On August 28, 2024, Justice Chan of the New York County Commercial Division issued a decision in Imperium Blue Acquisition Partners, LLC v. Marathon Asset Mgt., L.P., 2024 NY Slip Op. 33042(U), holding that a claim based on the implied covenant of good faith and fair dealing failed for lack of an enforceable contract, explaining:
In New York, causes of action based upon breach of the covenant of good faith and fair dealing cannot be sustained absent a contractual obligation between the parties. Absent the existence of a contract, a claim alleging breach of the implied covenant of good faith and fair dealing is legally unavailing.
Here, defendants argue that because the term sheet explicitly states that under no circumstances should the terms and conditions contained herein constitute or be deemed to constitute a legally binding commitment, the term sheet itself is not an unenforceable contract and, therefore, cannot be breached. Likewise, because there is no contract, there is no implied covenant of good faith, which does not exist in the absence of a contract. Defendants note that no claims based on conditions explicitly addressed in the Term Sheet can succeed.
Plaintiffs, on the other hand, argue that even if the term sheet itself is unenforceable, there existed an oral agreement between the parties that arose once plaintiffs attempted to terminate the agreement and defendants orally induced them to forgo the termination with redoubled promises to use best effort to close the transaction. Thus, plaintiffs argue that, even if the term sheet in not binding as far as completing the financing, defendants were nonetheless bound underwriting the financing in good faith. Plaintiffs also claim that defendants formed an oral contract by reassuring plaintiffs that they would be able to fulfill the terms of the contract. However, because there is clear and unambiguous language in the term sheet outlining that the term sheet is non-binding and unenforceable, plaintiffs’ argument that there is at minimum an implied good faith obligation in the term sheet is circuitous and unavailing. Further, plaintiff’s argument that defendants’ reassurance to fulfill a contract that is already non-binding does not create a separate binding oral contract.
(Internal quotations and citations omitted).