Commercial Division Blog
Claim Relating to Oral Agreement to Sell Business Interests Dismissed on Statute of Frauds Grounds
On April 9, 2015, the First Department issued a decision in Basu v. Alphabet Management LLC, 2015 NY Slip Op. 03034, dismissing breach of contract claims on statute of frauds grounds.
In Basu , the First Department reversed the trial court's denial of the defendants'motion for summary judgment to the extent it related to breach of contact and unjust enrichment causes of action relating to certain alleged oral agreements. First, it explained that the trial "court correctly found that the claimed oral agreements are not as a matter of law unenforceable for indefiniteness, since there may exist an objective method for supplying the missing terms needed to calculate the alleged compensation owed plaintiff" and that "General Obligations Law § 5-701(a)(1)," which renders unenforceable oral agreements which cannot be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime, "does not bar the breach of contract claim." However, the First Department went on to explain, that "defendants may raise General Obligations Law § 5-701(a)(10)," which renders unenforceable an oral agreement "to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest"
for the first time on appeal, since it is a legal argument which appeared upon the face of the record and which could not have been avoided if raised initially. That provision requires dismissal of the breach of contract claim insofar as it alleges a breach of the oral PIPE agreement, which involves a claim for compensation for negotiating the purchase of interests in businesses, since plaintiff acknowledged participating in the negotiations by procuring the deals and by performing research and analysis that determined for defendants the value of pursuing the deals. The unjust enrichment claim relating to the PIPE transactions must therefore also be dismissed.
(Internal quotations and citations omitted).