Wednesday, June 6, 2018
A good cause termination clause operates to save oral agreement from statute of frauds writing requirement
Here's another helpful teaching case, this time for the statute of frauds section. Out of Delaware, World Class Wholesale, LLC v. Star Industries, Inc., C.A. No. N17C-05-093 MMJ, discusses the "one year" statute of frauds category. The parties entered into an oral agreement "in which WCW agreed to be the exclusive distributor of Star's products in Delaware for an indefinite period of time." Star contended that the oral agreement violated the statute of frauds and should have been in writing.
The court disagreed. WCW had alleged that the oral agreement contained a "'good cause' termination clause." This meant that either party could have terminated the agreement with good cause at any time, including within a year. Therefore, under Delaware law, there was a possibility this oral agreement could have been permissibly terminated and therefore performed within one year, and therefore the statute of frauds did not block enforcement of it.