The old adage "get it in writing" remains good advice, as illustrated by a recent decision by Florida's Third District Court of Appeal, LaRue v. Kalex Construction and Development, Inc., Case No. 3D11-2368 (Fla. 3d DCA, August 22, 2012).
Rose LaRue began working for Kalex Construction and Development in February 2006 as a vice-president. After her termination in December of 2009, LaRue sued Kalex, contending that upon her hiring, she was orally promised that she would receive a 25% ownership interest in the company after three years of employment with Kalex. Kalex denied the allegations.
The issue in LaRue was whether Florida's statute of frauds barred her claim. Section 725.01, Florida Statutes, provides in part:
No action shall be brought . . . upon any agreement that is not to be performed within the space of 1 year from the making thereof . . . unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith or by some other person by her or him thereunto lawfully authorized.
The statute of frauds, as noted by the court, "was enacted to prevent fraud and the enforcement of claims based on loose verbal statements made faulty by the lapse of time." In other words, the statute of frauds recognizes that some plaintiffs lie, or can be mistaken, about the formation of contracts. And the more time that goes by, the harder it is for a defendant to defend against the allegation that the parties entered into a binding contract. Thus, the statute of frauds imposes a common-sense rule that agreements that are not to be performed within one year must be in writing.
As the court in LaRue noted, there are exceptions to this general rule. For example, where the contract is for the sale of land and the relief sought is for specific performance or other equitable relief, partial performance may remove an oral agreement from the statute of frauds. In addition, full performance of an oral agreement may remove the agreement from the statute of frauds if the agreement is capable of being performed within a year and was, in fact, performed within one year.
But the exceptions to the statute of frauds could not help LaRue, whose complaint was based on an alleged oral employment agreement that she would receive a 25% ownership interest in the company if she worked for the company for three years. "Because the alleged agreement was incapable of being performed in one year, her claim is barred by the statute of frauds[,]" the court concluded.