Published by LawTechie - January 27, 2010 - LawTechie

In Snyder v. Bronfman (Nov. 23, 2009), the New York Court of Appeals recently ruled that oral contracts barred by NY General Obligations Law 5-701(a)(10), a.k.a. “The Statute of Frauds,” could no longer recover on quantum meruit theory. While the admonition to “get it in writing” had long been understood by the business community, those who got caught up in the thrill of the deal sometimes forgot this bare necessity but were still able to recover under quantum meruit theory (also known as “unjust enrichment”) for the value of what they managed to prove the other side gained from the deal.

Example:

Peter orally agrees to work on a two-year project for Dave for a $1,000,000 commission at project completion. Two years go by, the project is successful and Peter’s contribution to it can be valued at $500,000, but Dave refuses to pay the contracted $1,000,000. Peter sues.

Old result: Peter can’t recover the $1,000,000 contract fee because there is no written contract, but he can recover $500,000 under quantum meruit if he is able to prove that his contribution to the project was valued at this number.

New result: No written contract = no recovery because oral contracts that fall under this particular Statute of Frauds are barred no matter what.

What this means:

Certain categories of oral contracts have always been barred from recovery by the Statute of Frauds because only a signed writing would be sufficient proof that the contract was actually made. Nevertheless, those who got caught up in the heat of the business moment and made foolish contracts could still recover on the theory of quantum meruit. Now the Court says no recovery.

The lesson for smart businessmen: GET IT IN WRITING!

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.

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