How Some Important Exceptions to NY's Statute of Frauds Can Sustain a Breach of Contract Action
In a Westchester County case that was reported upon in today's New York Law Journal, HP Hood, LLC v. Diamond D Realty, Inc., the plaintiff sought to recover over $1.5 million owed by the defendant for dairy products (in legalese, "goods") that were supplied - but not paid for - from January through December of 2009. In response to the complaint, the defendant moved to dismiss the complaint on the grounds that since there was no written agreement between the parties, the breach of contract claim was barred by New York's Statute of Frauds, in accordance with Uniform Commercial Code 2-201. Ultimately, the Court sided with the plaintiff and denied the motion, citing three (3) important exceptions to the Statute of Frauds: (1) Since the plaintiff sent invoices together with the goods which "afford a basis for believing that they reflect a real transaction between the parties," this case falls under the "merchant's exception" to the Statute of Frauds (UCC 2-201(2)), which states as follows: "Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection 1) against such party unless written notice of objection to its contents is given within ten days after it is received"; (2) Inasmuch as the defendant both received and accepted the goods, plaintiff's claim falls within another exception to the Statute of Frauds, as codified by UCC Â§2-201(3)(c); and, (3) Contrary to the defendant's contention that the case should be dismissed in accordance with NY Gen. Obl. Law 5-701 because the oral agreement was open-ended, and therefore incapable of being performed within one year, the Court held that this provision bars "only those contracts which, by their terms have absolutely no possibility in fact and law of full performance within one year." Applying that rule to this case, the Court stated as follows: "Here, the statute of frauds is not a bar to enforcement of the alleged oral agreement because its performance within one year was possible. The terms of the alleged oral agreement anticipated prospective purchases but did not bind either party to any particular transaction, and performance depended solely upon the will and desires of the two parties (Nat Nal Serv. Sta. v. Wolf, 304 N.Y. 332, 340, 107 N.E.2d 473). Diamond Dairy might or might not have placed orders with Hood and Hood might or might not have accepted them. Accordingly, neither party was bound by the terms of the alleged oral agreement "to do anything at any time, and consequently there is nothing in its terms to bring it within the statute of frauds." The moral of this particular case is fairly straightforward: even if you don't have a formal written agreement, you may still be entitled to recover your losses under New York law.
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