No Part-Performance Exception for Contracts Not Capable of Performance Within One Year of Their Making

The Appellate Division, First Department in Gural v. Fred Drasner recently addressed the following question:

whether a part performance exception should be applied to contracts that are not capable of performance within one year of their making, which must be in writing pursuant to General Obligations Law § 5-701(a)(1).

Noting its prior “inconsistent” decisions on the issue, it answered this question in the negative.

It reasoned:

Analysis of the part performance exception must begin by emphasizing that General Obligations Law § 5-701 lacks any provision for a part performance exception such as that explicitly provided for by General Obligations Law § 5-703, which concerns contracts for the conveyance of an interest in real property. That is, while § 5-703(4) specifically provides, “Nothing contained in this section abridges the powers of courts of equity to compel the specific performance of agreements in cases of part performance,” the broader statute of frauds provision of § 5-701 contains nothing of the sort – although, notably, it contains other exceptions (see e.g. § 5-701[10] [“This provision … shall not apply to a contract to pay compensation to an auctioneer, an attorney at law, or a duly licensed real estate broker or real estate salesman”]).

Two relevant principles of statutory construction apply here. The first is that “a court cannot amend a statute by inserting words that are not there, nor will a court read into a statute a provision which the Legislature did not see fit to enact”. The second is that an “inference must be drawn that what is omitted or not included was intended to be omitted and excluded”. Inferring that the Legislature authorized a part performance exception for an oral contract that is not capable of performance within one year violates these principles.

It therefore rejected the reasoning of the court’s prior cases recognizing a part-performance exception to GOL § 5-701, and squarely held “that the law simply does not provide for or permit a part performance exception for oral contracts other than those to which General Obligations Law § 5-703 applies.”

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