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Current Developments in the Commercial Divisions of the
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Posted: January 26, 2017

Test Under Statute of Frauds Is Not Whether Verbal Contract Lasted More Than a Year

On January 11, 2017, Justice Bransten of the New York County Commercial Division issued a decision in Fremuth v. Stetson, 2017 NY Slip Op. 30073(U), discussing the application of the Statute of Fraud’s one year rule:

New York law provides that an agreement will not be recognized or enforceable if it is not in writing and subscribed by the party to be charged therewith when the agreement by its terms is not to be performed within one year from the making thereof. As explained by the Court of Appeals, this provision of the Statute of Frauds has been long interpreted to encompass only those contracts which, by their terms, have absolutely no possibility in fact and law of full performance within one year. As long as the agreement may be fairly and reasonably interpreted such that it may be performed within a year, the Statute of Frauds will not act as a bar however unexpected, unlikely, or even improbable that such performance will occur during that time frame.

. . .

Under the terms alleged, the Verbal Agreement itself is capable of performance in one year. Performance, if it means anything at all, is carrying out the contract by doing what it requires or permits. The hiring of PEI Inc. employees, administration of the PEI Funds, and payment of distributions could be completed within one year. There are many potential circumstances under which this performance could occur, including, but not limited to, the dissolution of PEI Inc. or PEI Funds LLC. Although Defendants urge the Court to consider the likelihood that this Verbal Agreement could be performed in one year, the relevant inquiry is whether the agreement may be fairly and reasonably interpreted to be capable of performance in one year, even if unlikely or even improbable. Here, Defendants have not shown that there was absolutely no possibility in fact and law of performance in one year.

(Internal quotations and citations omitted) (emphasis added).

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