The one-year rule and the land rule

Mansfield, Connecticut, March, nineteen eighty six. A developer is planning a project near the university's main campus. Twenty industrial buildings, a hotel and convention centre, housing for nearly six hundred graduate students and professors, one hundred and twenty million dollars in all. At a dinner meeting the developer's representative asks a construction firm, Klewin, to manage the whole of it, and Klewin names its fee. Four per cent of the cost of construction, plus four per cent for overhead and profit.
The meeting ends with a handshake and the words, you've got the job, we've got a deal. They hold a press conference. They sign, ceremonially, a standard form of agreement between owner and construction manager, without filling in any of the blanks. Klewin builds the first phase. The developer, unhappy with the work, hires someone else for the second. Klewin sues on the oral contract for the entire project.
So here is the question. A project that everyone expected to take three to ten years, and a contract about it that nobody wrote down. Last lecture told you that a contract that cannot be performed within one year must be evidenced by a signed writing. Is this one inside the statute? Think about it before I go on, and notice that the contract itself said nothing about time at all.
And now the question I keep asking. What exactly did these people promise each other? Klewin promised to manage the construction of every phase. The developer promised to pay eight per cent. Neither promised how long it would take, and that silence, it turns out, is the whole case.
Here is the first line for the board. The one year provision reaches only contracts that by their terms cannot be performed within one year of their making. Not contracts that probably will take longer. Not contracts that everyone expects to take longer. Contracts whose own terms make performance within a year impossible. A contract of uncertain duration is outside the statute however long it actually runs.
Second line. The land provision reaches any contract for the sale of an interest in land, and it is read the other way, generously. But equity softened it almost at once with the doctrine called part performance. Where the buyer, in reasonable reliance on the oral contract and with the seller's knowledge, has so changed position that injustice can be avoided only by enforcement, a court will order the land conveyed. Restatement section one twenty nine.
Third line. Notice the two rules pull in opposite directions. The one year clause is read as narrowly as words allow, because courts think it serves no purpose. The land clause is honoured, because deeds and titles need certainty, and then equity carves an exception for the buyer who has already acted. Keep the two temperaments separate.
Now the case. C. R. Klewin against Flagship Properties, Supreme Court of Connecticut, nineteen ninety one, Chief Justice Peters, answering questions certified by the federal court of appeals. The federal trial judge had held the contract inside the statute, because the whole project could not possibly be finished in a year. The Connecticut court said that was the wrong test.
It began with history. The statute descends from an English act of sixteen seventy seven, and the one year provision is, in Professor Farnsworth's words, of all the provisions of the statute, the most difficult to rationalize.
The court quoted him at length, and concluded that the one year provision no longer seems to serve any purpose very well, and today its only remaining effect is arbitrarily to forestall the adjudication of possibly meritorious claims. For this reason, the courts have for many years looked on the provision with disfavor, and have sought constructions that limited its application.
Then the rule. The provision covers only those contracts whose performance cannot possibly be completed within a year. And the question the court had to answer was what possibly means. One reading, only contracts whose terms expressly rule out performance within a year. The other, contracts where it is realistically impossible, like a hundred and twenty million dollar development. We now hold that the former and not the latter is the correct interpretation.
A contract is not within this clause of the statute unless its terms are so drawn that it cannot by any possibility be performed fully within one year. Klewin's contract had no term about time at all. It was outside the statute. Whether Klewin could prove the contract, and whether the developer had broken it, went back to the federal court. What the statute could not do was end the case at the door.
Now the rule at its most extreme, an oral promise of a job for life. Robert Ohanian had run Avis's western sales region from San Francisco, and it was the one region growing in a bad economy. In nineteen eighty the company wanted him to take over the dying northeast region in New York, and he did not want to go. A senior manager talked him into it, and the manager's own words at trial are the case.
His future was secure in the company, unless, and I always had to qualify, unless he screwed up badly. And to Ohanian directly, unless he screwed up badly, there is no way he was going to get fired. He would never get hurt here in this company. Ohanian moved his family east in February nineteen eighty one. In July nineteen eighty two, at forty seven, he was fired without severance. A jury found the oral contract and awarded him three hundred and four thousand dollars.
Avis argued the statute. A promise of employment until retirement cannot be performed within a year. The Second Circuit, in Ohanian against Avis, nineteen eighty five, disagreed, applying New York law. The court found the promise capable of performance within a year, because it could be brought to an end within a year without anyone breaking it. Avis could fire him for screwing up badly, and that phrase covered conduct that was not a breach of contract by him.
