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Litigating Breach of Oral Contracts

Litigating Breach of Oral Contracts

In the case of Anita Terrace Owners, Inc. v. Goldstein Assoc Consulting Engr the Supreme Court of Queens County heard motions from both parties regarding a dispute regarding construction contracts. What is most interesting, for our purposes, is the fact that one of the contracts in this case was what is known as an oral contract. Oral contracts are non-written, but instead entered into verbally between the parties. Oral contracts are valid, but only if certain criteria are met, which we will discuss more fully below.

Background of the Case

Anita Terrace is an apartment complex located in Rego Park, NY. A few decades ago, it fell under some hard times and the complex and associated parking garage fell into disrepair. In fact, things got so bad that the parking garage was condemned and the apartment complex itself had to declare bankruptcy. New management, in the form of the Pinnacle Group, arrived and they retained the defendant, Goldstein (an engineering firm) to create a plan to renovate the parking garage.

Goldstein also solicited bids from construction companies to do the actual renovation and R&L was the winning contractor. Goldstein prepared a written contract to be entered into between Anita Terrace and R&L incorporating Goldstein’s specifications as well as the winning bid information from R&L. The contract between Anita Terrace and contractor R&L was the only contract in writing. No written contract existed between Goldstein and Anita Terrace. There was an oral contract, but its actual terms remain in dispute.

After the work was completed, Anita Terrance employees noticed that part of the parking garage was leaking water. The work that R&L did regarding waterproofing was called into question, and this care arose out of underlying facts too complex to really get into here.

Initial Issue: Did a Valid Oral Contract Exist?

As a general rule, oral contracts are valid unless they are subject to New York’s Statute of Frauds. The Statute of Frauds requires written contracts for the purchase or sale of real estate, contracts greater than one year in length, the sale of goods for a price greater than a statutory value, guaranteeing the debts of another, and the lease of goods for a price greater than a statutory value. In New York the statute does not apply to a situation like the one that existed between Goldstein and Anita Terrace – which was a form of engineering/construction contract. Both sides essentially admitted that an oral contract existed, and since the statute of frauds did not apply, this contract was valid and enforceable.

Disposition

A witness for the plaintiff offered credible testimony (via affidavit) as to the terms of the oral contract. However a witness for the defense offered equally credible testimony in support of the defense. The court, in its ruling, highlights the inherent messiness of litigation over an oral contract. Because there is no physical evidence as there would be in the case of a written contract, both sides may offer equally trustworthy evidence as to why they think they’re right. The court, in deciding, has to look to external or extrinsic evidence – and that generally means looking at how the parties acted. The court here looked at the actions taken by Goldstein and decided that summary judgment in the defendant’s favor was not appropriate and so allowed the case to move forward to a trial on the merits.

Oral contracts are especially tricky when it comes to business dealings. It is important to retain competent counsel who is familiar with the issues involved in litigation oral contracts. Please do not hesitate to contact our office for a consultation.

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