N.Y. Top Court doesn’t Need Signature to Apply ‘Written Agreement’ Exception

25 for 25 in '25

We take it back to '05 and a New York case that teaches us that a written agreement may still be enforceable in the eyes of a workers' compensation exception even if it was never signed. Simply Research subscribers have access to the full text of the decision.

Case

Flores v. Lower East Side Service Center, Inc., 828 N.E. 2d 593 (N.Y. 2005).

What Happened

The owner of a multi-story building in Manhattan that was undergoing rehabilitation entered into an agreement with a general contractor. The contract included a provision for the contractor to indemnify the owner for injuries arising out of or resulting from performance of the work.

In accordance with the terms of the agreement, the contractor purchased liability insurance. Later, a laborer working for the contractor sustained an eye injury while performing demolition work on the project.

After receiving workers' compensation benefits, the laborer brought a personal injury action against the owner, and the owner filed a third-party action against the contractor, asserting that the contractor was obligated to indemnify the owner for the laborer's injuries.

The trial court granted the contractor's motion to dismiss because the contract at issue was never signed and reasoned that New York's Workers' Compensation Law Section 11 authorized such a claim only when there was an executed contract.

Appellate Division affirmed, concluding that a contract that was never executed was not "entered into" within the meaning of the statute.

The owner appealed to the New York Court of Appeals

Rule of Law

Under Section 11, an owner was permitted to bring a third-party claim against an injured worker's employer in two circumstances: 1) where the injured worker suffered a "grave injury"; or 2) where the employer entered into a written contract to indemnify the owner.

What the Court of Appeals Said

In a case of first impression regarding the contractual indemnification exception of Section 11, the Court of Appeals reversed the case, reinstated the contractual indemnification claim, and granted summary judgment to the owner.

According to the court, the legislature did not express a clear intent to deviate from the common-law rule that a contract need not be singed to be enforceable.

"We have long held that a contract may be valid even if it is not signed by the party to be charged," the court wrote. "An unsigned contract may be enforceable, provided there is objective evidence establishing that the parties intended to be bound."

Workers' Comp 101: In Brown Brothers Electric Contractors v. Beam Construction Corp., 41 N.Y. 2d (1977), the court explained, landowner entered into a written agreement with a general contractor for the construction of a shopping plaza. The general contractor in turn contracted with Brown, a subcontractor, for electrical work. When the general contractor failed to pay Brown, the owner requested that Brown complete the work, which Brown did. When Brown submitted its bill for services to the owner, the owner refused to pay on the basis that it had never executed a written contract with Brown. After trial, the lower courts found that there was an enforceable agreement, and the Court of appeals agreed that "the course of conduct between [the owner] and Brown, including their writings ... was sufficient to spell out a binding contract," notwithstanding the failure of the parties to sign an integrated agreement.

Had the legislature intended that only signed written document could be used to enforce the indemnification exception, Section 11 would have used the word "signed" or "subscribed" prior to the phrase "written contract," the court reasoned.

"Given the many statutes that include language mandating that one or both parties to an agreement sign the document, it is evident that the Legislature knows how to impose such a limitation when it intends to do so," the court wrote. "In some instances, the Legislature has gone beyond requiring that agreements be signed by directing that they be executed with a particular level of formality, such as the requirement that separation agreements that serve as the basis of a divorce be memorialized in 'a written agreement . . . subscribed by the parties thereto and acknowledged or proved in the form required to entitle a deed to be recorded.'"

The court held in the owner's favor.

Takeaway

The New York Court of Appeals wouldn't interpret the term "written contract" to impose a signature requirement when the term "written agreement" did not.

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