Recent Statute of Frauds Case from Delaware

Based on the statute of frauds, a Delaware court recently granted an employer’s motion for summary judgment and dismissed a doctor/employee’s claim for breach of an oral employment contract.

Dr. Aurigemma sued his employer, a rehabilitation center,for violation of an alleged oral agreement pursuant to which the doctor alleged he was toserve as medical director for the employer. The doctor alleged that he entered into an oral agreement onSeptember 4, 2003, whereby he agreed to serve as medical director for one yearbeginning October 1, 2003.  The employerdenied any such agreement and contended that, even by the doctor’s owncontention, the contract was not enforceable because the statute of frauds required that it be in writing.

The court held for the employer.  The statute of frauds requires that a contract be in writingwhen it is not capable of being performed in one year. In this case, the doctor’s alleged oralagreement was for exactly one year of employment – but he allegedly entered into theagreement roughly a month before the commencement of his service as medicaldirector under that agreement. The courtheld:

The general rule regarding the Statute of Frauds canbe stated as follows: “An oral contract for a year’s services to beginmore than one day after the contract is entered into is invalid under thatprovision of the statute of frauds making invalid an oral contract not to beperformed within a year.” The time withinwhich such a contract is to be performed is reckoned from the making of thecontract, not from the time the performance is to begin.” Although this rule of law has never beenexplicitly expounded in Delaware,it appears to be the widely accepted construction of this particular provisionof the Statute of Frauds.

(footnotes omitted).

  Thus,the alleged oral agreement came within the statute of frauds, necessitatingthat it be reduced to writing.

The court further held that no exception to the statute of frauds applied. The doctor arguedthat he partially performed the alleged contract to serve as medical directorby assuming the duties of acting medical director on September 4, 2003. In response, the employer argued that the partialperformance exception is limited to real estate and financial transactions anddoes not apply to service or employment contracts.  Moreover, the employer argued, even though Dr.Aurigemma began to perform as interim medical director, this was not a partialperformance of permanent medical director position duties.The court held:

Delaware law is clear that the part performance doctrine does notapply to oral contracts not to be performed within one-year. “It is …uncontroverted that partial performance of services under an oral contract notto be performed within a year does not remove the contract from the operationof the Statute of Frauds so as to affect the portion of the services notperformed.” This view has been expressed as themajority view and is supported by case law in many jurisdictions.  The purpose of theStatute of Frauds is to prevent frauds that may occur if oral contracts werepermitted in certain areas of the law. The Indiana Supreme Court recentlypenned an excellent recitation of the purpose of the Statute of Frauds in consideringan argument identical to that offered here by Dr. Aurigemma. In Coca-Cola Co.v. Babyback International, Inc., that court said:

This purpose would be undermined if a party’sconduct could form the basis for establishing and enforcing a claimed oralagreement not to be performed within one year simply because the same party’sconduct arguably provided the only explanation for the agreement. Such anapproach would invite persons to concoct and seek enforcement of fictitiouscontracts on grounds that the existence of an agreement would provide the onlypossible explanation for such persons’ conduct. In contrast to real estatecontracts, where evidence of part performance is relatively clear, definite,and substantial, the nature of evidentiary facts potentially asserted to showpart performance of an agreement not performable within one year would bevague, subjective, imprecise, and susceptible to fraudulent application.

Aurigemma v. New Castle Care LLC,2006 WL 2441978 (Del.Super. Aug. 22, 2006).

[Meredith R. Miller]