Professional Bull Riders, Inc. v. AutoZone, Inc.

Brief Fact Summary.

Professional Bull Riders, Inc. (Plaintiff) and Autozone, Inc. (Defendant) entered into an oral contract for sponsorship. It was a two year contract, but Defendant could terminate the contract after only one year. Defendant claimed the contract was void under the statute of frauds.

Synopsis of Rule of Law.

Professional Bull Riders, Inc. (Plaintiff) and Autozone, Inc. (Defendant) entered into an oral contract for sponsorship. It was a two year contract, but Defendant could terminate the contract after only one year. Defendant claimed the contract was void under the statute of frauds.

Facts.

Plaintiff organized bull riding events and sought Defendant as a sponsor for those events. Plaintiff prepared a written contract that would run for two seasons, but also gave Defendant the option to terminate sponsorship after only one season. Defendant never signed the contract. Plaintiff brought suit for breach of an oral contract, alleging that Defendant accepted the terms of the agreement, since it performed for the first season, thereby creating an oral agreement with the same terms as the written one. The district court evaluated the oral contract as a two year contract and found it to be void under the state’s one year statute of frauds. The court entered summary judgment for Defendant and Plaintiff appealed to the court of appeals. The court of appeals granted review and certified a question of law on the dispositive issue to the state’s highest court

Issue.

When an oral contract offers a party the choice to perform for less than one year or for two years, is that contract void under the statute of frauds?

Held.

(Coats, J.) No. An oral agreement that contemplates two alternative performances, one of which would be completed within a year, falls outside of the statute of frauds. Under state law, the statute of frauds voids oral agreements that by their terms will not be performed within one year after they are entered into. Since the purpose of the statute is to prevent perjury, and it is not been found particularly effective in doing so, courts construe the statute of frauds narrowly to void as few oral contracts as possible. In doing so, courts only apply the statute of frauds where the agreement, by its terms, cannot be performed within one year. Courts agree that contracts that have two or more methods of performance, one of which could be performed within a year do not fall within the statute of frauds. Courts disagree about whether to consider an option to terminate an agreement as an alternative performance method. The issue here is whether the oral agreement sets up two alternate means of performance by Defendant, or if it just excuses nonperformance by Defendant in the second year. To determine this, the court must examine the contract’s purpose and determine the parties’ intent. Although the language of the agreement states that it is a two season contract with an option to terminate after one season, it is clearly an agreement to sponsor for either one or two seasons, at Defendant’s choice. The agreement did not allow Defendant to terminate at any time or upon the occurrence of some event, but gave Defendant two possible ways of performing. The agreement contemplated that Defendant could completely perform its obligation by sponsoring the bull riding events for only one season, which would allow for completion in less than a year. The agreement therefore does not come within the statute of frauds.

Discussion.

More and more courts are adopting the Colorado Supreme Court’s position in this case, finding that a contract does not fall within the statute of frauds if one party can terminate or perform within a year, even if the terms of the agreement contemplate a longer period of performance. A significant number of courts still take the opposite view, however.