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 §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.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In general terms, in order to establish a breach of contract claim under New York law, a plaintiff must prove the following 4 things: (1) the existence of an (enforceable) agreement; (2) that the plaintiff performed his end of the agreement; (3) that the defendant breached the agreement; and, (4) that the plaintiff sustained damages as a direct result of the defendant’s breach.

A plaintiff’s failure to prove any one of these elements should prove fatal to a breach of contract claim. Leaving aside, for the moment, the issue of enforceability (some types of agreements must be reduced to writing, as required by New York’s Statute of Frauds, and other agreements, such as illegal contracts, are unenforceable on public policy grounds), the prong that most often dooms breach of contract cases is the first: proving the existence of an agreement.  Here, the plaintiff is obligated to set forth the essential and specific terms of the agreement that the claim is based upon.

As a corollary to this rule, the following must be borne in mind: generalized breach of contract claims that are cast against a battery of defendants will fail unless the plaintiff can show a specific agreement with each defendant. In legalese, this is called “privity.” In other words, if I enter into an agreement with A Corp. to buy some widgets, and A. Corp. breaches the agreement, I have no inherent right to sue A. Corp.’s 5 other affiliates that weren’t parties to the original contract, and did not tortiously interfere with or otherwise induce the breach of contract. See, e.g., Chen v. Street Beat Sportswear, Inc., 364 F. Supp. 2d 269, 294-95 (E.D.N.Y. 2005).

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In Phone Card America, Inc. v. Quality Discount Equipment Sellers, LLC, the defendant sold plaintiff a specialized printing press for the express purpose of printing phone cards. Unfortunately, despite plaintiff’s numerous efforts to have the press’s problems  both diagnosed and repaired, they were informed by an expert technician that had been recommended by the defendant that it still required a transformer to make the machine functional. Although the defendant allegedly promised plaintiff that they would provide the transformer, they never did so.

In response to plaintiff’s lawsuit seeking, among other things, to rescind the contract, the defendant moved to dismiss the complaint on the grounds that since the contract was for goods exceeding $500 in value and had never been reduced to writing, plaintiff’s argument should be barred by New York’s Statute of Frauds.

In rejecting the defendant’s argument, however, the Queens County trial court held, however, as follows:

“In the case at bar, the plaintiff produced an e-mail from the defendant which amounts to a “writing” sufficient to satisfy UCC 2-201. (See, Bazak Intl. Corp. v. Tarrant Apparel Group, 378 F Supp 2d 377 [applying New York law].) Although the e-mail is not detailed, the Official Comment to UCC 2-201 states: “1. The required writing need not contain all the material terms of the contract and such material terms as are stated need not be precisely stated. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction.”

The moral of the story is both clear and twofold: (1) don’t automatically assume that your potential breach of contract action is D.O.A. just because you didn’t have a full-blown and detailed contract; and, (2) in any transaction or course of dealing, ALWAYS make sure you get SOMETHING about the nature of your agreement memorialized in writing; all you need is enough to  establish that an agreement between the parties existed.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

I enjoy it when the law works the way it should, and sticks it to a defendant that reneges on his word, and breaches his contract wherein he agreed to pay the plaintiff a percentage of his profit on the purchase and sale of a property.

And that is exactly what happened in Futersak v. Perl.

In a very detailed and well-written opinion,Nassau County trial judge Ira Warshawsky upheld the parties’ written agreement, and rejected the defendant’s contention that Futersak’s claim should be dismissed on the grounds that he was not a licensed real estate broker, in contravention of Section 442-d of the Real Property Law.

More importantly, for the purposes of this article, the Court set out a blueprint for how finders are distinguished from brokers, and what a finder must prove in order to collect his finder’s fee under New York law. Following are the pertinent parts of the Court’s opinion:

“[N]ew York courts distinguish between finders and brokers. Finders find potential buyers or sellers, stimulate interest and bring parties together, while brokers bring the parties to an agreement on particular terms (Train v. Ardshiel Associates, Inc., 635 F Supp. 274, 279 [SDNY 1986]) …

“Finders must demonstrate that the final deal which was carried through flowed directly from his introduction of the matter to be entitled to collect his fee (Seckendorff v. Halsey, Stuart & Co., 234 AD 61, 71 [1st Dept 1931], rev’d on other grounds 259 NY 353 [1932]; cf. Bendell v. De Dominicis, 251 NY 305, 311 [1929] [brokerage commissions ordinarily become due when the broker produces to his principal a party ready, willing and able to purchase on the terms of sale authorized or accepted by such principal]). While a finder may be entitled to his fee in a special business situation for merely introducing and bringing the parties together to conduct their own negotiations, if that is his agreement with his principal, a licensed real estate broker, however, cannot recover unless he brings the parties to an agreement (Lehman v. Arlen Operating Co., 54 Misc 2d 372, 375 [Sup Ct, NY County 1967]).”

