Why Lacking a Valid Contract Doesn't Have to Mean You Lose
Consider this fact pattern:
After months of long back-and-forth discussions and e-mails, you're promised a great new job, but it's out of town. You leave your current dead-end job, sell your house and move, hopeful that you can make a fresh start.
But when you finally arrive at your new job, you learn that there's one "small" problem:
They've eliminated your position.
And then the reality sets in, which causes you to smack your forehead:
You never got a written contract.
A long-time customer places a large order over the phone for your product; an order large enough that you hire additional staff and purchase additional machines just to accommodate the order.
And then you learn that the customer has decided to back out.
And, like in scenario #1, you go back and realize that you forgot to reduce your agreement with the customer to writing, and worse, you're out hundreds of thousands of dollars.
Why Giving Up Just Because You Didn't Have a Written Agreement in Place Could be a HUGE Mistake
While you might be inclined to just throw up your hands in frustration and walk away, that would probably be a mistake - at least under New York law.
And the reason is a doctrine called "quasi-contract," which means that the Courts are obliged, out of a sense of equity or fairness, to restore the status quo ante, i.e., putting the parties back into their original positions, even where there is no written, valid and enforceable contract.
Two (2) Examples of Quasi-Contract, Allowing You to Recover - Even in the Absence of a Written Agreement
Two examples of this are as follows:
- Promissory Estoppel - As the Appellate Division, Second Department held,"[T]he elements of a cause of action based upon promissory estoppel are a clear and unambiguous promise, reasonable an d foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise." Williams v. Eason, 49 A.D.3d 866, 868 (2d Dept. 2008). This type of claim would be equally applicable to the two scenarios listed above.
- Unjust Enrichment - In a different vein, an unjust enrichment claim is based on the unfairness inherent in the defendant benefiting from the plaintiff's services without paying for them. To that end, the Appellate Division, First Department summarized the elements of an unjust enrichment claim as follows: "To state a cause of action for unjust enrichment, a plaintiff must allege that it conferred a benefit upon the defendant, and that the defendant will obtain such benefit without adequately compensating plaintiff therefor." Nakamura v. Fuji, 253 A.D.2d 387, 390 (1st Dept. 1998).
A Word of Caution
At this point, it bears emphasis that these claims are only applicable in the absence of a valid, enforceable contract. Stated differently, a quasi-contract claim that is based upon the same facts and transactions as a breach of contract claim will be dismissed.
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