in writing. In ever-changing markets, where billions can
be won or lost in moments, such commonly accepted
practices remain in place to prevent the markets from
spiraling into chaos. Such rules are necessary.
New York’s highest court, the State Court of
Appeals, firmly established this principle as a rule
of law in late December, after centuries of seeing it
honored as an unwritten rule. This decision will likely
save trading markets from the potentially serious
disruptions and disorder brought on by institutions —
or rogue players — that don’t necessarily respect the
Email and Conversations Are Binding
The landmark decision regarding the case Stonehill
Capital Management vs. Bank of the West (BOTW)
overruled a surprise New York Appellate Court ruling.
It essentially concluded that “a trade is a trade,”
meaning a sale, purchase or trade is executable as
long as the material terms and conditions — through
emails and conversations — are spelled out and mutually accepted, even if a formal agreement has not yet
been signed. The decision also raised the bar on often-used escape clauses that were designed to give one
party an ability to back out for any reason it deemed
fit. That’s not how our markets function best, and the
court understands that.
An old adage dating back centuries underscores the importance that integrity plays in life and in business — your word is your bond.
Perhaps that’s why the London Stock Exchange
inscribed these words in Latin, Dictum Meum Pactum,
on its coat of arms in 1923. Both the motto and the
exchange have withstood the test of time — surviving
several world wars, recessions and depressions and
many other global and domestic challenges. It’s an
important reminder that our words and our bonds
really do matter.
Across the world, in markets, banks and on trading
floors, people understand that principle all too well. So
too do industry professionals who operate by another
common principle, a trade is a trade, which effectively
means buyers and sellers abide by rules in which they
first verbally agree to terms and then confirm the deal
A ‘Trade is a Trade’:
Why It Matters Here and in Markets Around the World
BY MARTIN EISENBERG
A recent case before the New York State Court of Appeals ruled that a “trade is a trade” if an informal
agreement exists even though a formal document has not been signed. Martin Eisenberg represented
Stonehill Capital Management in this case that has international ramifications and creates stability in
A sale, purchase or trade is executable as long as the material
terms and conditions — through emails and conversations
— are spelled out and mutually accepted, even if a formal
agreement has not yet been signed.
Principal, Law Offices of