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Part Performance Exception to the Statute of Frauds Does Not Apply to Contracts Which Cannot Be Performed Within One Year

The First Department, in a full-fledged opinion by Justice Saxe, determined that the part performance exception to the statute of frauds should not be applied to contracts that cannot be performed within one year.  The court first explained what “capable of performance within one year” means, and then looked at the controlling statute (General Obligations Law 5-701 (a)(1):

Before addressing the central issue of the applicability of a part performance exception for contracts that must be in writing under General Obligations Law § 5-701, I note … the oral contract alleged here was categorized as a contract incapable of performance within one year of its making (General Obligations Law § 5-701[a][1]). The application of § 5-701(a)(1) is limited to contracts that “have absolutely no possibility in fact and law of full performance within one year” … . “[T]he statute does not include an agreement which is simply not likely to be… performed, nor yet one which is simply not expected to be performed within the space of a year. Neither does it include an agreement which, fairly and reasonably interpreted, admits of a valid execution within that time, although it may not be probable that it will be” … . So, the determination of whether an alleged oral contract can possibly be performed within one year of its making is not conducted by looking back at the actual performance; it requires analysis of what was possible, looking forward from the day the contract was entered into. * * *

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 … .

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. Gural v Drasner, 2013 NY Slip Op 08391, 1st Dept 12-17-13

 

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