Commercial Division Blog

Posted: December 27, 2013 / Categories Commercial, Contracts

No Part Performance Exception to Statute of Frauds for Obligations that Cannot be Performed Within a Year

On December 17, 2013, the First Department issued a decision in Gural v. Drasner, 2013 NY Slip Op. 08391, overruling earlier cases recognizing a part performance exception to the Statute of Frauds for contracts that are incapable of being performed within a year.

Plaintiff and defendant allegedly orally agreed that if plaintiff cleared defendant's land, he could use it for pasturing and that defendant would reimburse plaintiff's expenses when defendant sold the property. It took several years to clear and improve the land.  When defendant later sold his property, he refused to reimburse plaintiff's expenses.

Plaintiff sued to recover his expenses. Defendant moved for summary judgment because it took more than one year for plaintiff to perform the alleged oral agreement. Plaintiff argued that part performance took his claim out of the Statute of Frauds. The First Department assumed for purposes of the appeal that the task performed by plaintiff could not possibly have been performed in a year (although it expressed doubts on that score in dicta, noting that "the determination of whether an alleged oral contract can possibly be performed within one year of its making is not conducted by looking back at the actual performance; it requires analysis of what was possible, looking forward from the day the contract was entered into." (emphasis added)). The First Department then held that there was no part performance exception to the General Obligations Law's Statute of Frauds for obligations that could not be performed within a year:

Analysis of the part performance exception must begin by emphasizing that General Obligations Law § 5-701 lacks any provision for a part performance exception such as that explicitly provided for by General Obligations Law § 5-703, which concerns contracts for the conveyance of an interest in real property. That is, while § 5-703(4) specifically provides, ‘Nothing contained in this section abridges the powers of courts of equity to compel the specific performance of agreements in cases of part performance,’ the broader statute of frauds provision of § 5-701 contains nothing of the sort —- although, notably, it contains other exceptions (see e.g., §5-701[10] (‘This provision ... shall not apply to a contract to pay compensation to an auctioneer, an attorney at law, or a duly licensed real estate broker or real estate salesman’)).

Two relevant principles of statutory construction apply here. The first is that ‘a court cannot amend a statute by inserting words that are not there, nor will a court read into a statute a provision which the Legislature did not see fit to enact’ The second is that an "inference must be drawn that what is omitted or not included was intended to be omitted and excluded.’ Inferring that the Legislature authorized a part performance exception for an oral contract that is not capable of performance within one year violates these principles.

(Internal quotations and citations omitted).

Although Gural was not an appeal from a Commercial Division decision, the principle it announces is important in commercial litigation affected by the Statute of Frauds.