Contracts II

C.R. Klewin v. Flagship Properties, Inc.

Supreme Court of Connecticut, December 10, 1991

Facts:

Plaintiff is a corporation that provides general construction services. Defendants do real estate development. Defendants had a major project for the construction of twenty industrial building, a 280-room hotel, and housing for 592 graduate students and professors. This was estimated to cost $120 million.

Representatives from plaintiff and defendants had a dinner, where plaintiff told defendants its fee would be 4% of the cost of construction plus 4% for its overhead and profit. Defendants told plaintiff it had the job, and shook on it. This agreement was publicized in a taped press conference, and a standard form was ceremoniously signed, without filling in the blanks.

Construction began on the first phase, and a written agreement was signed therefore, but defendants soon became dissatisfied with plaintiff's work. They therefore contracted with another contractor for the second phase of the construction. In response, plaintiff sued for breach of contract.

Procedural History:

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The district court granted summary judgment, reasoning that (1) "the contract was not of an indefinite duration or openended" because full performance would take place when all phases of the ConnTech Project were completed, and (2) the contract "as a matter of law" could not possibly have been performed within one year. In drawing this second conclusion, the court focused on the sheer scope of the project and Klewin's own admission that the entire project was intended to be constructed in three to ten years.

Klewin appealed to the United States Court of Appeals for the Second Circuit. The Court of Appeals held that "the issues presented involve substantial legal questions for which there is no clear precedent under the decisions of the Connecticut Supreme Court"

Issue:

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[W]hether the provision of the statute of frauds, . . . requiring a writing for an "agreement that is not to be performed within one year from the making thereof," renders unenforceable an oral contract that fails to specify explicitly the time for performance when performance of that contract within one year of its making is exceedingly unlikely.

Plaintiff's Argument:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 572
  1. breach of an oral contract to perform as construction manager on all phases of the project;
  2. quantum meruit recovery for services performed in anticipation of future stages of the project; and
  3. detrimental reliance on Flagship's promise to pay for preconstruction services.

Defendant's Argument:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 572
  1. "the contract was not of an indefinite duration or openended" because full performance would take place when all phases of the ConnTech Project were completed, and
  2. the contract "as a matter of law" could not possibly have been performed within one year. In drawing this second conclusion, the court focused on the sheer scope of the project and Klewin's own admission that the entire project was intended to be constructed in three to ten years.

Reasoning:

The statute of frauds is a destructive force in modern life because it allows people to break their contracts on a technicality. Expanding its reach just extends its "destructive force." Furthermore, making the boundary of what falls within it less plain would increase litigation as people would press irrelevant issues for the most remote possibility of getting out of the contract.

Rule/Holding:

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[A]n oral contract that does not say, in express terms, that performance is to have a specific duration beyond one year is, as a matter of law, the functional equivalent of a contract of indefinite duration for the purposes of the statute of frauds. Like a contract of indefinite duration, such a contract is enforceable because it is outside the proscriptive force of the statute regardless of how long completion of performance will actually take.

Judgment:

No costs taxed to either party.

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