The business world runs on contracts. Indeed, contractual obligations control multiple aspects of business operations in New Jersey, covering matters of employment contracts, leases, shipping contracts and supply contracts.
Thorough and well-written contracts can make-or-break businesses. Yet if contracts do not properly define each party’s role in a transaction, conflicts may arise. When one party does not uphold the obligations defined in the contract, then a breach of contract has occurred.
The Bank of New York Mellon Corp is now defending against a breach of contract claim. A judge in New York recently dismissed claims regarding fiduciary duties brought by customers. However, the judged declared that the breach of contract claims can move forward.
These customers are public pensions from Detroit. The dispute arises from transactions in 2008. The pensions claim that New York Mellon did not do enough to protect investments that it had made on behalf of the pensions. According to the pensions, the bank invested $1.9 billion in Lehman, whose financial stability was in question at the time.
Eventually, Lehman filed for bankruptcy protection and the pensions lost money. The pensions subsequently sued New York Mellon for $1 billion claiming it had the duty to protect the investments.
Contract disputes, such as this one, can be costly and distracting for a business. The unfortunate situation in many cases is that a lot of this confusion surrounding a breach of contract case could have been avoided in the first place, had the contract been better. All businesses should ensure their contracts are written to avoid costly cases such as these.
Source: Reuters, “UPDATE 1-Bank of NY Mellon fails to end client lawsuit on Lehman,” Sept. 11, 2012