Tuesday, March 5, 2013
Statute of Frauds Language Clarified By Arizona Court of Appeals
By Garrett Olexa
Arizona has codified the common law doctrine of the Statute of Frauds (A.R.S. §44-101). Essentially, the Statute of Frauds bars a party from suing to enforce certain types of agreements that are not in writing. One such type of agreement is an oral agreement that is not to be performed within one year from the date it is made (A.R.S. §44-101(5)).
Recently in Rudinsky v. Harris, 231 Ariz. 95, 290 P.3d 1218, (App. 2012), the Arizona Court of Appeals clarified the language -- “which is not to be performed within one year from the making thereof” -- which is set forth in A.R.S. § 44-101(5). The Rudinsky case arose out of a purported deal between Helen Rudinsky, real estate agent, and a full service brokerage company, Green Light Real Estate, LLC, concerning commissions on new business and future real estate transactions. Rudinsky alleged that the deal for future commissions with buyers introduced to the brokers would continue indefinitely into the future.
While the language in A.R.S. § 44-101(5) has been interpreted to not be applicable to oral contracts when there is a possibility of performance within one year, the Court in Rudinsky rejected the argument that the possibility that Rudinsky’s buyers may not have generated any more deals after the initial transaction made the contract one that was capable of being completed within one year. Rather, the Court held that the Rudinsky arrangement was distinguishable from other indefinite contracts that are capable of being performed within one year because Rudinsky had alleged the existence of a permanent contractual relationship that failed to contain any term that would terminate the contractual relationship within one year. The Court noted that even Rudinsky’s potential death would not terminate the contractual obligation of the full service brokerage company because the obligation would pass to the benefit of her estate, heirs, or beneficiaries. The Court held that such a relationship was not capable of being performed within one year and thus such a contract fell within the Statute of Frauds and was unenforceable.
The Rudinsky case provides a simple reminder that the best way to secure an enforceable contract is to get it in writing. If you have a verbal agreement and wonder whether it falls within the Statute of Frauds, check the nine categories of documents that A.R.S. §44-101 requires be in writing to be enforceable. If you need further assistance interpreting and understanding the Statute of Frauds, contact Garrett Olexa at email@example.com or 623.878.2222.