Commercial Division Blog

Posted: September 25, 2016 / Categories Commercial, Contracts

Claim Alleging Partial Performance of Oral Modification of Written Contract Adequate

On August 18, 2016, Justice Ramos of the New York County Commercial Division issued a decision in Obsessive Compulsive Cosmetics, Inc. v. Sephora USA, Inc., 2016 NY Slip Op. 51295(U), upholding a claim for breach of an oral modification to a written contract based on the partial performance of that modification, explaining:

When a written contract provides that it can only be changed by a signed writing, an oral modification of that agreement is not enforceable. However, complete and partial performance are exceptions to the requirement of a written modification:

When the oral agreement to modify has in fact been acted upon to completion, the same need to protect the integrity of the written agreement from false claims of modification does not arise. In such case, not only may past discussions be relied upon to test the alleged modification, but the actions taken may demonstrate, objectively, the nature and extent of the modification. Moreover, apart from statute, a contract once made can be unmade and a contractual prohibition against oral modification may itself be waived.

Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is the requirement of a writing under (subdivision 1) section 15-301 (of the General Obligations Law) avoided.

. . .

In the instant case, OCC alleges that it produced products for the new and other existing locations pursuant to purchase orders from Sephora totaling $590,558.40 in reliance on Sephora's vice president's verbal representation that it would share in the fixture costs. OCC has sufficiently plead partial performance unequivocally referable to the alleged oral modification that Sephora would share in the fixture costs in light of allegations that OCC initially refused Sephora's purchase orders and only agreed to produce new products after Sephora's verbal representation was made with respect to sharing fixture costs. Further buttressing the contention that OCC's performance is unequivocally referable to the oral modification is the fact that the Written Agreement is not a requirements contract, and thus, OCC had no contractual duty to expand the placement of its products at Sephora's stores.

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