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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 1, 2019

Defendant’s Acknowledgement of Existence of Oral Contract Defeats Statute of Frauds Defense

On September 16, 2019, Justice Borrok of the New York County Commercial Division issued a decision in CAS Mktg. & Licensing Co. v. Jay Franco & Sons, Inc., 2019 NY Slip Op. 32732(U), holding that a defendant’s acknowledgement of an oral contract defeated the statute of frauds, explaining:

As the Court of Appeals has explained, an implied-in-fact contract arises from a mutual agreement and an intent to promise, when the agreement and promise have simply not been expressed in words. The promise may be inferred in whole or in part from the parties’ conduct. The same basic contract elements of consideration, mutual assent, legal capacity and legal subject matter apply to an implied-in-fact contract. Mutual assent may be manifest by full or part performance. Here, there is simply no question of a contract between the parties: Franco has admitted as much. Nor are the terms too indefinite: Messrs. Franco have testified to the exact percentage of commissions owed, the licenses subject to commission and the duration of the commission period (i.e., until Ms. Stoebenau’s death unless terminated by the parties). The subject licenses, commission amounts, and relevant time periods are also confirmed by the RAF. Franco’s opposition does not raise any triable issue of fact with respect to any specific license or amount. There is plainly no issue with consideration as it is undisputed CAS performed services for Franco in exchange for commission and Franco does not argue as much.

The fact that certain proposed written contracts previously exchanged between the parties were never executed and were, purportedly, rejected by Franco is also immaterial and does not negate the agreement that Franco admits was in effect during the relevant time period. Nor does CAS claim that Franco ever agreed to any 1990’s-era draft contract that it produced in discovery, nor does it seek to enforce the terms of any such draft contract. Simply put, this argument by Franco is nothing but a red herring. Franco cannot create a genuine issue of material fact by relying on these rejected proposals as evidence of the parties’ intent to only be bound by a written contract when the parties’ conduct clearly establishes this to not be the case.

Finally, inasmuch as Franco relies on the statute of frauds for its argument that the contract is unenforceable, the the statute of frauds does not apply here since Franco expressly admitted the existence of a contract. The Statute of Frauds was designed to prevent the enforcement of unfounded fraudulent claims, not as a bar to a contract fairly, and admittedly, made. Here, the peril of perjury and risk of unfounded fraudulent claims is largely, if not entirely, absent. CAS seeks to enforce only what Franco has admitted to owing and is not pursuing any additional claims.

For the avoidance of doubt, to the extent that Franco in its opposition papers argues that the relationship was not formal and that therefore no amounts are in fact due, the argument fails. Having made the admissions in the RAF that certain percentages were to be applied to the specific sales during the specific periods set forth in the RAF, Franco can not now argue that those amounts are not in fact due.

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

Contract law–usually straightforward–has traps for the unwary, like the requirement that some contracts be in writing (the statute of frauds). And as this decision shows, sometimes there are ways to escape from those traps. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under an oral contract.

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