Contrary to popular belief, the failure to obtain a fully signed (or, in legal terms, “executed”) agreement is not fatal to a breach of contract claim. That’s not to say it isn’t far better to have a fully executed agreement; it’s just that it doesn’t automatically mean you don’t have a valid, enforceable agreement either.

As a trial court in Brooklyn recently held in Skanska USA Bldg. Inc. v. Long Isl. Univ.:

“Based upon well-settled principles of contract interpretation, a court will find that no valid and enforceable contract was formed if a written agreement was negotiated, but never executed … ‘This rule yields, however, when the parties have agreed on all contractual terms and have only to commit them to writing. When this occurs, the contract is effective at the time the oral agreement is made, although the contract is never reduced to writing and signed’ (Matter of Mun. Consultants & Publ., Inc. v Town of Ramapo, 47 NY2d 144, 148 [1979].”

In other words, if the parties’ actions clearly indicate that a contract was entered into, or that an agreement was reached, the mere omission of a signature to the contract will not later preclude a court from finding that there was in fact a viable, enforceable agreement.

And, as a final thought, here’s something else to consider: even if no enforceable agreement is found, you may still be able to recover the fair value of your work under a “quantum meruit” legal theory. For more information on this topic, please see, “What You Can Do Under NY Law If You Don’t Have a Valid Contract.”

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I find it sad when people learn a lesson the hard way.

On the other hand, I understand why the Court, and the New York Legislature set up the rules in this fashion: simply put, if they allowed unlicensed contractors to still get paid for work that requires a license, then that would effectively abrogate the need for the license altogether.

And that’s precisely what happened in Enko Construction Corp. v. Aronshtein. In this Nassau County case, the plaintiff construction company sought payment of monies owed for the home improvement work it did, but wasn’t paid for, in either breach of contract or quasi-contract (i.e., the reasonable value of the services they rendered on equitable grounds, which is also referred to as “unjust enrichment” or “quantum meruit“). There was one “small” problem with its claim, though:  the plaintiff wasn’t licensed to do home improvement.

Thus, in dismissing the complaint, the Court held as follows:

“It is well settled that a home improvement contractor who is unlicensed at the time of the performance of the work for which he or she seeks compensation forfeits the right to recover damages based on either breach of contract or quantum meruit. B & F Bldg. Corp. V. Liebig, 76 N.Y.2d 689 (1990); Flax v. Hommel, 40 A.D.3d 809 (2nd Dept. 2007).”

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In Rosenberg v. Harris, an August 17 decision in a breach of contract case between two dentists – one of whom was renting office space and equipment from the other – a New York County court issued a fascinating ruling: the agreement between the two doctors, which called for the tenant to pay a portion of the fees he generated to the landlord constituted illegal fee-splitting, and was therefore void as against public policy.

But that wouldn’t be completely fair (or, in legal terms, “equitable”) to the doctor who lent out his space, equipment and space, would it?

So, despite holding that the contract was illegal, and therefore not a valid contract, the Court held that the plaintiff could still recover the fair rental value for the office space and equipment in quasi-contract,  because otherwise the defendant would be “unjustly enriched” by not having to pay for the benefits he received.

For additional information on this topic, you may wish to read “What You Can Do Under NY Law if You Don’t Have a Valid Contract” or “When Illegal Agreements Can Still Be Enforceable in New York.“

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There are instances, like the case discussed in my recent blog post, “No Written Agreement? No Problem, Says NY Court,” where the failure to reduce your agreement to writing is not fatal to a breach of contract claim under New York law.

But there are other cases, like Springer v. Linden Seventh Day Adventist Church, where the failure to get a written contract spells death to the claim. And, as painful as it may be to the plaintiff, the Brooklyn judge deciding this case was absolutely right.

First, the plaintiff, who was producing a documentary on behalf of the church, never actually received the church board’s approval for the project. In fact, he never dealt directly with anyone that had authority to bind the church to any agreement. Second, they never agreed on any price for the services that he was going to render.

As noted by the Court, “plaintiff acknowledged that no material terms of the contract (including payment) were ever stated, defined, or agreed upon, and that the Church Board never agreed to pay him … There was no agreement as to the details of what type of film would be made, the starting or ending date of such production, and no price terms were discussed between plaintiff and defendants. Thus, plaintiff cannot sustain his claim for breach of contract (see Matter of Express Indus. & Term. Corp., 93 NY2d at 589).”

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If you take an unreasonable position and refuse to pay for services that were rendered, you should be prepared to have a court rule against you. And that’s exactly what happened in John Anthony Rubino & Co. CPA v.  Schwartz (a decision that is scheduled to appear in tomorrow’s edition of the New York Law Journal).

In Rubino, the plaintiff-accountant was retained to prepare financial projections for a proposed business venture. And he did it.

But when the defendant abandoned the project, he contended that he didn’t owe the plaintiff any money, because he only agreed to pay the plaintiff if the project went through. Not surprisingly, the plaintiff-accountant had a different understanding; he believed that he was going to be paid for the work he did whether the project went through or not.

