New York Law Review

Tag: Quasi-Contract

  • Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500 (1983): Recovery for Reliance on Unenforceable Agreements

    Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500 (1983)

    A party may recover the fair and reasonable value of partial performance rendered at the request of another party, even if the underlying agreement is unenforceable due to the Statute of Frauds, based on reliance and quasi-contractual principles.

    Summary

    Farash sued Sykes Datatronics to recover the value of renovations he made to a building at Sykes’s request, anticipating a lease agreement that never materialized. The Court of Appeals held that while the oral lease and agreement to enter into a lease were barred by the Statute of Frauds, Farash could recover for the work performed in reliance on Sykes’s statements. This recovery is not based on enforcing the void contract, but on the principle that Farash should be compensated for the detriment he suffered by improving the property at Sykes’s urging, regardless of whether Sykes directly benefitted. The court emphasized placing the plaintiff in the position they were in before the unenforceable agreement.

    Facts

    Plaintiff Farash owned a building and alleged an oral agreement with Defendant Sykes Datatronics to lease the building, contingent on Farash renovating it and making modifications on an expedited basis.
    Sykes never signed a lease or occupied the building.
    Farash completed work on the building based on Sykes’s representations.

    Procedural History

    Farash sued Sykes, alleging breach of the oral lease, breach of an agreement to enter a lease, and a claim for the value of work performed.
    Sykes moved to dismiss for failure to state a cause of action; the motion was denied at the trial level.
    The Appellate Division reversed, dismissing all causes of action.
    Farash appealed to the New York Court of Appeals.

    Issue(s)

    Whether a party can recover the value of work performed on a property in anticipation of a lease agreement when the lease is unenforceable under the Statute of Frauds, even if the other party did not directly benefit from the work.

    Holding

    Yes, because even though the oral lease and agreement to enter a lease are barred by the Statute of Frauds, a party can recover for the value of work performed in reliance on the other party’s statements and request, based on principles of quasi-contract and reliance.

    Court’s Reasoning

    The court reasoned that the first and third causes of action, seeking to enforce an oral lease or an agreement to enter into a lease, were clearly barred by the Statute of Frauds (General Obligations Law, § 5-703, subd 2).
    However, the second cause of action, seeking to recover for the value of work performed in reliance on Sykes’s statements, was not an attempt to enforce the void contract but to disaffirm it.
    The court cited Baldwin v Palmer, 10 NY 232, 235, stating this action can be maintained.
    That Sykes did not benefit directly from Farash’s work was not a bar to recovery. Farash could recover for those efforts to his detriment, worsening his position. The court referenced Kearns v Andree, 107 Conn 181.
    As the court noted, “The contract being void and incapable of enforcement in a court of law, the party * * * rendering the services in pursuance thereof, may treat it as a nullity, and recover * * * the value of the services” (Erben v Lorillard, 19 NY 299, 302).
    The court also quoted the Restatement, Contracts 2d, § 349, noting the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance.
    The court rejected the dissent’s argument that the second cause of action was equivalent to the third and thus barred by the Statute of Frauds. It emphasized that the claim was not based on enforcing the contract, but on quasi-contractual principles to prevent unjust enrichment.

  • Bradkin v. Leverton, 26 N.Y.2d 192 (1970): Recovery in Quasi-Contract Despite Lack of Direct Agreement

    Bradkin v. Leverton, 26 N.Y.2d 192 (1970)

    A party who knowingly benefits from the services of another under circumstances where it would be unjust to retain such benefit without compensation may be liable in quasi-contract, even in the absence of a direct agreement.

    Summary

    Bradkin sued Leverton, seeking compensation for Leverton’s profits from financing Mauchly, a company Bradkin had originally introduced to Leverton’s company, Federman. Bradkin had a written agreement with Federman to receive a percentage of profits from any Mauchly financing. Leverton, leveraging the relationship created by Bradkin, personally financed Mauchly. The court held that Leverton was liable to Bradkin in quasi-contract because Leverton knowingly benefited from Bradkin’s services, making it unjust for Leverton to retain the profits without compensating Bradkin, despite the lack of a direct agreement. The Statute of Frauds was not applicable because the action was not between a finder and his employer.

    Facts

    Bradkin, an employee of H.L. Federman & Co., introduced Mauchly Associates to Federman for financing.
    Bradkin had a written agreement with Federman to receive $10,000 for arranging the initial financing and 10% of the net profit from any subsequent financing of Mauchly in 1967.
    Leverton, an officer, director, and nonvoting stockholder of Federman, became acquainted with Mauchly through Bradkin’s introduction.
    Leverton, without Bradkin’s knowledge, arranged private financing transactions with Mauchly, profiting personally.
    Bradkin sought 10% of Leverton’s net profit from the Mauchly financing, claiming an implied promise to pay, but Leverton refused.

