Ellig v. Molina
2014 WL 521210, 996 F. Supp. 2d 236, 2014 U.S. Dist. LEXIS 16475 (2014)
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Rule of Law:
A signed writing that acknowledges the existence of an oral contract for the sale of goods over $500 can satisfy the Statute of Frauds, even if it omits or inaccurately states certain terms, so long as it affords a basis for believing that the offered oral evidence refers to a real transaction.
Facts:
- Bruce and Janice Ellig became close friends with Alfred Molina, a jeweler, after meeting on a trip in 2007.
- In late 2010, Mr. Ellig discussed buying a special 65th birthday gift for his wife with Molina, who suggested a large diamond ring as a safe investment.
- Concerned about the high price, Mr. Ellig only agreed to consider the purchase after Molina repeatedly made an oral promise to buy the ring back within one year for the full purchase price plus a 10% return if the Elligs were unhappy for any reason.
- Relying on this buy-back promise, the Elligs purchased a diamond ring from Molina, paying over $650,000 in two wire transfers in June 2011.
- The completed ring, with a modified setting, was delivered to the Elligs in late July or early August 2011.
- Over the next several months, Mrs. Ellig grew dissatisfied with the ring's appearance and perceived value.
- In late May or early June 2012, within one year of receiving the ring, Mrs. Ellig informed Molina that they had decided to return it pursuant to his promise.
- On July 11, 2012, Molina sent the Elligs a letter (the "Dear Brother" letter) that acknowledged the buy-back agreement but introduced a new condition that he would have to resell the ring before returning their money.
Procedural Posture:
- Janice and Bruce Ellig sued Alfred Molina and Molina, Inc. in the U.S. District Court for the Southern District of New York for breach of contract.
- Defendants filed a motion in limine to exclude Molina's 'Dear Brother' letter, arguing it was an inadmissible settlement offer, which the court denied.
- The case proceeded to a bench trial before Judge Forrest.
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Issue:
Does a signed letter that confirms the existence of an oral buy-back agreement for a specific good satisfy the Statute of Frauds, thereby making the oral agreement enforceable, even if the letter attempts to introduce a new, disputed term?
Opinions:
Majority - Forrest, J.
Yes, a subsequent signed letter that confirms the existence of an oral buy-back agreement can satisfy the Statute of Frauds and make the agreement enforceable. The court found that an enforceable oral contract existed, with the buy-back guarantee serving as consideration for the Elligs' purchase. Although the Statute of Frauds (N.Y. U.C.C. § 2-201) requires contracts for the sale of goods over $500 to be in writing, Molina's "Dear Brother" letter satisfied this requirement. The letter was a writing signed by Molina (the party to be charged), it identified the quantity of goods (one ring), and it provided a sufficient basis to believe a real transaction and guarantee existed. The court determined that the letter's introduction of a "gray area" (the consignment term) was an ex post facto attempt to alter the original agreement and did not negate the letter's power to satisfy the statute. The court also held the letter was not an inadmissible settlement offer under FRE 408 but rather a statement of Molina's position on the facts.
Analysis:
This decision reinforces the principle that the Statute of Frauds' writing requirement is not a rigid rule demanding a perfect, contemporaneous contract, but rather a safeguard against fraudulent claims. The case demonstrates that subsequent, informal communications, such as a letter, can satisfy the statute if they acknowledge the core of an underlying oral agreement. This ruling provides a path for enforcing oral promises in commercial transactions where one party later attempts to renege, showing that a party's own words in later correspondence can be the very 'writing' that makes their initial oral promise legally binding. It serves as a significant precedent for cases where the parties' disagreement is not over the existence of a deal, but over its specific terms after the fact.
