Zupan v. Transamerica Insurance Group, 45 N.Y.2d 900 (1978)
A contract that, by its terms, cannot be performed within one year from its making falls within the Statute of Frauds and must be evidenced by a writing to be enforceable.
Summary
Zupan sued Transamerica Insurance Group alleging breach of an oral contract where Transamerica would pay Zupan $5,000 annually for every year it used an advertisement Zupan designed. Zupan had already been paid $42,500 for the design. The court held that because the alleged oral agreement was not evidenced by any writing, it was void under the Statute of Frauds, as the contract’s terms made it impossible to be performed within one year. The court reversed the lower court’s decision, granting summary judgment to Transamerica.
Facts
Plaintiff Zupan designed an advertisement for Defendant Transamerica Insurance Group. Zupan was paid $42,500 for this design work. Zupan claimed there was an oral agreement that Transamerica would pay Zupan $5,000 per year for every year the advertisement was used. This alleged agreement was not documented in writing.
Procedural History
The lower court ruled in favor of Zupan. Transamerica appealed. The New York Court of Appeals reversed the lower court’s decision and granted summary judgment in favor of Transamerica.
Issue(s)
Whether the alleged oral contract between Zupan and Transamerica is unenforceable under the Statute of Frauds because, by its terms, it is not to be performed within one year from the making thereof.
Holding
No, because the oral agreement stipulates payments for each year the advertisement is used, and there’s no way Transamerica could unilaterally terminate the agreement within one year, the contract falls within the Statute of Frauds and is unenforceable without a written agreement.
Court’s Reasoning
The court reasoned that the oral agreement was void under the Statute of Frauds (General Obligations Law, § 5-701, subd a, par 1) because the agreement’s terms precluded performance within one year. The court distinguished this case from contracts that are theoretically possible to perform within a year, even if highly improbable, stating, “This contract is not one which by its terms can be performed within a year. If it were, it would be without the statute even if, as a practical matter, it were well nigh impossible of performance within a year.”
The court also distinguished this case from contracts involving alternative performances, where one option could be completed within a year, and from contracts terminable at will by the defendant within a year without breaching the contract. The court emphasized that Transamerica’s obligation to pay Zupan arose each year the advertisement was used, and there was no mechanism for Transamerica to unilaterally terminate the agreement within a year without breaching it. As the court noted, “Defendant has allegedly promised plaintiff, as a part of the consideration for designing the advertisement, that defendant will pay plaintiff an additional fee for every year in which the advertisement is used…In fact, it would appear that there is no way in which defendant could unilaterally terminate the contract. Thus, the contract cannot by its own terms be performed within a year, and is within the Statute of Frauds.”