There are several categories of agreements that must be reduced to writing in order to be enforceable under New York law, such as contracts for services that cannot be completed within one year, or contracts pertaining to real estate. (For more on this topic, you may wish to download the free guide to NY breach of contract cases, “When You Don’t Have a Written Agreement,” or read one or more of the following articles:  “Commission Agreements, Finders Fees and New York’s Statute of Frauds,” “How Some Important Exceptions to NY’s Statute of Frauds Can Sustain a Breach of Contract Action,” “How Much Writing is Enough to Be Considered a ‘Written Agreement’  Under NY Law?“).

But, contrary to popular belief, a partnership isn’t one of them; in fact, New York’s courts have explicitly held that partnership agreements may be oral.

As a New York County trial court noted in Vilkelis v. Holmes:

“Whether a partnership status is enjoyed turns on various factors, including sharing in profits and losses, exercising joint control over the business and making a capital investment and possessing an ownership interest in the partnership. M.I.F. Securities Co. v. R.C. Stamm & Co., 94 AD2d 211, 214 (1st Dept 1983). A partnership agreement may be oral. Missan v. Schoenfeld, 95 AD2d 198, 208 (1st Dept 1983). A party claiming the existence of an oral partnership bears the burden of proving the indica of such a relationship. F & K Supply, Inc. v. Willowbrook Development Co., 304 AD2d 918, 920 (3rd Dept 2003). An oral agreement to form a partnership for an indefinite period creates a partnership at will and is not barred by the statute of frauds. Prince v. O’Brien, 234 AD2d 12 (1st Dept 1996). Partnerships of will are subject to dissolution at any time by any partner. Sanley Co. v. Louis, 197 AD2d 412, 413 (1st Dept 1993).”

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Just over one year ago, I wrote about how a New York County trial court refused to dismiss two at-will employees that worked as placement professionals, and were promised both salary and commission did not forfeit their earned commissions – even though they never reduced their agreements to writing, in derogation of the Statute of Frauds. (See, “At Will Employees’ Breach of Oral Contract for Unpaid Bonuses Survives Dismissal“).

An appeals court across the river in Brooklyn has now followed suit.

In the breach of contract action of  Bauccio v. Aon Recovery, Inc., the plaintiff, a consultant, had earned certain unpaid commissions working for two companies that  were later acquired by the defendant. Seeking to recoup his unpaid commissions, the plaintiff purportedly entered into an oral agreement with the defendant whereby the defendant would pay him not only for his past unpaid commissions, but for future commissions with respect to those clients he had already referred to the defendant.

Although the appellate court agreed that the defendant’s alleged promise to pay for future commissions was barred by the Statute of Frauds (which requires that such an agreement be reduced to writing), it declined to dismiss that branch of the plaintiff’s claim seeking payment of his earned commissions, and cited to an exception to the Statute of Frauds, stating:

“Pursuant to General Obligations Law § 5-701(a)(2), a special promise to answer for the debt, default or miscarriage of another person’ must be in writing, and subscribed by the party to be charged therewith.’ Under a longstanding exception to this rule, however, the promise need not be in writing if it is supported by a new consideration moving to the promisor and beneficial to him’ and provided, further, that the promisor has become in the intention of the parties a principal debtor primarily liable …

‘T”he plaintiff raised triable issues of fact as to whether his continued efforts to secure a particular client, Adecco, on behalf of the defendant constituted new consideration running to the benefit of the defendant, and whether the parties intended the defendant to become primarily liable for the unpaid commissions [that defendant's predecessors in interest] owed to the plaintiff.”

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In the last year, I’ve been asked a few times whether you can incur personal liability merely by virtue of signing an agreement on  behalf of a corporation. Well, you need wonder no more, as a Suffolk County trial court in Cutler v. Collura-Repp has laid out the law on this issue in no uncertain terms:

“When an agent acts on behalf of a [corporation], the agent will not be personally liable for a breach of contract unless there is clear and explicit evidence of the agent’s intention to be personally liable …. even though he signed a contract without any language limiting his signature.” Weinreb v. Stinchfield, 19 A.D.3d 482, 797 N.Y.S.2d 521 (2d Dep’t 2005).

In order to assess whether the agent should be personally liable, the Court will engage in a two-part inquiry:

(1) whether the agent signed the agreement in her individual capacity, or merely on behalf of the corporation; and,

(2) whether the agent made a special promise to answer for the debt or default of the corporation (as called for by New York’s Statute of Frauds).

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In the breach of contract context, one of the most common – and potent – defenses to these cases is that the agreement was never reduced to writing, and therefore barred by New York’s Statute of Frauds.

There is a narrow, but  important exception to this rule: 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.” (For more on this topic, please see “How Some Important Exceptions to NY’s Statute of Frauds Can Sustain a Breach of Contract Action.”)

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 your failure to reduce your agreement to writing is fatal to your breach of contract case.

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I get asked this question an awful lot: “Well, we didn’t have a formal written agreement; all we have is a few back-and-forth e-mails, so I guess that means I have no case for breach of contract, right?”

As a recent case from New York’s Appellate Division, First Department held, the answer is no; that fact alone does not necessarily mean that you automatically lose. To the contrary, in its October 5 opinion in Naldi v. Grunberg, the appellate court stated as follows:

“We reject defendant’s argument that an e-mail can never constitute a writing that satisfies the statute of frauds of GOL § 5-703 …  Given the vast growth in the last decade and a half in the number of people and entities regularly using e-mail, we would conclude that the terms “writing” and “subscribed” in GOL § 5-703 should now be construed to include, respectively, records of electronic communications and electronic signatures.”

This decision is both well-reasoned and well-written. And here’s the best part: it acknowledges modern reality, and has taken a common sense approach to recognize what we already know from the real world – that e-mail has achieved recognition and acceptance as a perfectly valid form of written communication. This decision is also further proof that very little is needed to be considered a “written agreement” under New York law.

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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 §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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Although the range of different types of contracts is quite vast, a common thread unites them: the basic elements of a contract, and what you need to prove in the event that the contract is breached.

www.youtube.com/watch?v=1LT66lUMXnI

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).

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Not terribly much, according to a recent decision from a Queens County trial court.

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.

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I admit it.

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]).”

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When you read about a New York breach of employment contract case against a large institution that, if valid, would yield a significant amount of damages, yet the plaintiff is proceeding pro se, i.e., without an attorney, there is probably a very good reason for that. And Kant v. Columbia University, a case that was brought in a New York Federal Court is no exception to this rule.

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.

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