Returning to the facts of this particular case, it does not seem that the Court struggled to reach its decision in the least, stating:

“The written agreement between the parties, and drafted by Defendant, explicitly refers to Plaintiff being compensated in the role of a finder. There is nothing in the agreement explicit or implied that Futersak was an agent of Defendants in the actual or functional meaning of that term and relationship. Futersak had no explicit or implied power to bind Defendants. He did not have the power to negotiate the transaction. Futersak did not have the power to do anything except find and introduce prospects.”

A final word of caution is in order here: Futersak won because he had a written contract. As noted in the Court’s opinion, “New York’s Statute of Frauds applies to finders and their agreements to provide finding services, which means that finders must memorialize their agreements to find in writing to be enforceable (General Obligations Law §5-701 [a] [10]).”

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In this case, the plaintiff, who was named a visiting scholar at Columbia University back in 2001, claimed that Columbia had breached their oral agreement to award him a tenure-track position in their economics department after completing one year as an unpaid visiting scholar at the University.

In granting the University’s motion to dismiss the complaint, the Court noted that even assuming that plaintiff’s assertions were completely true (the University denied the allegations), plaintiff’s claim still failed as a matter of law because the oral contract – even according to the plaintiff – provided for performance over a two-year period, and was therefore barred by New York’s Statute of Frauds.

As suggested above, this was not even a close case, because the Statute of Frauds clearly states that every agreement or promise that “by its terms is not to be performed within one year” will be deemed void unless it is reduced to writing. And employment contracts are no exception to this rule; to the contrary, a New York Federal Court expressly held as follows:  “An employment contract for a term of more than one year is thus unenforceable under the Statute of Frauds ‘unless it is memorialized in a writing signed by the party to be charged.’ Celi v. Canadian Occidental Petroleum, Ltd., 804 F. Supp. 465, 469 (E.D.N.Y. 1992).

Under the circumstances, it seems pretty clear why no attorney wanted to take this case.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

If your ability to purchase a property hinges upon which your ability to get needed financing (which is often the case), you’d better make sure that this is memorialized in the contract. Otherwise, you could end up like the defendant in Abart Holdings LLC v. Bayou Properties, Inc., and lose your entire deposit when a court finds you in breach of your real estate contract.

In this New York County case, the plaintiff-seller moved for summary judgment on that branch of its claim seeking a  finding that it was entitled to keep the deposit the defendant buyers had placed into escrow as damages for the defendants’ failure to abide by their contract, and close on the property.

In granting the plaintiff seller’s motion, the Court noted that the only reasons proffered by the buyers for failing to close as had been agreed were two-fold, and neither were convincing: (1) that the plaintiff had failed to deliver certain documents at the closing; and, (2) that the defendants had not received the funding that was needed to close, and that had always been understood as a pre-condition, or in legal terms, a condition precedent, to the deal.

And here’s why the defendants’ arguments failed: First, the defendants did not raise the plaintiff’s purported failure to deliver these documents as an issue at the closing, and therefore, this issue was waived; Second -and this is important – since the parties never expressly made the defendants’ ability to secure financing a condition precedent to closing, the Court would not do so now. In support of its holding, the Court summarized the law governing conditions precedent as follows:

“A condition precedent is ‘an act or event, other than the lapse of time, which, unless the condition is excused, must occur, before a duty to perform a promise in the agreement arises.’” (Oppenheimer & Co., Inc v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995]). “[N]onoccurrence of the condition may yet be excused by waiver, breach or forfeiture.” (Id at 691). ” “Courts will interpret doubtful language as embodying a promise or constructive condition rather than an express condition.”( Id). “If the language is in any way ambiguous, the law does not favor a construction which creates a condition precedent. A contractual duty will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition precedent.” (Ashkenazi v. Kent S. Assoc., LLC, 51 AD3d 611, 611-612 [2d Dept 2008]).

The lesson to be gleaned from this case is clear: if there are conditions that you need fulfilled before you can close on a property, make sure they are memorialized in the contract and/or at the closing.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

According to the plaintiff in the Suffolk County case of Kimelstein v. Kimelstein, he was wrongfully frozen out of his 50% interest in a property that he and brother had acquired jointly through a non-party corporation.  More specifically, he contends that pursuant to an oral agreement he made with his brother in 2007, the plaintiff agreed to forgo his interest in the non-party corporation and sell his interest in the Defendant corporation as well as the real property it owned for the sum of $350,000, in exchange for his brother’s promise to make weekly payments in the amount of $850, until such time as Defendants were able to refinance the real property, after which the balance of the $350,000 would become due.

As I’m sure you can guess, the defendants stopped making payments, and now, they moved to dismiss the lawsuit on the grounds that the plaintiff’s claim is barred under New York’s Statute of Frauds because the claim pertains to real estate and there was no written contract.

