D & Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y.2d 449 (1984)

An oral agreement that is indefinite in duration and terminable within one year only by its breach falls within the Statute of Frauds and is void if unwritten.

Summary

D & Boening, Inc. sued Kirsch Beverages, Inc. and American Beverage Corp. seeking damages for breach of an alleged oral exclusive sub-distributorship agreement for “Yoo-Hoo” beverage. The agreement, initiated in 1955 and continued through successive company acquisitions, was allegedly terminable only if Boening failed to satisfactorily distribute the product. Kirsch terminated the agreement in 1982. The New York Court of Appeals held that the agreement was subject to the Statute of Frauds because it was indefinite in duration and terminable within one year only upon a breach by Boening, rendering it void for lack of a written contract. The court emphasized that termination due to breach is not the same as performance and does not take an agreement outside the Statute of Frauds.

Facts

In 1955, Minck Beverages, a “Yoo-Hoo” distributor, entered into an oral agreement with Joseph Boening and his sons, granting them exclusive sub-distribution rights in Nassau County and part of Suffolk County. The Boenings were required to stop distributing a competitor’s drink, and the agreement was to last “for as long as they satisfactorily distributed the product, exerted their best efforts and acted in good faith.” American Beverage Corp. acquired the franchise in 1963 and continued the agreement. Upon Joseph Boening’s death in 1965, his sons continued the business as D & Boening, Inc. In 1982, Kirsch Beverages, Inc. purchased American and then terminated the agreement with Boening. Boening sued for breach of contract.

Procedural History

The defendants moved to dismiss the complaint under CPLR 3211(a)(5), arguing the agreement violated the Statute of Frauds. Special Term denied the motion, reasoning that the agreement was terminable at any time and thus could be performed within one year. The Appellate Division reversed, holding the agreement was not performable within one year but only terminable by breach, thus falling under the Statute of Frauds and being void because it was unwritten. The Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

Issue(s)

Whether an oral franchise agreement that is indefinite in duration and terminable within one year only upon a breach by one of the parties falls within the Statute of Frauds and is therefore void if unwritten?

Holding

Yes, because the agreement’s duration was indefinite and its termination within one year could only occur through a breach of contract, making it subject to the Statute of Frauds and requiring a written agreement for enforceability.

Court’s Reasoning

The Court of Appeals held that the Statute of Frauds requires certain agreements, including those not performable within one year, to be in writing. The court emphasized a narrow interpretation, limiting the statute to agreements with “absolutely no possibility in fact and law of full performance within one year.” The court distinguished between agreements terminable at will (outside the statute) and those terminable only by breach (inside the statute). Citing Zupan v. Blumberg, the court stated, “The contract was not, then, one which might be performed within a year, but rather one which could only be terminated within that period by a breach of one or the other party to it [emphasis in original].” The court found that the alleged agreement was indefinite in duration and was terminable within one year only by Boening’s failure to satisfactorily distribute the product, constituting a breach. The court reasoned that a breach is not a mode of performance, and thus, the agreement fell within the Statute of Frauds and was void for being unwritten. The court noted that “termination is not performance, but rather the destruction of the contract…where there is no provision authorizing either of the parties to terminate as a matter of right.” Because Boening’s satisfactory performance was the sole limitation and any failure would constitute a breach, there was no option for rightful termination within the first year and thus the agreement was in violation of the statute.