It’s The Terms of the Contract That Control

• Posted on: Dec 15 2025

By: Jeffrey M. Haber

In any contract dispute, “it is necessary to consider the language in the contract, for that is what controls the parties’ rights and responsibilities.”[1] For this reason, New York courts “are guided by the standard rules of contractual interpretation, which provide that ‘a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.’”[2]  In applying these rules of construction, “courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.”[3]

With the foregoing rules in mind, we examine Stevens v. Audthan, LLC, 2025 N.Y. Slip Op. 06922 (1st Dept. Dec. 11, 2025), and Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc., 2025 N.Y. Slip Op. 06901 (1st Dept. Dec. 11, 2025).

Stevens v. Audthan, LLC

Stevens concerned the alleged breach of a temporary relocation agreement (TRA).

Plaintiff and his long-time roommate were the rent-regulated tenants of a single room occupancy unit (SRO) in Manhattan. Defendants entered into separate TRAs with plaintiff and his roommate to house them in temporary relocation apartments during the pendency of a construction and renovation project. The TRAs contemplated that each tenant would have the option to return to the building once construction was complete, at which time they would have separate units. However, the construction work was never completed.

Pursuant to plaintiff’s TRA, defendants offered him the option of remaining in his temporary relocation apartment or returning to his original SRO. Plaintiff sent a lengthy response, electing to move back into his original SRO together with his long-time roommate.

Much litigation ensued, including a plenary action in which plaintiff claimed that defendants had breached their TRA by requiring that he share his original unit with a co-tenant. The motion court granted defendants’ motion for summary judgment dismissing plaintiff’s claim that defendants breached the TRA with him.

The Appellate Division, First Department, affirmed the motion court’s order.

The Court held that the TRA was clear and unambiguous concerning plaintiff’s options.[4] Looking at the TRA, the Court found that Paragraph 8(f) “clearly state[d] that if defendant Clinton Housing Development Company Inc. (CHDC) cease[d] to be the managing agent of the construction project, plaintiff ha[d] the option of returning to the original SRO unit he resided in prior to the temporary relocation or remaining in the apartment to which he was relocated.”[5] “It says nothing about residing in the unit alone,” said the Court.[6] The Court explained that “when CHDC did cease to be managing agent, plaintiff notified CHDC that he opted to return to the original SRO with his former roommate. Plaintiff provided no credible evidence that he was deceived or coerced into signing the TRA, which contained a merger clause providing that the signed contract comprised the entire agreement between the parties.”[7]

The Court also held that “plaintiff [was] judicially estopped from insisting in this action that he [was] entitled to return to the original unit without his roommate.”[8] The Court noted that the “doctrine of judicial estoppel” precluded plaintiff from taking a contrary position to the one that he took in a related action.[9] “Plaintiff and his roommate, in an illegal lockout proceeding against the property owner, took the position that they both had the right to possession of the original unit, and the Civil Court agreed. Plaintiff cannot now take the position that it [was] only he who was entitled to take possession as the sole tenant merely because his interests have changed”, said the Court.[10]

Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc.

Greenland arose out of a merger between a special-purpose acquisition company (SPAC) and a private company.

The acquisition of a private company by a SPAC allows the private company to be publicly traded and to access the funds raised by the SPAC’s initial public offering. A SPAC’s sponsor is usually compensated through discounted SPAC shares received before the SPAC’s IPO. Those shares generally have value only if the SPAC transaction is finalized, meaning that the private company is acquired. Additionally, those shares cannot be sold unless and until the SPAC, or its successor in interest following the transaction, either registers the shares with the Securities Exchange Commission (SEC) by successfully filing a registration statement (Registration Route) or removes the restrictive legend on the shares pursuant to 17 C.F.R § 230.44, otherwise known as SEC Rule 144 (Rule 144 Route).

Plaintiff sponsored the SPAC Golden Path Acquisition Corporation (Golden Path) to raise funds through an IPO for the purpose of merging with or acquiring the targeted private company. On September 10, 2021, Golden Path entered into a merger agreement with “MC Hologram Inc.” The parties closed on the agreement to merge on September 16, 2022, and Golden Path simultaneously changed its name to its current form, MicroCloud Hologram, Inc.

On June 21, 2021, before Golden Path’s IPO occurred, plaintiff and Golden Path entered into two agreements. One was a private-placement purchase agreement through which plaintiff acquired 248,000 private-placement units. The second was a registration-rights agreement (RRA). As a result, plaintiff owns 1,735,050 MicroCloud shares, consisting of 1,437,500 founder shares and 297,500 shares obtained through the private-placement transaction and redeemed private warrants upon consummation of the merger. MicroCloud, however, did not make any of plaintiff’s shares saleable through either the Registration Route or the Rule 144 Route. All of plaintiff’s shares remained restricted securities.

In response to MicroCloud’s inaction in registering the shares, plaintiff sued MicroCloud, asserting four claims for relief: breach of contract, breach of implied contract, breach of the implied covenant of good faith and fair dealing, and conversion.

MicroCloud moved to dismiss all four claims. The motion court denied the motion with regard to the causes of action for breach of contract (the first cause of action) and breach of the implied covenant of good faith and fair dealing (the third cause of action).

The Appellate Division, First Department, unanimously affirmed.

