C.R. Klewin, Inc v. Flagship Properties, Inc.

Brief Fact Summary. The Defendant, Flagship Properties, Inc. (the "Defendant"), contracted with another builder to complete Plaintiff, C.R. Klewin’s (the "Plaintiff"), work, because he was not satisfied with the Plaintiff’s performance.  The Defendant claims the agreement is not enforceable because it was not in writing.

Synopsis of Rule of Law. A contract is not within the statute of frauds (SOF) unless its terms are so drawn that it cannot by any possibility be performed fully within one year.

Facts. The Defendant was developing a major project for the University of Connecticut that involved several buildings for a total project cost of $120 million.  The Defendant had a dinner meeting with the Plaintiff (a construction manager), and a fee was agreed upon subject to the timing of the different phases of the project.  The meeting ended with a handshake and “You’ve got the job.  We’ve got a deal.”  Subsequently the parties held a press conference about their deal, and ceremoniously signed an American Institute of Architects Standard Form of Agreement between ("AIASFA") between owner and construction manager, but did not fill in the blanks.
•    Construction began and the parties entered into a written agreement for the first phase.  Five months later the first phase was finished.  The Defendant decided that he did not like the Plaintiff’s work and contracted with another construction manager five months after that to complete the project.  The Plaintiff then filed suit alleging: (1) breach of oral contract; (2) quantum meruit for services performed in anticipation of the next phases and (3) reliance on Defendant’s promise to pay for preconstruction services.
•    The Defendant moved for summary judgment claiming the oral agreement was unenforceable under the Statute of Frauds ("SOF").  The District Court granted summary judgment because:  (1) the contract was not indefinite because it would be completed when it was finished and (2) as a matter of law it could not have been performed within one year.  The Plaintiff admitted that it was intended to take 3-10 years.

Issue. Plaintiff appealed to the Second Circuit. The Second Circuit certified the following questions to the Connecticut Supreme Court:
•    Whether under the SOF an oral contract that does not specify the time for performance falls explicitly outside of the SOF?
•    Is it unenforceable when the performance is contemplated to be finished in more than one year, but does not negate the possibility of being performed within one year?

Held. Historically, the one-year rule to the SOF was seen to combat the failure of evidence and memory.  However, this cannot be the case because the one-year period does not run from the making of the contract to the proof of making, but from the making of the contract to the completion of performance.  (i.e., if an oral contract cannot be performed within one year, but is broken a day after it is made, the provision applies even though the contract is still fresh in their minds). Another rationale for the provision was to distinguish a significant contract of long duration from less significant contracts of short duration.  However, this purpose is not applicable to the SOF because the period does not run from commencement of performance to the completion.
•    The court said there is no legitimate purpose served by this statute anymore so, it decided to limit its application.  The court adopts the narrow view that unless it appears from the agreement itself that the contract is not to be performed explicitly within one year, the statute does not apply.  A contract is not within this clause unless its terms are so drawn that it cannot by any possibility be performed fully within one year.

Discussion. This case offers an interesting analysis of one exception to the SOL.