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Statute of Frauds Problem in A Breach of Contrac

Statute of Frauds Problem in A Breach of Contrac

The Supreme Court of Suffolk County recently heard the case of Soldano v. Precision CNC Corp. Soldano was the president of Apex Corporation and an individual named Napolitano was the sole officer of Precision. Another defendant was known as Rohrbaugh. This case was interesting because it involved the application of a special contract requirement known as the Statute of Frauds. The S/F is a form of defense to an allegation of breach of contract. When accused of a breach of contract, a party may argue that no valid contract existed to be breached, because the S/F was not satisfied.

Background of the Case

Apex leased space in an office building in Deer Park, NY, known as ‘the premises.’ The defendants (CNC and Precision) also leased space in the very same building. Apparently Apex had difficulty making the rent payments on time and the landlord (not a party to this lawsuit) was very unhappy. Apex and the landlord negotiated a deal for payment, which Apex could not live up to. After getting a court judgment Apex agreed to be evicted by October 31, 2011. Shortly before the eviction date, the landlord and Precision agreed on a 3-year lease, starting November 1, 2011, for the Apex premises.

The plaintiffs alleged that Precision has taken over Apex’s business, including supplying parts to Rohrbaugh, which the plaintiff used to do. This was a somewhat peculiar allegation, but plaintiffs fleshed it out more fully. They claimed that Napolitano and Precision said that while they would take over the lease, they would allow the plaintiff to continue its business, and in fact there was a contract, the ‘Lease takeover Agreement.’

The plaintiffs in essence say that the defendants took advantage of them: plaintiffs relied on the representations made in the takeover agreement, but that once the lease was renegotiated, the defendants reneged on the deal and took over plaintiff’s business. The defendants moved to dismiss the complaint for failure to state a cause of action.

Analysis

The court first analyzed the essence of the purported deal. The lease takeover agreement was in essence a contract for an interest in real property: Precision would take over the lease as tenant, and allow plaintiff to remain as a subtenant. The lease period was for three years.

Unfortunately for the plaintiff, this agreement was never reduced to writing. Instead, it was an oral contract. This is where the Statute of Frauds (S/F) comes in. The S/F is a rule that certain contracts MUST be in writing. The S/F exists in all fifty states, and certainly exists in New York. In this particular case, a contract for an interest in real estate (e.g. a lease) for a period greater than one year is subject to the S/F and must be in writing. Indeed, in most jurisdictions any contract with a duration of performance greater than one year must be in writing. Additionally, in most jurisdictions any contract for an interest in real estate must be in writing. Thus this particular situation very strongly violates the S/F.

Without a valid contract, the plaintiff simply has no recourse in the breach of contract portion of their lawsuit. In fact, in New York, the alleged contract that violates the S/F confers no legal rights whatsoever; courts are particularly careful to not allow plaintiffs to work around the S/F issue with regard to the obligation in question.

If you have questions about breach of contract, please don’t hesitate to contact our officefor a consultation.

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