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Current Developments in the Commercial Divisions of the
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Posted: January 19, 2016

Statute of Frauds Bars Oral Finder’s Fee Agreement

On January 12, 2016, the First Department issued a decision in Goldfarb v. Schaeffer, 2016 NY Slip Op. 00134, holding that an oral finder’s fee agreement was barred by the statute of frauds.

In Goldfarb , the plaintiff alleged that he had an oral finder’s fee agreement with the defendant and that through a chain of introductions initiated by the plaintiff, the defendant obtained financing from non-party LIQD. The plaintiff claimed a share of that investment. The First Department agreed with the motion court that the plaintiff’s claim was barred by the statute of frauds, explaining:

Reading the complaint liberally, as we must, we find that the motion court correctly determined that the breach of contract claim is barred by the statute of frauds, because the alleged oral contract between [the parties] was not in writing. The complaint alleges an agreement to pay compensation for services plaintiff rendered to [the defendant] in negotiating a business opportunity, which squarely falls within the statute of frauds.

The “narrow” cofinder exception to the statute of frauds does not apply here, because the complaint does not allege that [the parties] were joint brokers or joint finders . . . . There is no fair reading of the complaint that [the parties] decided to pool their efforts in providing services to LIQD. To the contrary, the complaint alleges that plaintiff’s services were provided to [the defendant], not LIQD. Nor is there any allegation in the complaint that [the defendant] agreed to perform any services for LIQD, or what fees [the defendant] would supposedly earn from LIQD for any such services.

(Internal quotations and citations omitted).

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