Nat Nal Service Stations, Inc. v. Wolf
107 N.E.2d 473, 1952 N.Y. LEXIS 747, 304 N.Y. 332 (1952)
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Rule of Law:
An oral agreement is not subject to the Statute of Frauds' one-year provision if, by its terms, neither party is obligated to perform for a period exceeding one year, and either party can terminate the relationship or decline to enter into future transactions at any time without breaching a continuous contractual right.
Facts:
- The plaintiff operated a garage and gas station at 14 Second Avenue in New York City.
- The individual defendant Wolf and the corporate defendant had an arrangement with Socony Vacuum Oil Company and Standard Oil Company, allowing them to receive a discount based on the volume of gasoline purchased through them.
- To obtain a greater discount by increasing their volume, the defendants approached the plaintiff with a proposition.
- The defendants orally promised to pay the plaintiff an amount equal to the discount they received from the oil companies on each gallon of gasoline plaintiff purchased through the defendants, provided the defendants accepted such orders.
- The plaintiff subsequently placed orders for gasoline through the defendants, which the defendants accepted and then transmitted in their name to the oil companies.
- The defendants received a discount of at least one cent per gallon on these orders.
- The plaintiff purchased approximately 907,115 gallons of gasoline through the defendants under this arrangement.
Procedural Posture:
- The plaintiff initiated an action to recover upon an oral agreement against the defendants.
- The defendants answered, denying the allegations and pleading as a separate defense that the oral agreement violated the Statute of Frauds because it was not to be performed within one year.
- The defendants moved for summary judgment under Rule 113 of the Rules of Civil Practice.
- Special Term (trial court) denied the defendants' motion for summary judgment.
- The defendants appealed Special Term's order to the Appellate Division (intermediate appellate court).
- The Appellate Division reversed the order of Special Term and granted summary judgment dismissing the plaintiff's complaint, holding the oral agreement unenforceable under the Statute of Frauds.
- The plaintiff appealed the decision of the Appellate Division to the New York Court of Appeals.
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Issue:
Does an oral agreement, under which a plaintiff agrees to purchase gasoline through defendants and defendants agree to pay a discount for accepted orders, fall within the Statute of Frauds' one-year provision when neither party is obligated to make or accept future orders and either party can terminate the relationship at any time?
Opinions:
Majority - Conway, J.
No, such an oral agreement does not fall within the Statute of Frauds' one-year provision because it is an agreement at will, where neither party is obligated to continue the arrangement, and each order constitutes a separate, executed contract. The court reasoned that the Statute of Frauds' one-year provision applies only to agreements which, by their terms, cannot possibly be performed within one year. The agreement in this case was explicitly 'at will' and for no definite or specific time, meaning it did not, by its own terms, necessarily extend beyond one year. Neither the plaintiff nor the defendants were obligated to do anything further; the plaintiff could choose to purchase gasoline elsewhere, and the defendants were not bound to accept any future orders. Each time the plaintiff offered to buy gasoline and the defendants accepted, a separate contract was formed, giving rise to an obligation to pay the discount only for that specific, completed transaction. Unlike cases where a defendant incurs a continuous, non-terminable liability based on a plaintiff's fully executed performance (e.g., procurement of a customer), here, neither party had any contractual right or obligation that extended indefinitely in time beyond the acceptance of an individual order. The defendants could discontinue payments at any time by refusing an order or notifying the plaintiff, and the plaintiff could cease placing orders.
Dissenting - Desmond, J.
Yes, this oral agreement falls within the Statute of Frauds' one-year provision because its terms establish a relationship of indefinite duration where neither party can unilaterally end the underlying arrangement within a year. The dissenting justice argued that the plaintiff's claim was based on a single, definite oral contract under which the right to place orders and the obligation to pay discounts would continue for an indefinite time, so long as the conditions (plaintiff purchasing through defendants, defendants accepting orders) were met. He believed there was no action either party could take within one year to completely terminate the underlying arrangement or discharge the defendant's ongoing obligation. Drawing parallels to Cohen v. Bartgis Bros. Co. and Martocci v. Greater New York Brewery, the dissent concluded that because the agreement by its terms imposed a continuing, indefinite obligation, it was unenforceable without being in writing, regardless of whether individual sales transactions were optional.
Analysis:
This case clarifies the application of the Statute of Frauds' one-year provision by distinguishing between a contract with an indefinite duration of a continuous obligation and a series of independent contracts forming an ongoing commercial relationship. It underscores that if an agreement allows either party to terminate the entire arrangement or decline future transactions at any time without breaching a long-term contractual right, it falls outside the statute. This ruling provides an important guideline for businesses structuring oral agreements, particularly those involving ongoing supply or service arrangements, emphasizing the need to define mutual obligations and termination rights to determine enforceability.
