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Home New Cases Ambiguous Clauses Must Be Read in Context of Entire Agreement

Ambiguous Clauses Must Be Read in Context of Entire Agreement


September 13, 2021, Southern District of New York – Capstone Asset Management Co., Ltd. (“Capstone”) sued Defendants Dearborn Capital Group LLC (“Dearborn”) and its principal Oren Richland to recover out-of-pocket expenses that it incurred during its attempt to assist the Defendants in securing financing.

Capstone alleges that Dearborn breached the explicit obligation memorialized in two letters and three-term sheets to reimburse Capstone’s reasonable out-of-pocket expenses. Capstone brought claims against Dearborn for breach of contract, promissory estoppel, equitable estoppel, and unjust enrichment, and against Richland for intentional misrepresentation. Defendants contended that Capstone failed to adequately plead the existence of a binding contract or damages to Capstone caused by Dearborn’s failure to perform.

The Court found that when read in its entirety, each of the letters and the term sheets was unambiguously a non-binding agreement. Each document included one or more express disclaimers and as each document explains, the terms in the body of the document were a proposed framework for executing a transaction. Each document expressly recognized that other documents were necessary to form a binding commitment, whether it be a joint venture arrangement or the issuance of a mezzanine loan. The Court found that provision in each document regarding reimbursement of expenses stands on no separate footing than any of the other provisions in the proposals. Each document contained many draft terms over which the parties could negotiate and which may or may not have survived those negotiations and appeared in any final agreement. The Court held that none of the five documents was an enforceable contract and none of the reimbursement clauses was an independently enforceable and binding contract. The Court also rejected other claims brought by Capstone and granted Dearborn’s motion to dismiss the complaint.

Capstone Asset Mgmt. Co. v. Dearborn Capital Grp. LLC, 2021 U.S. Dist. LEXIS 177578


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