Trivial Breaches and Form Over Substance

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Posted on: Apr 29 2025

The elements of a claim for breach of contract are straightforward. The movant must establish: (1) the existence of a valid contract, (2) the plaintiff’s performance of the contract, (3) the defendant’s breach of the contract, and (4) damages resulting from the defendant’s breach.[1]

As readers of this Blog know, “[w]hen the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving practical interpretation to the language employed and the parties’ reasonable expectations.”[2]

Under New York law “when a party materially breaches a contract, the non-breaching party must choose between two remedies: it can elect to terminate the contract or continue it. If it chooses the latter course, it loses its right to terminate the contract because of the default.”[3] “The election of remedies doctrine requires knowledge of the alleged breach and an affirmative action that constitutes an election to continue performance.”[4] “Typically, where courts find that a breach claim is barred by the doctrine of ‘election of remedies,’ the claimant has not only continued to perform under the contract, but received benefits under the contract.”[5]

“Under New York law, when a party to a contract materially breaches that contract, it cannot then enforce that contract against a non-breaching party.”[6]

Sometimes a contract requires an event or occurrence to happen before the contract becomes effective. This requirement, known as a condition precedent, is defined as “an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.”[7] “Most conditions precedent describe acts or events which must occur before a party is obliged to perform a promise made pursuant to an existing contract, a situation to be distinguished conceptually from a condition precedent to the formation or existence of the contract itself.”[8] In the latter situation, no contract arises “unless and until the condition occurs”.[9]

“Conditions can be express or implied. Express conditions are those agreed to and imposed by the parties themselves. Implied or constructive conditions are those ‘imposed by law to do justice.”[10] “Express conditions must be literally performed, whereas constructive conditions, which ordinarily arise from language of promise, are subject to the precept that substantial compliance is sufficient.”[11]

In determining whether a particular agreement makes an event a condition, courts will interpret doubtful language as embodying a promise or constructive condition rather than an express condition.[12] “This interpretive preference is especially strong when a finding of express condition would increase the risk of forfeiture by the oblige.”[13]

“Interpretation as a means of reducing the risk of forfeiture cannot be employed if ‘the occurrence of the event as a condition is expressed in unmistakable language.’”[14] Nonetheless, the nonoccurrence of the condition may yet be excused by waiver, breach or forfeiture.[15]

The doctrine of substantial performance (i.e., substantial compliance) is flexible one and “stands in sharp contrast to the requirement of strict compliance that protects a party that has taken the precaution of making its duty expressly conditional.”[16] If the parties “have made an event a condition of their agreement, there is no mitigating standard of materiality or substantiality applicable to the non-occurrence of that event.”[17] Substantial performance in this context is not sufficient, “and if relief is to be had under the contract, it must be through excuse of the non-occurrence of the condition to avoid forfeiture.”[18]

The substantial performance doctrine does not apply in every instance. Thus, “[t]o the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.”[19] In other words, when the non-performance is trivial, courts will not find an actionable breach.

With the foregoing principles in mind, we examine Manorhaven Capital LLC v. Marc J. Bern & Partners, LLP, 2025 N.Y. Slip Op. 02551 (1st Dept. Apr. 29, 2025) (here).

In August 2021, plaintiff and defendant entered into an agreement pursuant to which defendant retained plaintiff to serve as its exclusive investment banker for procuring a debt refinancing (the “Agreement”).[20] Pursuant to one section of the Agreement (Section 3), defendant agreed to pay plaintiff, at each closing of debt refinancing, a cash fee equal to 2% of loan proceeds “actually received” by defendant (the “Fee”) with respect to any debt refinancing transaction during the term of the Agreement, from August 16, 2021 through December 31, 2021 (the “Fee Provision”). Section 5 of the Agreement (the “Fee Tail Provision”) provided that defendant’s obligation to pay the Fee extended for another year, to December 31, 2022, with respect to any debt refinancing transaction entered into by defendant with a lender or investor that had been “contacted” by plaintiff during the Term of the Agreement (the “Tail Period”), “provided that, [plaintiff] shall have kept [defendant] apprised on a contemporaneous and continuing basis with the names, key contact information and status of conversations with potential lenders for the Transaction, which information shall be set forth in Schedule 1, as amended from time to time” (the “Notice Provision”).

The record established, which, according to the Court, defendant did “not dispute”,[21] that plaintiff “contacted” nonparty D.E. Shaw during the term of the Agreement, and that defendant entered into a financing transaction with D.E. Shaw less than a year after the Agreement expired. However, noted the Court, defendant had not paid plaintiff the Fee earned under the Agreement. The Court concluded that “[i]n the face of this clear contractual language and the undisputed facts, Supreme Court properly awarded summary judgment to [plaintiff].”[22]

In affirming the motion court’s grant of summary judgment to plaintiff, the Court rejected defendant’s contention that plaintiff did not strictly comply with the Notice Provision of Section 5. Defendant maintained that the updates provided from plaintiff to defendant were not continuous, in writing, and in real time, and that such communications did not include “key contact information” and were not provided under the title of “Schedule 1”.[23] The Court explained that “the record firmly establishe[d] that [plaintiff] indisputably informed [defendant] of its contacts with D.E. Shaw and that D.E. Shaw had passed on the deal (such that there would be no further updates to provide).”[24] The Court concluded that “[t]his was enough to establish compliance with the Notice Provision.”

