The Statute of Frauds is an often confusing concept, even to a practicing business attorney. The essence of the doctrine is that certain agreements will be unenforceable in a court of law, unless those agreements are in writing and signed by the party against whom enforcement is sought.  In today’s business climate, where it must be assumed that no business or person is providing services for free, the application of the Statute of Frauds to an oral business agreement can produce some seemingly unfair results.

            Such was the case in Snyder v. Bronfman (2009 NY Slip Op 8667 [2009]), a recent Court of Appeals case.  In this case, the Plaintiff, Robert Snyder, was at first a casual business acquaintance of Defendant Edgar Bronfman, a wealthy New York City investor.  The parties then orally agreed that plaintiff would function as defendant’s “experienced right hand’, ‘sounding board’, ‘loyal ally’, ‘principal advisor’, and most importantly, his ‘consigliore”, in connection with a joint venture to acquire and operate companies in the media business. 

            Thereafter, Plaintiff worked on trying to put together acquisitions for the joint venture. He developed for the parties’ joint venture, a series of business relationships with key figures in the corporate and investment banking communities.  He apparently spent countless hours working on aborted deals, before finally bringing to fruition a deal to acquire Warner Music from Time Warner.  Although there was no debate in the record that Plaintiff was a major contributor to the success of the deal, after the deal had closed, Defendant refused to compensate Plaintiff for his efforts in bringing about the deal. 

            Plaintiff then sued, and the Defendant moved to dismiss the complaint.  The Court, in affirming the lower court’s decision granting Defendant’s motion, held that (1) the parties did not have an enforceable contract because the terms of the parties’ agreement were too indefinite, and (2) that Plaintiff’s quasi-contract claim to recover the reasonable value of the years of work he performed finding Defendant a business to acquire and causing an acquisition to take place, was barred by the Statute of Frauds provision relating to negotiating the purchase of a business opportunity.  As a result, despite the clear understanding of the parties that Plaintiff would be compensated in some capacity for his efforts, the Court held that Plaintiff had, in essence, worked for free in bringing about a $2 billion transaction.    

            While this case does not seem to have changed the law, it does bring forth a stark reminder that potential business partners need to firm up their understandings of a deal and put it in writing, before they begin expending resources to bring it about.  Otherwise, the law may not provide a remedy to the aggrieved party, no matter how unfair the circumstances seem. If you require legal advice about your business, contact us and deal with an experienced business attorney.

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