Mon Ny owned a house, which was secured by a mortgage loan held by Bank of America. To maintain possession of the home, Ny was required to make regular payments to Bank of America; if he didn’t, Bank of America could foreclose on the property and then sell it to recover the money it had loaned Ny to purchase the home.

Question

When Ny was unable to make the payments, Bank of America notified him that it intended to foreclose on the property. Ny wanted to enter into a payment plan with Bank of America to avoid it foreclosing on the property. In an effort to prevent the pending foreclosure, Ny’s lawyer entered into negotiations with Bank of America’s attorneys via telephone. During their conversation, the attorneys discussed various terms of a settlement agreement, which Bank of America’s lawyers agreed to draft and send to Ny’s lawyer.

Two week later, Bank of America’s lawyers sent Ny’s lawyer the proposed settlement agreement. After examining the document, Ny’s lawyer responded to Bank of America’s lawyers, indicating that Ny accepted the settlement terms, but that the settlement agreement was missing two key elements discussed during the telephone negotiations that needed to be included in the final settlement agreement. At this point, the foreclosure was set to occur the following week, and Ny’s lawyer asked that Bank of America’s lawyers confirm that the foreclosure would not take place.

A couple of days later, Ny’s lawyer sent a follow-up letter to Bank of America’s lawyers to confirm that a settlement had been reached and that the foreclosure would not take place. Bank of America’s lawyers responded indicating that no settlement had been reached and that the foreclosure would proceed as scheduled. The following week, Bank of America foreclosed on the property. Ny filed a breach of contract claim against MRU, asserting that he had settled the matter with MRU, which precluded them from proceeding on the foreclosure.

In this jurisdiction, the elements of a binding contract are:

offer - an offer was made;
acceptance - the offer was accepted;
consideration - something of value was exchanged;
capacity - the parties had legal capacity to enter into the contract; and
legality - the subject matter of the contract wasn't prohibited by law.
Additionally, parole evidence is not admissible in this jurisdiction.

Using the above rule, what laws can Ny use to prove that he and Bank of America had reached a settlement agreement that Bank of America had breached the contract by foreclosing on the property.

Answer 1

To prove that a binding settlement agreement existed between Ny and Bank of America and that the bank breached that contract by proceeding with the foreclosure, Ny will need to address the elements of a contract as laid out in the jurisdiction's law, as well as any applicable legal principles that support his position. Here’s how he might approach this:

1. Offer

Ny can argue that Bank of America made an offer through its lawyers when they proposed the settlement terms in the written document. This offer is evidenced by the initial telephone negotiations and the subsequent draft agreement sent to Ny’s lawyer.

2. Acceptance

Ny's acceptance is somewhat complicated by the fact that he identified missing elements in the proposed settlement. However, his lawyer's communication indicating acceptance of the settlement terms could be interpreted as an acceptance of the offer, contingent upon the inclusion of the additional terms discussed during the negotiations. Ny can argue that once he indicated acceptance, the lack of these elements should not invalidate the acceptance of the overall agreement, especially since those terms were previously discussed and agreed upon.

3. Consideration

Ny can argue that consideration existed, as the settlement agreement would involve Ny’s commitment to make payments to Bank of America in exchange for the bank refraining from foreclosure. The mutual exchange of promises (i.e., Ny’s payments for the bank’s forbearance on foreclosure) constitutes consideration.

4. Capacity

Assuming Ny had the legal capacity to enter into the contract (he is of legal age and mentally competent), there is unlikely to be an issue here. This element typically does not arise as a defense.

5. Legality

Since the subject matter of the contract pertains to debt repayment and the foreclosure process, which is legal under the law, this element is satisfied.

Additional Considerations:

• Evidence of Agreement: In jurisdictions where parol evidence is not admissible, the written agreement (or the absence of an executed final agreement) is critical. Ny can emphasize that the written document came after substantive negotiations and was intended to document the agreement that was reached.

• Actions of the Parties: In arguing that an agreement existed, Ny could highlight that both parties acted in a way that indicated there was an agreement (such as the negotiations and the bank's initial acceptance to draft the agreement).

• Estoppel or Detrimental Reliance: If Ny relied on the negotiations and Bank of America's representations (e.g., in forbearance from making further payments or taking other actions based on the belief that a settlement was reached), he might argue that Bank of America should be estopped from denying the existence of the agreement, especially given the pending foreclosure.

Conclusion

Ny's case hinges on demonstrating that a valid offer and acceptance of the settlement terms were reached, supported by consideration. He can argue the enforceability of the agreement despite missing elements by pointing to the parties' conduct and communications as evidence of a mutual intent to be bound by the revised terms, as well as the nature of the obligations involved in the settlement agreement. Ultimately, he would need to show to the court that these factors combined support his claim and justify a ruling in his favor against Bank of America for breach of contract.