The Court went on to say that “[e]ven assuming that [plaintiff] did not strictly comply with Section 5 of the Agreement, [defendant] would still be obligated to pay the Fee because the minutiae of the Notice Provision amounted to more than a ‘matter of form, not substance.’”[25] “The failure to provide any additional updates or contact information with respect to D.E. Shaw, who had already passed on the deal,” explained the Court, “would have amounted to a relatively trivial breach.”[26]

Finally, the Court held that the motion court “properly awarded summary judgment to [plaintiff] with respect to damages.”[27] In doing so, the Court rejected defendant’s interpretation of the Fee Provision in which they contended that the motion court “improperly awarded damages based on the total funds that were disbursed to [defendant] under the credit facility (some $233 million), rather than the amount of funds that had been ‘actually received’ by [defendant] (some $45 million).”

The Court found that the “Fee Provision’s language relating to the loans ‘actually received’ plainly mean[t] the amount of the loan facility that was actually drawn down by [defendant] ($233 million) as opposed to the total amount that had been committed under the Credit Agreement ($250 million).”[28] Given the plain meaning of the Agreement, the Court concluded that the motion court “properly found that [defendant]’s proffered interpretation — excluding from the Fee the loan proceeds that had been directed to third party creditors, because they had not been ‘actually received’ by [defendant] — as overly technical and leading to a result that [was] not supported by the record or the Fee Provision.”[29]

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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, e.g., Harris v. Seward Park Housing Corp., 79 A.D.3d 425, 426 (1st Dept. 2010); Morris v. 702 E. Fifth St. HDFC, 46 A.D.3d 478, 479 (1st Dept. 2007).

[2] Franklin Apt. Assoc., Inc. v. Westbrook Tenants Corp., 43 A.D.3d 860, 861 (1st Dept. 2007).

[3] Awards.com v. Kinko’s, Inc., 42 A.D.3d 178, 187 (1st Dept. 2007).

[4] MBIA Ins. Corp. v. Patriarch Partners VIII, LLC, 842 F. Supp. 2d 682, 710 (S.D.N.Y. 2012).

[5] Hallinan v. Republic & Trust Co., 519 F. Supp. 2d 340, 352 (S.D.N.Y. 2007) (citing ARP Films, Inc. v. Marvel Entertainment Group, Inc., 952 F.2d 643, 649 (2d Cir. 1991)).

[6] Nadeau v. Equity Residential Props. Mgmt. Corp., 251 F. Supp. 3d 637, 641 (S.D.N.Y. 2017). See also Gaviria v. El Tawil, 2019 WL 103724 at *5 (Sup. Ct., N.Y. County Jan. 4, 2019) (finding that the defendant could not make a breach of contract claim against the plaintiff because the defendant was in breach of the agreement).

[7] Oppenheimer & Co. v. Oppenheim, 86 N.Y.2d 685, 690 (1995) (citations omitted).

[8] Id. (citation omitted).

[9] Id. (citation omitted).

[10] Id. (citing Calamari and Perillo, Contracts § 11-8, at 444 (3d ed.)).

[11] Id.

[12] Id. at 691.

[13] Id. (citing Restatement (Second) of Contracts § 227 (1)).

[14] Id. (citing Restatement (Second) of Contracts § 229, comment a, at 185; and § 227, comment b (where language is clear, “[t]he policy favoring freedom of contract requires that, within broad limits, the agreement of the parties should be honored even though forfeiture results”)).

[15] Id.

[16] 2 Farnsworth, Contracts § 8.12, at 415 (2d ed. 1990).

[17] Restatement (Second) of Contracts § 237, comment d, at 220.

[18] Id.

[19] Oppenheimer, 86 N.Y.2d at 691 (citation omitted).

[20] Plaintiff is an investment bank. Defendant is a national law firm concentrating primarily in the areas of personal injury, mass tort, and medical malpractice.

[21] Slip Op. at *1.

[22] Id.

[23] Id. at *1-*2.

[24] Id. at *2.

[25] Id. (quoting PDL Biopharma, Inc. v. Wohlstadter, 2019 N.Y. Slip Op. 32693(U), 19-20 (Sup. Ct., N.Y. County 2019)).

[26] Id. (citing PDL Biopharma, 2019 N.Y. Slip Op. 32693(U) at 19-20).

[27] Id.

[28] Id.

[29] Id.