- Court
- New York Supreme Court, Appellate Division, Second Department
- Case
- Babadzhanov v. B & L Health, Inc.
- Docket
- 2022-07507
- Filed
- May 27, 2026
- Slip Op
- 2026 NY Slip Op 03284
- Citation
- 2026 NY Slip Op 03284 (N.Y. App. Div. 2d Dep’t 2026)
Background
Aleksandr Babadzhanov commenced an action against B & L Health, Inc. to recover damages for breach of an oral loan agreement. Babadzhanov claimed that the parties had entered into an oral agreement under which he loaned money to the defendant corporation, and that B & L Health failed to repay the loan as promised.
The case proceeded to a nonjury trial before Supreme Court, Nassau County. In a decision dated November 23, 2021, the trial court determined that the oral loan agreement was unenforceable because there was no meeting of the minds as to the agreement’s material elements. The court found that the parties had not reached a mutual agreement on the essential terms of the purported loan, including fundamental provisions that would be necessary to create a binding obligation.
On July 25, 2022, the court entered a judgment in favor of B & L Health and against Babadzhanov, dismissing the complaint. Babadzhanov appealed from the judgment to the Appellate Division, Second Department, challenging the trial court’s finding that no enforceable contract existed between the parties.
Holding
The Appellate Division, Second Department unanimously affirmed the trial court’s judgment dismissing the complaint, with costs awarded to the defendant. The court applied the well-established standard of review for nonjury trial determinations, noting that its power of review is “as broad as that of the trial court” and that it may “render the judgment it finds warranted by the facts, bearing in mind in a close case, that the trial judge had the advantage of seeing the witnesses and hearing the testimony,” citing Rimberg v. Horowitz, 206 AD3d 832.
The court reiterated the fundamental principle of contract law that to create a binding and enforceable contract, there must be a showing that the parties are in agreement as to all material terms, citing Petkanas v. Petkanas, 191 AD3d 708. Applying this standard, the court found that the Supreme Court’s determination that there was no meeting of the minds as to the material terms of the oral loan agreement was supported by the evidence, citing Herskowitz v. Wesley Hills Ctr., LLC, 203 AD3d 1031.
The court also found the plaintiff’s remaining contention to be without merit, providing no further basis for reversal.
Takeaways
This decision reinforces several important principles for practitioners dealing with oral agreements in New York. First, the case underscores the fundamental requirement that all material terms must be agreed upon for a contract to be enforceable. An oral agreement that lacks mutual assent on essential elements — such as repayment terms, interest rates, or other key provisions — will not be enforced by the courts regardless of whether one party performed under it.
Second, the decision highlights the challenges of proving oral loan agreements in litigation. Unlike written contracts that memorialize the parties’ intentions, oral agreements depend entirely on the credibility of the witnesses and the strength of the evidence presented at trial. The trial court’s advantage in observing witnesses and assessing their credibility firsthand gives significant deference to its factual findings on appeal.
Third, practitioners should note the Appellate Division’s broad standard of review in nonjury trial cases. While the reviewing court has the power to render its own findings, the practical reality is that a trial court’s credibility determinations are rarely disturbed, particularly when supported by the record.
Why It Matters
This case serves as a cautionary tale for parties who rely on informal oral agreements for financial transactions. Even in business relationships where there may be a degree of trust, the absence of a written agreement documenting the material terms of a loan creates substantial litigation risk. If a dispute arises, the party seeking to enforce the agreement bears the burden of proving that both sides agreed to the same essential terms, a burden that can be difficult to carry without documentary evidence.
The decision also has practical implications for attorneys advising clients on business transactions. Counsel should emphasize the importance of memorializing loan agreements in writing, including at minimum the principal amount, interest rate, repayment schedule, and any collateral or security arrangements. Even a simple written confirmation exchanged between the parties can provide critical evidence of the agreement’s terms and the parties’ mutual assent.