The Statute of Frauds is a concept that lawyers have been grappling with for centuries. A very early version of the Statute of Frauds was enacted by the English Parliament in 1677.[1] So, what is the Statute of Frauds? In its most basic form, the Statute of Frauds is a law that makes certain contracts unenforceable if they are not in writing and not signed by the party that is to be obligated by the contract.
As its name suggests, the law was meant to prevent fraud and perjury.[2] The Statute of Frauds most often comes up as a defense against the enforcement of an oral contract or agreement. In other words, when one party (the plaintiff) sues another (the defendant) for the breach of an alleged oral agreement, the defendant may bring up the Statute of Frauds as a defense to argue that the alleged contract is unenforceable because it was not in writing and not signed by the defendant.
General Unenforceability of Oral Contracts
New York’s Statute of Frauds is codified in New York’s General Obligation Law.[3] It makes any agreement that, by its terms, could not possibly be performed within one year of its formation, unenforceable unless it is in writing and signed by the party who is obligated by the agreement.[4] So, for example, an oral employment contract that is for a term of two years is not enforceable because (1) it is not in writing, (2) it is not signed by the party the oral agreement is intended to obligate, and (3) it is impossible to perform in less than one year. Furthermore, oral employment contracts that are for a term of one year are unenforceable if the oral contract was entered into before the employee’s start date. On the other hand, oral contracts that are for a term of less than one year are enforceable.
An employer’s mere concession that a multi-year employment agreement exists is not enough in itself to make such an agreement enforceable. Furthermore, written documents that establish other terms related to employment – such as benefits, wages or salary, and benefits – do not, by themselves, create an enforceable contract under the Statute of Frauds.
Contracts for an Indefinite Term
The Statute of Frauds does not prevent the enforcement of an oral contract for an indefinite term. What is an employment contract for an indefinite term? An employment contract for an indefinite term is one that sets out important obligations of both the employer and the employee but does not have a specified end date. So, by its definition, the contractual obligations can be performed in less than one year. This means that the Statute of Frauds would allow proof of terms (such as salary and benefits) that are related to an alleged oral employment agreement for an indefinite term.
Renewal Contracts
New York courts have held that if an employee is hired for term of one year at a yearly salary, and that employee continues his employment on the same terms after the initial term ends, the employee and the employer are presumed to have agreed to a new contract of employment on the same terms.[5] A signed writing is not necessary to create the extension and thus the Statute of Frauds becomes an unavailable defense.[6] The presumption is rebuttable; the parties can show that one or all of them did not intend for the contract to renew automatically.[7] Finally, the presumption will not arise if an employee’s continued employment is on substantially different terms.
Exceptions
A written memorandum, or an alleged contract, does not need to be contained in a single document to be enforceable. Multiple writings, even if some are signed and others are not, may be pieced together to establish a contract that satisfies the Statute of Frauds.[8] New York courts will treat separate documents that are alleged to constitute a contract as a whole if (1) at least one of the documents is signed by the party to be charged, and (2) the other unsigned documents refer to the same transaction as the signed writing.
As can be seen, navigating the Statute of Frauds can be a daunting task. That is why it is important for businesses to be counseled by an experienced and knowledgeable legal team. At KI Legal, our Labor and Employment Division specializes in creating customized legal compliance strategies for all types of businesses. If you are interested in learning more about these strategies, or in the unfortunate event that your business has been threatened with litigation, contact KI Legal for a consultation by calling (212) 404-8644 or emailing info@kilegal.com.
[1] 4 Corbin on Contracts § 12.1 (2022).
[2] 4 Corbin on Contracts § 12.1 (2022).
[3] NY GOL Sec. 5-701.
[4] NY GOL Sec. 5-701.
[5] See Cinefot Int’l Corp. v. Hudson Photographic Indus., 13 N.Y.2d 249, 252 (1963).
[6] Id.
[7] See Goldman v. White Plains Ctr., 11 N.Y.3d 173, 177 (2008).
[8] See Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48 (1953).
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