When An Oral Agreement Is Perfectly Valid Under New York Law
One of the most common - and potent - defenses to a breach of contract claim is that the agreement was never reduced to writing, and therefore barred by New York's Statute of Frauds.
But is that the end of the story?
Very often - and fortunately for the party seeking to recover what they're owed - the answer is no.
Why At-Will Contracts Can Survive - Even if They Were Never Reduced to Writing
One narrow, but important, exception to the Statute of Frauds, which allows parties to pursue breach of contract claims even when the agreement was not reduced to writing is when the contract is terminable at will, or, in other words, if either party to the agreement is free to walk away at any time.
This limited exception falls within the ambit of the larger exception that the Statute of Frauds does not apply to agreements that "are capable of being performed within one year." See, NY GOB § 5-701(a)(1).
The reason for applying this exception to this circumstance should be fairly obvious:
If either party is free to walk away from the deal at any time, then the agreement, by its own terms, can be perfomed within one year.
(For more on this topic, please see "How Some Important Exceptions to NY's Statute of Frauds Can Sustain a Breach of Contract Action.")
How New York's Courts Have Applied This Exception to the Statute of Frauds
This exception has been applied by New York's courts in several different contexts, ranging from the breach of an agreement to supply goods to oral joint business venture agreements - even when they apply to real estate (which normally must be reduced to writing as a matter of law). For example, in the recent case of Mendelovitz v. Cohen, a Brooklyn court held that a formal writing is not necessary to enforce such an oral joint venture agreement because the alleged joint venture agreement was capable of being performed within one year.
Likewise, in the Queens County case of Reliable Realtors v. Guerre, where the parties' alleged joint venture was only to invest in and develop property, rather than creating a new property interest, the oral agreement was upheld as well.
The moral of the story is clear:
Don't assume that the failure to reduce your agreement to writing is fatal to a breach of contract case.
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