE TO BE SIGNED TO BE BINDING
In December 2022, a trial court in New York ruled that although neither party to an owner’s representative agreement signed it, they were nevertheless bound to its terms based upon their objective intent to be bound. 325 Fifth Avenue Condominium v. Continental Residential Holdings, LLC, 2022 NY Slip Op 34432 (Sup. Ct. NY County 2022).
In 325 Fifth Avenue, a dispute arose over the installation of balconies in a condominium complex. To correct the problem the owner hired an owner’s rep to replace the balconies pursuant to a written agreement. After the owner sued the representative for an alleged breach of the agreement, the rep argued that it was not binding since neither party signed it. In ruling that both parties were bound to its terms the court held that ‘an unsigned contract may be enforceable, provided there is objective evidence establishing that the parties intended to be bound.’
Here, because the owner’s rep began performing services under the agreement and was paid for a portion of its work the parties’ actions manifested an intent to be bound to the terms of the unsigned contract.
It is not unusual in the construction industry for parties to negotiate a written contract but then fail to fully sign the agreement prior to commencing a project. Even where both parties fail to sign this will not be the ultimate act determining whether the contract and its terms are legally binding. Instead, under New York law the court will look at the parties’ actions to determine whether there was an intent to be bound, such as partial performance and/or partial payment for the work at issue.
The bottom line is that parties should be wary of intentionally failing to sign an agreement under the belief that it will not be binding should a dispute eventually arise. Instead, their actions on the project will carry much more weight than their signature.
About the author: George Marco is an attorney practicing in the field of construction law. He also holds a Bachelor of Science in Mechanical Engineering and was previously employed as a Project Manager for a public improvement contractor.
Disclaimer: This article is for informational purposes only and not intended to serve as legal counsel.