Thus, the court said, this oral contract could have been terminated for just cause within one year, without any breach by plaintiff, and is therefore not barred by the statute of frauds. Where either party under the contract may rightfully terminate within a year, the contract is outside the statute. A promise for life, outside the one year clause, because life at the company could lawfully end within the year. That is how narrowly the clause is read.
Now the land rule, and a lot in Plymouth, Massachusetts. In July nineteen eighty Mrs. Green advertised a vacant lot for sale. On the eleventh and twelfth the Hickeys discussed it with her and orally agreed to buy it for fifteen thousand dollars. She took a five hundred dollar deposit cheque, with the payee line left blank for her to fill in. She never filled it in, never cashed it. Hickey told her he meant to sell his own house and build on her lot.
Relying on the arrangements, the Hickeys advertised their house, found a buyer within days, took his deposit and banked it. On the twenty fourth of July Mrs. Green told Hickey she no longer intended to sell to him. Someone had offered sixteen thousand. Hickey said he had already sold his house and offered sixteen thousand himself. She refused. The Hickeys sued for specific performance, and she pleaded the statute. An oral contract for land, no signed writing.
The Massachusetts Appeals Court, in Hickey against Green, nineteen eighty two, began with the Restatement. A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.
Then it applied it. Mrs. Green knew that the Hickeys were planning to sell their former home and build on the lot. Relying on her oral promise, they moved rapidly to make their sale. Within ten days of paying their deposit they had bound themselves to a buyer of their own house.
There is no denial by Mrs. Green of the oral contract. She made the promise on which the Hickeys so promptly relied, and, nearly as promptly, but not promptly enough, repudiated it because she had a better opportunity. The stipulated facts require the conclusion that in equity Mrs. Green's conduct cannot be condoned.
Specific performance, on payment of the fifteen thousand dollars. With one careful proviso. If, by the time the case got back to the trial court, the Hickeys' own house sale had fallen through, so that their change of position had been undone, the judge could substitute full restitution of their costs for the conveyance. Equity gives the remedy the injustice requires, and no more.
Now let's change one fact. The Klewin agreement had said, in words, that Klewin would manage construction for the five years of the project. Is it inside the statute? Choose an answer before I go on.
Most people say yes, and they are right. Now the contract by its terms cannot be performed within a year. Five years is written into it. The narrow reading protects contracts that are silent about time or that could conceivably end within the year. It does not protect a contract whose own words put performance beyond twelve months. Klewin would need a signed writing, and the ceremonial form with the blanks empty is a very thin one.
Change one fact again. The Avis manager had promised Ohanian lifetime employment with no discharge for any reason whatever. Choose.
This one is argued, and the argument is the point. Take away the just cause exit and Avis can no longer end the contract lawfully within the year. But Ohanian can, by dying, and most courts hold that a contract measured by a life is performable within a year for exactly that reason.
New York adds a wrinkle, a separate clause for performances not to be completed before the end of a lifetime. Say which state you are in. In most, the promise is still outside the one year rule. In New York, look at the lifetime clause.
Change one fact a third time. The Hickeys had told friends they were buying the lot, and had done nothing else, when Mrs. Green changed her mind. Choose.
No part performance, and the statute bars the claim. Telling friends is not a change of position. The doctrine needs reliance that has actually cost the buyer something the seller could see, taking possession, improving the land, paying a substantial part of the price, or, as here, selling the buyer's own home. And it needs that injustice can be avoided only by specific enforcement. Return the deposit and the Hickeys are where they started. Nothing to enforce.
Here is what people get wrong here, and why it is tempting. The first mistake is measuring the one year rule by probability. A ten year project sounds like a ten year contract. It is not, unless the contract says so. Ask whether performance within a year is possible under the contract's own terms, however unlikely. The second mistake is treating every reliance as part performance. The doctrine requires a real change of position the seller knew about, and a remedy that restitution cannot supply.
The third mistake is forgetting what part performance gives you. It is an equity doctrine, and it gives specific performance, the land itself. Where the buyer wants damages instead, most courts say the statute still bars the claim, and the buyer is left with restitution of what he paid.
Here is the rule, in one breath. The one year provision catches only a contract whose own terms make full performance within a year impossible, so a contract silent on time or lawfully terminable within the year is enforceable without a writing, while a contract for an interest in land needs a signed writing unless the buyer, relying reasonably and to the seller's knowledge, has so changed position that only conveying the land will avoid injustice. Now, five questions.