Free Initial Consultations 646.760.6493
What Happens if I Don't Get a Compensation Agreement in Writing?

What Happens if I Don't Get a Compensation Agreement in Writing?

When it comes to any type of business contract, it is always best to get it in writing. New York, like many states, has a Statute of Frauds, which specifies when agreements must be in writing to be enforceable in court. For example, a “contract to pay compensation for services rendered” in negotiating the sale of a business or any related assets must be in writing. This means if you agree to sell merchandise on commission, you must have a written contract to enforce your rights in court.

Yarusi v. S. Sedghi Incorporated

A written contract does not necessarily mean a single document. Several writings taken together may prove the existence of a valid contract. What a court looks for is that all “essential terms” are in writing and subscribed to by all parties.

It can still be difficult, however, to prove a contract without a single, integrated document. Here is a recent example from a federal case pending before a federal judge in Manhattan. The plaintiff in this case worked as an “independent sales representative” for a clothing manufacturer. Specifically, she arranged sales of the manufacturer's products to a large national retailer. In exchange, the the plaintiff said she received a 2.5% commission on each sale.

The manufacturer unilaterally terminated the plaintiff's services in August 2013 and ceased paying commissions as of December 2013. The plaintiff argued she was still entitled to commissions earned on sales that she arranged but were not completed until early 2014. The manufacturer refused to pay, and the plaintiff subsequently sued for breach of contract.

But as U.S. District Judge Naomi Reice Buchwald held in an August 13 decision, the plaintiff's “complaint fails to satisfy New York's Statute of Frauds.” The plaintiff never presented a single, written contract with the manufacturer. Instead, she offered three other types of evidence: first, the written termination letter she received, which referred to her “agreed upon commission” for sales to the retailer; second, copies of shipping statements from the manufacturer to the retailer, which included line items for commissions paid to the plaintiff; and finally, copies of the commission checks the plaintiff actually received.

All of this did not add up to proof of a contract, Judge Buchwald concluded, at least far as the Statute of Frauds was concerned, because “the writings fail to indicate the scope of the agreement.” None of the documents provided by the plaintiff established her actual job responsibilities, her rate of commission or the duration of the agreement. At best, Judge Buchwald said the plaintiff's termination letter indicated her employment was “at will,” which in and of itself does not contain a “duration term,” a necessary element of a contract.

That said, Judge Buchwald did not dismiss the plaintiff's lawsuit in its entirety, only her breach of contract claim. The judge found the plaintiff's documentary evidence was sufficient to pursue a claim for restitution based on the manufacturer's alleged “unjust enrichment”; that is, the plaintiff performed services for the defendant “and that neither she nor defendant regarded those services as gratuitous.” This claim remains pending before the court.

Need Help With a Breach of Contract Claim?

As the above case illustrates, written contracts offer the best protection for parties if and when the business relationship sours. And while it is not impossible to recover when a party has breached an unwritten agreement, it is certainly more difficult to do so. In any event, you should not try to resolve a contractual dispute of any sort without the assistance of an experienced New York civil litigation attorney. Contact our offices today if you would like to speak with someone immediately.
Categories:

Contact Us Today

All Consultations Are Free and Confidential
    • Please enter your first name.
    • Please enter your last name.
    • Please enter your email address.
      This isn't a valid email address.
    • This isn't a valid phone number.
    • Please make a selection.
    • Please enter a message.