Freedman v. Chemical Constr. Corp., 43 N.Y.2d 260 (1977)

An oral agreement is not barred by the Statute of Frauds if it is capable of being performed within one year, even if the agreement contemplates performance beyond one year, due to the existence of a contingency that could terminate the agreement within one year.

Summary

Freedman involved an oral agreement where the plaintiff was to install coin-operated laundry machines in the defendant’s buildings. The agreement would terminate if the defendant sold the buildings. The defendant argued the contract was unenforceable under the Statute of Frauds because its duration was four years, and therefore could not be performed within one year. The New York Court of Appeals held that the possibility of the building’s sale within one year brought the agreement outside the Statute of Frauds, making it enforceable. The court emphasized that the mere possibility of performance within one year is sufficient to remove a contract from the statute’s bar.

Facts

The plaintiff, Freedman, and the defendant, Chemical Construction Corporation, entered into an oral agreement.
Freedman was to install and maintain coin-operated laundry machines in buildings owned by Chemical Construction.
The agreement was to last for four years.
A provision existed that the agreement would terminate if Chemical Construction sold the buildings.
Chemical Construction subsequently sought to avoid the agreement, arguing it was unenforceable under the Statute of Frauds because it was not in writing and could not be performed within one year.

Procedural History

The lower court ruled in favor of Freedman, finding the oral agreement enforceable.
The Appellate Division affirmed the lower court’s decision.
Chemical Construction appealed to the New York Court of Appeals.

Issue(s)

Whether an oral agreement for a term longer than one year is barred by the Statute of Frauds if a contingency exists that could result in the agreement’s termination within one year.

Holding

Yes, because the existence of a contingency, like the sale of the buildings, that could terminate the agreement within one year makes the contract capable of being performed within a year, and therefore not barred by the Statute of Frauds.

Court’s Reasoning

The Court of Appeals relied on the established rule that an oral agreement is not barred by the Statute of Frauds if it is capable of being performed within one year.
The court cited North Shore Bottling Co. v. Schmidt & Sons, stating, “[t]he existence of one of two contingencies performable within a year is sufficient to take the case out of the statute”.
The court reasoned that the possibility of the building’s sale within one year made the agreement capable of being performed within one year, regardless of the stated four-year term.
The court distinguished the case from situations where the agreement’s performance is impossible within one year, focusing on the presence of a contingency that allows for early termination.
The court dismissed the argument that the definite four-year term distinguished the case from North Shore Bottling Co., emphasizing that the critical factor was the possibility of performance within one year due to the contingency.