Although the Court was constrained to dismiss the plaintiff’s breach of contract claims, the Court was clearly troubled by the facts of this case, and therefore allowed the plaintiff’s equitable claims for unjust enrichment and the imposition of a constructive trust to survive, stating:

“Plaintiff’s allegations that he was a family member, that Defendant promised him $350,000 to forego his interest in the property owned by L&J as well as the corporation, that Plaintiff spent time and money over seven years investing in L&J, are sufficient to withstand a motion to dismiss …

“Plaintiff has alleged that Defendants received valuable benefits, including his contributions over the years to the corporate entities and toward the purchase of the real property; that he has given up any claim to ownership of stock in at least one of the corporations and that it would be inequitable for the individual Defendant to hold title to both without affording plaintiff some sort of compensation.”

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In a case that they brought in Federal Court in Upstate New York, Opto Generic Devices Inc. (“OGD”) sued Air Products & Chemicals Inc. (“ACC”) for breach of contract and for consequential damages, asserting that it lost profits when the defendant did not buy its products. In this case, the defendant admitted that the parties had entered into a series of agreements that delineated the scope of work to develop certain products for plaintiff, and included a $400,000 agreement for license rights to these products. In light of the ongoing working relationship between the parties, and the exchange of nearly $1,000,000 between them with regard to the development of this product, the plaintiff was caught off guard when the defendant never actually bought the finished product.

But the plaintiff had one “small” problem with their case – while the contract set forth the parties’ responsibilities as to patent prosecution and maintenance, commercial rights and licenses (i.e., it was a development contract), there was absolutely no provision requiring ACC to buy any OGD products. Consequently, I can’t say I’m surprised that the Court dismissed this aspect of their breach of contract action.

You know the old saying about what happens when you assume something …

It’s just another example of the costs of failing to reduce your agreements to writing.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Absolutely not, held a New York County trial court.

In Nichols v. SG Partners, Inc., the plaintiffs were employed by defendant as placement professionals, earning both a base salary as well as a percentage of defendant’s revenues generated for placements that the plaintiffs made, or commissions. After the plaintiffs found the working conditions “intolerable,” they resigned, and requested that the defendant pay them for the commissions they had earned during their employment. Not surprisingly, the defendant ignored these requests.

Accordingly, the plaintiffs sued the defendants, contending that the defendants were liable for breach of contract, breach of an implied covenant of good faith and fair dealing, unjust enrichment and violation of New York Labor Law (“Labor Law”) §193. The defendant then promptly moved to dismiss the case, arguing, among other things, that since the plaintiffs did not have a written contract the plaintiffs’ claims were barred under New York’s Statute of Frauds (N.Y. Gen. Obl. Law §5-701).

In rejecting the defendant’s argument, the Court cited a long litany of precedent for the proposition that “[B]ecause an at-will employment relationship may be freely terminated by either party at any time for any reason or even no reason, employment agreements of this type generally do not fall under the proscription of the Statute of Frauds.”

Importantly, the Court also noted that if it is later found at trial that an employer willfully withheld the plaintiffs’ wages, in derogation of Labor Law §198.1-a, “an additional amount as liquidated damages equal to twenty-five percent of the total amount of the wages found to be due” (Rasmussen v. Yellow River, Inc. 298 AD2d 322 [1st Dept 2002]; Wolintetz v. Island Stationary Corp., 16 Misc 3d 1133 [NY Dist Ct 2007] (withholding of payment of commissions was a willful act of retaliation for the plaintiff’s leaving the defendant’s employ)).

The message to employers is unmistakably clear: if you wrongfully withhold earned wages or payments due to your former employees, you do so at your own peril.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

In Al-Bawaba.com, Inc. v. Nstein Tech. Corp., a decision that was discussed in last week’s New York Law Journal, a Kings trial court dismissed their lawsuit against a software company that sought more than $1 million in damages for the defendant’s alleged breach of contract to provide software that would translate the news from English to Arabic.  In this case, there were substantial negotiations over price, the manner and time in which the payments would be made for the software license. And although some of these e-mails went so far as to say “we have an agreement in principle,” no further, formal contract was ever executed.

As noted by the Court, “the record in this matter fully supports defendant’s contention that the parties intended to execute a written agreement, foreclosing any argument that an enforceable oral agreement was ever reached, or even intended … [P]laintiff’s statement that before an agreement could be “filed away in the company’s filing cabinets, it has [sic] to be reviewed by a lawyer and signed” convincingly demonstrate that, as far as plaintiff was concerned, additional terms needed to be resolved and reduced to writing prior to entering an enforceable agreement.” In legalese, this claim was barred by New York’s Statute of Frauds.

The worst part of it, from the plaintiff’s perspective is this: they had a full 15-page contract in hand, but never had their lawyers finish reviewing it.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.