Commercial Division Blog
Statute of Frauds Does Not Bar Multi-Year Oral Agreement That Could Be Performed in One Year
On November 8, 2013, the Fourth Department issued a decision in DeJohn v. Speech, Language & Communication Assoc., SLP, OT, PT, PLLC, 2013 NY Slip Op. 07331, showing the narrow scope of the Statute of Frauds.
In DeJohn, the parties allegedly entered into an oral agreement providing that "defendants would purchase plaintiff's business for $480,000 and make an initial payment of $10,000, followed by 23 monthly payments of $20,000 and a final payment of $10,000." Defendants moved to dismiss, arguing that an oral agreement envisioning performance over a period of more than a year was not enforceable under the Statute of Frauds. The Fourth Department affirmed the trial court's denial of that motion, holding:
As long as an 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 to enforcing it however unexpected, unlikely, or even improbable that such performance will occur during that time frame. Here, the absence of a term prohibiting payment in full within the first year makes possible full performance of the alleged oral agreement within that year, and thus defendants did not meet their burden of establishing that the statute of frauds renders the alleged oral agreement void and unenforceable.
(Internal quotations and citations omitted).
DeJohn shows the narrow scope of the Statute of Frauds. However, that plaintiff in DeJohn had to defend this motion at all shows why it is best to memorialize commercial contracts in writing.