Commission Agreements, Finders Fees and New York's Statute of Frauds

Over the last several years, most people that have contacted my office regarding a breach of employment contract matter came in with the assumption that absent a written agreement, there was no viable claim. And in the same vein, these people assumed that this would certainly apply if they had resigned or quit before getting paid their sales commissions.

While there is more than a grain of truth to these thoughts, it should come as no surprise that many of these assumptions are also erroneous. In point of fact, absent a written agreement (which is often the case, particularly in an at-will employment), New York's courts have distinguished between an employee's commissions - which may be recoverable - and a non-employee's finder's fees - which are generally not recoverable.

Generally speaking, the Statute of Frauds (N.Y. Gen. Obl. Law 5-701, et seq.) , bars a claimant from recovering damages on a breach of contract claim if the agreement was not reduced to writing, and the agreement could not have been performed within one year. Applying that rule, New York's courts have held that the "negotiation of business opportunities," or "fee-finders" arrangements fall squarely within the ambit of the Statute of Frauds, and therefore, the essential terms of agreement must be reduced to writing in order to be enforceable.

On the other hand, as in Nichols v. SG Partners, Inc., where the claimants were not mere "negotiators," and their role vis-a-vis the defendant was neither transitory nor limited, and the oral contract is intended for the hiring of individual employees rather than the formation of a new business entity (or the acquiring of an existing entity), such damages can be recoverable, as they fall outside the purview of the "business opportunities" provision of the Statute of Frauds.




Long Island, New York business litigation lawyer Jonathan Cooper represents businesses and individuals in commercial litigation and other matters ranging from breach of contract and breach of fiduciary duty to trade secret theft in New York's courts located in Nassau, Brooklyn, Bronx, Queens, Suffolk counties, as well as New York City and Westchester. In order to learn more information about business or commercial litigation under New York law, please see Jonathan Cooper's New York business litigation blog; to schedule a free consultation with Mr. Cooper, please contact his main office located in Cedarhurst, Long Island at 516.791.5700, or toll free at 866.374.1164.

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