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Current Developments in the Commercial Divisions of the
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Posted: April 11, 2018

Oral Fee-Sharing Agreement With At-Will Employee Not Barred by Statute of Frauds

On April 5, 2018, the First Department issued a decision in Goldfarb v. Romano, 2018 NY Slip Op. 02411, holding that an oral fee-sharing agreement with an at-will employee was not barred by the statute of frauds, explaining:

The statute of frauds does not bar the alleged oral agreement between plaintiff and defendant law firm, pursuant to which the firm agreed to pay plaintiff 50% of the legal fees it earned on cases that he procured or originated and performed work on. In pertinent part, the statute renders void an agreement that by its terms is not to be performed within one year from the making thereof. The fact that plaintiff was an at-will employee, i.e., he could be terminated at any time, made the oral agreement capable of completion within the one-year period. The fact that legal fees earned during the one-year period would not be paid until after the period had ended did not make the agreement incapable of completion within the period.

(Internal quotations and citations omitted).

Contract law–usually straightforward–has traps for the unwary, like the requirement that some contracts be in writing (the statute of frauds). And as this decision shows, sometimes there are ways to escape from those traps. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under an oral contract.

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