Professional Bull Riders, Inc. v. AutoZone, Inc.
113 P.3d 757 (2005)
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Rule of Law:
An oral agreement that contemplates performance for a definite period of more than one year is not rendered void by the Statute of Frauds if it provides one party with the option to fully perform its obligations by terminating the agreement within the first year.
Facts:
- Professional Bull Riders (PBR) and AutoZone had an ongoing sponsorship relationship.
- For the years 2001 and 2002, PBR prepared a written sponsorship agreement for a two-year term, commencing December 29, 2000, and ending December 31, 2002.
- The proposed agreement contained a clause giving AutoZone the option to terminate the agreement and its sponsorship at the end of the 2001 season by providing written notice by August 15, 2001.
- AutoZone never signed the written agreement.
- PBR alleged that the parties entered into an oral agreement that mirrored the terms of the unsigned written document.
- In January 2002, AutoZone notified PBR that it would not be sponsoring PBR events during the 2002 season.
Procedural Posture:
- Professional Bull Riders, Inc. (PBR) sued AutoZone in the United States District Court for breach of an oral sponsorship agreement.
- AutoZone and its subsidiary, Speedbar, filed a counterclaim for trademark infringement.
- The district court granted summary judgment to AutoZone on PBR's breach of contract claim, ruling the oral agreement was unenforceable under the Colorado Statute of Frauds because it could not be performed within one year.
- PBR appealed the summary judgment ruling to the United States Court of Appeals for the Tenth Circuit.
- The Tenth Circuit, finding no controlling Colorado precedent, certified the question of law regarding the Statute of Frauds to the Colorado Supreme Court.
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Issue:
Is an oral agreement that contemplates performance for more than one year void under the Statute of Frauds if it also provides one party with the option to terminate the agreement and its performance obligations within the first year?
Opinions:
Majority - Coats, Justice
No. An oral agreement is not void under the Statute of Frauds when it allows for alternative performances, one of which can be completed within one year. The court reasons that the one-year provision of the Statute of Frauds is construed narrowly to apply only to agreements that are, by their express terms, impossible to perform within one year. When a contract provides a party with an option to terminate its obligations within a year, that option is viewed as an alternative means of performance, not merely an excuse for non-performance. Since AutoZone could fully satisfy its contractual duties by either sponsoring for two seasons or by sponsoring for one season and exercising its termination option, the agreement provided for an alternative performance that could be completed within a year, thus placing it outside the scope of the Statute of Frauds.
Analysis:
This decision significantly clarifies the application of the Statute of Frauds' one-year provision in Colorado, aligning the state with a growing number of jurisdictions that take a narrow view of the statute. By characterizing an option to terminate within a year as an 'alternative performance,' the court makes it more difficult for parties to use the Statute of Frauds to escape oral agreements intended to last longer than a year. The ruling emphasizes contractual interpretation, focusing on whether the parties' essential purposes could be achieved within the one-year timeframe. This precedent will likely reduce the applicability of the Statute of Frauds as a defense in cases involving multi-year oral agreements that contain early termination clauses.
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