Since there was no written contract, and the parties clearly did not have the same understanding (in legalese, a “meeting of the minds”), the Court was constrained to dismiss the plaintiff’s breach of contract claim. On the other hand, and nevertheless, the Court held that the plaintiff was still entitled to recover the reasonable value of the services that he rendered, which in legal terms is called “quantum meruit,” (and occasionally, “unjust enrichment“) because the Court held that the defendant’s purported belief that he should not have to pay the accountant unless he decided to pursue this business venture went through was unreasonable as a matter of law.

The moral of this story should be fairly obvious: just because you don’t have a written contract doesn’t mean that you can’t recover your losses.

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Although, in the legal world, you can generally pursue different theories – even if they are inherently at odds with each other – to try and recover your losses, there are some exceptions to that rule. And the realm of breach of contract – at least in New York – is precisely one circumstances. You simply must ascertain whether your claim is based upon the breach of a valid written contract, or whether your claim is grounded in quasi-contract, i.e., to seek recovery on an strictly equitable basis.

In Fwan Management Co., LLC v. 420 West Broadway Corp., a New York County trial court dismissed the unjust enrichment claims of a shareholder in a real estate cooperative and proprietary lessee of commercial property space’s claims that he had been overcharged by the landlord. And the reason that his claims were dismissed, as noted in my earlier blog post, “What You Can Do Under NY Law if You Don’t Have a Valid Contract,” was based upon a straightforward application of New York law:

“Generally, an enforceable written contract precludes recovery in quasi contract with respect to events arising from the same subject matter. See Curtis Properties Corp. v. Greif Companies, 236 AD2d 237, 239 (1st Dep’t 1997). An unjust enrichment cause of action is ‘precluded by the fact that a simple breach of contract claim may not be considered a tort unless a legal duty independent of the contract-i.e., one arising out of circumstances extraneous to, and not constituting elements of, the contract itself-has been violated.’ Brown v. Brown, 12 AD3d 176, 176 (1st Dep’t 2004). However, a plaintiff may proceed on both breach of contract and quasi-contract theories where there is a genuine dispute as to the existence of a contract. Id

Since, in this case, there was no question that the issues were governed by express contractual language, the plaintiff’s unjust enrichment (i.e., “quasi-contract”) claims were correctly dismissed.

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Reading this decision, I can’t help but wonder what the plaintiff or his attorney were thinking when they brought this breach of oral agreement and breach of fiduciary duty lawsuit.

In Malaty v. Malaty, the plaintiff Naguib Malaty sued his brother to compel the turnover of the defendant’s interest in a Brooklyn property that was supposedly purchased with plaintiff’s money, and for money damages in breach of conract and breach of fiduciary duty that the defendant purportedly owed to plaintiff’s two corporations.

Plaintiff had a few “minor” problems with his claim, however. First, he had no proof that his corporations were actually legitimate (based upon the evidence adduced at trial, the Court opined that these corporations for tax evasion purposes); Second, he had no written agreement memorializing the defendant’s agreement to transfer ownership of the subject property to plaintiff, as a result of which his claim was barred by New York’s Statute of Frauds.

In dismissing this branch of the plaintiff’s claim, the Court cited the underlying theory behind New York’s Statute of Frauds, which is over 100 years old:

“The purpose of the Statute of Frauds is sufficiently indicated by its title. It is a statute against frauds. It was designed to prevent litigation over oral agreements, where the terms are always dependent upon the uncertain and varying memory of witnesses. This evil was to be remedied by the reduction of the terms of the contract to writing, so that the parties might not misunderstand the particulars of the contract which they were making; that no one might be induced to enter a court of justice to vex the peace of his opponent without clear and definite evidence of the terms of the contract which formed the ground of action, equally accessible to both parties and to the court; and that perjury might not be invited to sustain a claim which never had any real existence.”

I find the irony in this decision amusing. The plaintiff figured that in attacking his brother’s integrity, no one would bother to question his own, and in so doing, lost sight of the fact that he could be setting himself up for an IRS audit and investigation.

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In today’s edition of the New York Law Journal, there was an interesting decision from a New York County trial court in a breach of contract case, Garber v. Inter Capital Resources LLC. In this case, the plaintiff was a commission salesman who sought to recover the commissions that he purportedly earned – but was never paid – for the second and third quarters of calendar year 2008.

The underlying, earlier decision from which this more recent decision stems is even more important, because it serves an important reminder to attorneys litigating breach of contract and breach of employment agreement cases: make sure that your causes of action are not only supported with specific factual allegations, but that they are also separately and distinctly pled.

In short, since the Court found that the plaintiff had not particularized any specific violations of the Labor Law, but had only set forth enough facts to sustain a common law (as opposed to statutory) breach of contract claim, the plaintiff was not entitled to recover statutory damages under the Labor Law, and therefore, the Court dismissed the plaintiff’s claims seeking to recover liquidated damages and attorney’s fees based upon the defendants’ alleged violations of Labor Law § 198 (1-a), stating: “Breach of contract claims do not give rise to the relief afforded under Labor Law §198 (1-a). See Gottlieb v. Kenneth D. Laub & Co., Inc., 82 NY2d 457, 464 (1993); Pachter v. Bernard Hodes Group, 10 NY3d 609 (2008).”

One final note: since the plaintiff failed to allege enough factual particulars, his attempt to pierce the defendants’ corporate veil failed as well.

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It is a very sad day when you can’t trust your own brother.

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.”

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If an at-will employee resigns before they are paid their commissions, they forfeit their right to collect them, right?

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.

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