Panel Upsets Earlier Case Law on Contract Part Performance

, New York Law Journal

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Justice Saxe

Part performance is not an exception to the statute of frauds for oral contracts that cannot be performed within a year, a unanimous Appellate Division, First Department panel has ruled, rejecting a line of earlier First Department cases on the issue.

Justice David Saxe (See Profile) wrote in an opinion handed down Tuesday in Gural v. Drasner, 103283/08, that the earlier First Department cases had gone against longstanding Court of Appeals case law and the language of the relevant statutes. He was joined by Justices Rolando Acosta (See Profile), Karla Moskowitz (See Profile), Helen Freedman (See Profile) and Sallie Manzanet-Daniels (See Profile).

The case involves a dispute between two neighbors in Dutchess County over a tract of land used for grazing horses.

The plaintiff, Jeffrey Gural, and the defendant, Fred Drasner, owned neighboring properties in Stanfordville. Gural's property included a horse-breeding farm.

In 2001, the two men allegedly made an oral agreement under which Gural agreed to clear trees from part of Drasner's property, plant grass for horses to graze, and build a road, well, fence and horse shed. In return, Drasner allegedly agreed to let Gural's horses occupy the land until he sold his property, at which point he agreed to reimburse Gural for his work from the sale proceeds.

Gural alleges that he did the work over several years, spending over $180,000. In 2005, soon after the work was done, Drasner told Gural that he was selling the land and the horses could no longer use it. Drasner sold the land in 2006, for $3.5 million, and the new buyer began using the land that Gural improved for her own horses. Gural demanded payment, but Drasner refused. Gural subsequently sued Drasner for breach of contract and unjust enrichment.

Drasner, moving for summary judgment, claimed that the oral agreement was unenforceable, citing General Obligations Law §5-701(a)(1), which states that an oral contract incapable of being performed within a year falls under the statute of frauds and must be in writing. Drasner claimed that the contract could not be performed in a year because it necessarily took at least two years for grazing grass to grow after being seeded.

Gural argued that even if that were true, his partial performance of the contract took it out of the statute of frauds and made it enforceable. He also said that it would have been possible to perform the contract within a year, even though he didn't do so, because horses could have been allowed on the land before the grass was fully grown.

Manhattan Supreme Court Justice Saliann Scarpulla (See Profile) agreed with Drasner that the contract could not be performed in a year. However, she ruled that there were issues of fact about whether Gural's work constituted part performance, and denied summary judgment.

Drasner appealed. He argued that, even if Gural had partially performed the contract, the part performance exception does not apply to contracts that can't be performed within a year.

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