## Facts

- Robert C. Lipsit worked for Jackson D. Leonard from September 1961 to January 1969 under a series of annual letter agreements.
- Lipsit alleged Leonard made repeated oral promises (initially to induce him to change jobs and later to retain him) that Lipsit would receive an equity interest in Leonard’s business in exchange for past and future services.
- The written letters discussed only a possible future arrangement involving partial ownership or other incentives, contingent on mutual satisfaction and later agreement.
- No concrete ownership arrangement was offered until 1968, when Leonard proposed terms that Lipsit rejected as financially impossible for him.
- Lipsit’s employment ended at the beginning of 1969.
- Lipsit sued on (1) breach of contract based on the alleged oral equity promise and (2) fraud, alleging Leonard never intended to grant equity and made the promises to obtain Lipsit’s services.
- The parties proceeded on the understanding that New York substantive law governed.

## Issues

1. Whether the alleged oral promise of an equity interest was enforceable as a contract term in light of the written annual agreements and New York’s parol-evidence rule.
2. Whether Lipsit could pursue an independent tort claim for fraud in the inducement based on alleged oral promises notwithstanding the parol-evidence rule, and what limits applied to damages.

## Decision

- The court affirmed summary judgment dismissing the contract claim: the writings did not create a definite right to equity participation, and parol evidence could not be used to add or vary the written agreements to enforce the alleged oral promise as a contract.
- The court reversed summary judgment on the fraud claim and remanded: New York law permits parol evidence of oral misrepresentations to prove fraudulent inducement even when the oral promise is not enforceable as a contract.
- The court noted potential proof difficulties (including showing specific out-of-pocket loss and proving the content of the alleged oral promises) but held those issues were for the trier of fact, not summary judgment.

## Legal Principles

- Under New York law, the parol-evidence rule bars using prior or contemporaneous oral promises to modify or supplement an integrated written agreement when the plaintiff seeks to enforce the contract as modified.
- A fraud-in-the-inducement claim may proceed based on oral promises or misrepresentations that induced the written agreement, and parol evidence is admissible to establish the fraud.
- A false representation of a present intention (a promise made without intent to perform) can constitute actionable fraud.
- In a fraud action seeking money damages, recovery is limited to indemnity for actual pecuniary loss (out-of-pocket damages); the plaintiff cannot obtain the equivalent of enforcing the contract plus the alleged oral promises through tort damages.
- Summary judgment is improper where material factual disputes exist concerning intent, reliance, and the alleged misrepresentations.

## Conclusion

The court held that the alleged oral promise of equity could not be enforced as a contractual right due to the written agreements and the parol-evidence rule, but it allowed the plaintiff to proceed on a separate fraud-in-the-inducement theory, with damages limited to out-of-pocket loss, and remanded for further proceedings on the fraud claim.


Lipsit v. Leonard, 315 A.2d 25 (N.J. 1974)