India.com, Inc. v. Dalal

Sandeep Dalal (defendant) acted as a sales broker for the sale of India.com, Inc. (ICI) (plaintiff), a subsidiary of EasyLink Services Corporation (EasyLink). Dalal negotiated terms with Business India Publications Limited (BI), and EasyLink and BI signed a stock purchase agreement (the agreement) for the sale of ICI. The agreement’s negating clause provided that neither the agreement nor any schedule of the agreement was intended to create a right, claim, or remedy in favor of anyone other than the parties to the agreement. The agreement identified Dalal as the sales broker and indicated that Dalal was entitled to a commission under terms set out in a disclosure schedule. In a separate agreement, EasyLink agreed to pay a commission to Dalal when the sale between EasyLink and BI closed. EasyLink terminated the agreement before completing the sale. Dalal argued that EasyLink failed to close the transaction to avoid paying Dalal’s commission. ICI sued Dalal, and Dalal counterclaimed against EasyLink for breaches of contract and the implied covenant of good faith and fair dealing, seeking recovery under the agreement as a third-party beneficiary. The district court held that Dalal was a third-party beneficiary under the agreement and entered judgment for Dalal for over $930,000. EasyLink moved to amend the judgment, and the court reversed its decision, finding that the agreement’s negating clause was controlling and that Dalal was not a third-party beneficiary. The court reversed again upon Dalal’s motion, concluding that EasyLink had waived a defense based on the negating clause by failing to raise it, and reinstated the judgment for Dalal. Both parties appealed.