The Court held that “[p]laintiff stated a cause of action for breach of contract by alleging that defendant failed, among other things, to file a registration statement with the Securities and Exchange Commission, despite plaintiff’s multiple written demands that it do so under the terms of the parties’ contract.”[11]

The Court held that “the contract sufficiently provided objective criteria by which to measure defendant’s performance of its obligation.”[12] The Court found that the terms of the agreement were clear and unambiguous about defendant’s obligation to prepare and file the registration statement:

Under the terms of the contract, once plaintiff submitted a demand for registration, defendant was required to use its “best efforts”[13] to prepare and file a registration statement with the SEC “as expeditiously as possible,” to cause the registration statement to become effective, and to keep it effective until defendant sold its securities. The contract’s definitions, in turn, expressly refer[red] to the filing of registration statements, amendments, and supplements in compliance with the Securities [Exchange] Act [of 1933] and SEC regulations, therefore incorporating the Act and the regulations into the contract’s terms and providing objective standards for judging the adequacy of defendant’s efforts. Similarly, the requirement to file “as expeditiously as possible” is modified by a proviso allowing defendant to “defer any Demand Registration for up to thirty (30) days,” thus providing additional guidance as to the timing of defendant’s obligation to file a registration statement.[14]

The Court also held that plaintiff “stated a cause of action for breach of the implied covenant of good faith and fair dealing by alleging that defendant denied its requests because its principal sought to sell his own shares on the open market without having to compete with plaintiff.”[15] The implied covenant of good faith and fair dealing “embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.”[16] The covenant is breached when a party acts in a manner that deprives the other party of the benefits of the contract. Id.

The Court noted that even if “defendant had some discretion under the contract to refuse plaintiff’s request as unreasonable, it did not warrant dismissal because “‘even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party’s right to the benefit under the agreement.’”[17]

The Court “reject[ed] defendant’s contention that it possessed the sole discretion to decide whether to remove a restrictive legend on the securities, as the contract stated that defendant ‘shall’ take action to enable plaintiff to sell its shares under the Securities Act.”[18] The Court also rejected the notion that “plaintiff’s action [was] foreclosed by the SEC’s comment that ‘the removal of a legend is a matter solely in the discretion of the issuer of the securities’ under Rule 144.”[19] The Court noted that the “SEC also recognizes that ‘[d]isputes about the removal of legends are governed by state law or contractual agreements’, and the parties’ contract require[d] defendant to remove any obstacles to plaintiff’s selling of its shares on the market, including by removing restrictive legends.”[20]

Takeaway

In New York, courts enforce contracts based on their written terms. If an agreement is clear and complete, the courts will apply its plain meaning—without adding, removing, or rewriting provisions. This means that the written terms of the parties’ agreement control the rights and obligations of the parties. Both Stevens v. Audthan, LLC and Greenland Asset Mgt. Corp. v. MicroCloud Hologram, Inc. stand for this foundation principle of contract interpretation.[21]

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] See Beinstein v. Navani, 131 A.D.3d 401, 405 (1st Dept. 2015). 

[2] Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002).

[3] Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (internal quotation marks omitted).

[4] Stevens, Slip Op. at *1.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id. (citing Baje Realty Corp. v. Cutler, 32 A.D.3d 307, 310 (1st Dept. 2006) (the doctrine of judicial estoppel precludes a party who assumed a certain position in a prior proceeding, and who secured a judgment in his or her favor, from assuming a contrary position in another action simply because his or her interests have changed) (citations omitted)).

[10] Id.

[11] Greenland, Slip Op. at *1.

[12] Id.

[13] “[U]nder New York law, a best efforts’ clause imposes an obligation to act with good faith in light of one’s own capabilities,” and apply “such efforts as are reasonable in the light of that party’s ability and the means at its disposal and of the other party’s justifiable expectations.” Ashokan Water Servs., Inc. v. New Start, LLC, 11 Misc. 3d 686, 692(Civ. Ct., Kings County 2006) (internal quotation marks omitted). “[A] best efforts clause permits parties a degree of discretion in the selection of a plan of action and allows them to rely on their good faith business judgment as to the ‘best way’ to achieve the desired result.” In re CHATEAUGAY Corp., 186 B.R. 561 (Bankr. S.D.N.Y. 1995) (citing Western Geophysical Co. of Am., Inc. v. Bolt Assocs., Inc., 584 F.2d 1164, 1171 (2d Cir. 1978)). See also Bloor v. Falstaff Brewing Corp., 601 F.2d at 614-15 (2d Cir. 1979) (party may demonstrate “best efforts” were made by proving “there was nothing significant it could have done” to meet its obligations “that would not have been financially disastrous.”). “Best efforts” require “greater care and diligence” than the “ordinary care and diligence” to which the promisor would otherwise be bound to exercise. See Allen v. Williamsburgh Sav. Bank, 69 N.Y. 314, 322 (1877). In a commercial contract, a commercial reasonable effort clause sets a lower bar than a best efforts clause. So, if a party fails to meet the commercial reasonable effort standards, it will fail to meet the best-efforts clause.

[14] Id. (citation omitted).

[15] Id.

[16] 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002) (citation and internal quotation marks omitted).

[17] Id. (quoting Legend Autorama, Ltd. v. Audi of Am., Inc., 100 A.D.3d 714, 716 (2d Dept. 2012) (quoting Richbell Info. Servs. v. Jupiter Partners, 309 A.D.2d 288, 302 (1st Dept. 2003)).

[18] Id.

[19] Id. (citation omitted).

[20] Id. (citation omitted).

[21] This Blog has written numerous articles in which the courts made clear that the words in a contract are to be enforced so long as they are clear and unambiguous. Some of those articles include: Contracts that Say What They Mean, Mean What They Say; Contracts That Say What They Mean, Mean What They Say Redux; Contract Interpretation: Words Have Meaning; Giving Two Contract Provisions Their Intended Meaning; and Written Agreements That are Clear and Unambiguous Must Be Enforced According To The Plain Meaning of Their Terms.

Tagged with: Breach of Contract, Business Litigation, Commercial Litigation, Contract Interpretation