    Procedural History

    Bradkin filed suit against Leverton to recover a percentage of profits and an accounting.
    The trial court (Special Term) granted Leverton’s motion to dismiss the complaint, citing the Statute of Frauds.
    The Appellate Division affirmed the dismissal without opinion.
    Two justices dissented at the Appellate Division, arguing that the complaint stated a cause of action in tort.
    The New York Court of Appeals reversed the lower courts’ decisions.

    Issue(s)

    Whether Leverton, who profited from a financing opportunity initially procured by Bradkin for Leverton’s company, is liable to Bradkin in quasi-contract despite the absence of a direct agreement between Bradkin and Leverton.
    Whether the Statute of Frauds bars Bradkin’s claim against Leverton where Bradkin had a written agreement with Leverton’s company, but no written agreement with Leverton personally.

    Holding

    Yes, because Leverton knowingly benefited from Bradkin’s services under circumstances where it would be unjust for Leverton to retain the benefit without compensation. The obligation is imposed by law to ensure a just and equitable result.
    No, because the Statute of Frauds applies to contracts between a finder and his employer, not between a finder and a third party who benefits from the finder’s services.

    Court’s Reasoning

    The court reasoned that quasi-contracts are obligations imposed by law to prevent unjust enrichment, regardless of the parties’ intentions. The court quoted Miller v. Schloss, stating that “a person shall not be allowed to enrich himself unjustly at the expense of another.” Bradkin’s introduction of Mauchly to Federman created the opportunity from which Leverton profited. Leverton, by using his corporate position to benefit personally from the Mauchly financing, obtained the benefit of Bradkin’s labors. The court emphasized that “when the defendant took over the corporation’s financing arrangements, he assumed its obligation to the plaintiff for commissions.” The Statute of Frauds was deemed inapplicable because it is intended to protect against fraudulent claims between a finder and their employer, not between a finder and a third party. The court stated, “Quite manifestly, the purpose of the statute is to protect against fraudulent dealings between the finder and his employer, not between the finder and a third party.” The dissent in the Appellate Division agreed that the complaint should be upheld. The court concluded that it would be against good conscience for Leverton to retain the benefits of the contract made with his corporation without compensating Bradkin for his services. The court also noted that because there was no fiduciary relationship between Bradkin and Leverton, Bradkin was not entitled to an accounting.

  • Robbins v. Frank Cooper Associates, 19 N.Y.2d 903 (1967): Implied Contract and Reasonable Value of Property

    Robbins v. Frank Cooper Associates, 19 N.Y.2d 903 (1967)

    When parties negotiate for the use of property but fail to reach an agreement, and the property is subsequently used and made valueless, the law implies a contract obligating the user to pay the reasonable value of the property where the parties contemplated payment for its use.

    Summary

    Robbins sued Frank Cooper Associates for the reasonable value of Robbins’ property after negotiations for its use failed, but Cooper still used it, rendering it valueless. The trial court found an implied contract and awarded damages. The Appellate Division reversed, but the New York Court of Appeals reversed the Appellate Division and reinstated the trial court’s judgment, holding that an implied contract existed and the proper measure of damages was the reasonable value of the property. The court found sufficient evidence to support the jury’s verdict on value.

    Facts

    The parties negotiated for the conveyance of Robbins’ property, but they did not agree on the terms. Frank Cooper Associates nevertheless took the property and made it valueless for Robbins. Robbins then sued, seeking compensation for the reasonable value of the property.

    Procedural History

    The Supreme Court, New York County, entered judgment for Robbins. The Appellate Division reversed. The New York Court of Appeals reversed the Appellate Division’s order and reinstated the Supreme Court’s judgment.

    Issue(s)

    Whether, in the absence of an express agreement, the use of another’s property after failed negotiations for its conveyance gives rise to an implied contract requiring the user to pay the reasonable value of the property.

    Holding

    Yes, because when parties deal with each other in the context of an intention of payment for use of property, and negotiations fail but the property is still used, the law implies an obligation to pay its reasonable value.

    Court’s Reasoning

    The Court of Appeals held that the Trial Judge properly submitted a single issue to the jury: whether there was a contract implied in fact. Because the property was taken and made valueless after failed negotiations, “the law imposes an obligation to pay its reasonable value where the parties dealt with each other in the context of an intention of payment for its use.” The court cited Healey v. Macy & Co., 251 App. Div. 440, affd. 277 N. Y. 681; La Varre v. Warner Bros. Pictures, 282 N. Y. 68; cf. Grombach Prods. v. Waring, 293 N. Y. 609; see Desny v. Wilder, 46 Cal. 2d 715. Further, the court determined that opinion evidence of the property’s value was properly admitted, citing Sheldon v. Metro-Goldwyn Pictures Corp., 106 F. 2d 45, affd. 309 U. S. 390; Duane Jones Co. v. Burke, 306 N. Y. 172, 192; Stanley v. Columbia Broadcasting System, 35 Cal. 2d 653; see, also, Grombach Prods. v. Waring, 267 App. Div. 986, revd. on other grounds 293 N. Y. 609. The court concluded that the opinion evidence, taken together with the defendants’ evidence, sufficiently supported the verdict and found no reversible error in the court’s charge.