On February 9, 2022, Justice Emerson of the Suffolk County Commercial Division issued a decision in Castle Restoration, LLC v. Castle Restoration & Constr., Inc., 2022 NY Slip Op. 50082(U), refusing to enforce an alleged oral modification to a written contract, explaining:
The threshold issue for the court to determine is whether the alleged oral agreement is enforceable. As the court noted in its summary-judgment decision, the asset-sale agreement contained a no-oral-modification provision. Parties to a written agreement who include a proscription against oral modification are protected by the statute of frauds. Any contract containing such a clause cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement is sought. Put otherwise, if the only proof of an alleged agreement to deviate from a written contract is the oral exchanges between the parties, the writing controls. Thus, the authenticity of any amendment is ensured.
A party’s admission of the existence and essential terms of an oral agreement is sufficient to take the agreement out of the statute of frauds. The defendants acknowledge that Castle Inc. entered into an oral agreement with Castle LLC in which Castle LLC agreed to complete Castle Inc.’s work-in-progress. The parties’ dispute centers on the terms of the oral agreement, specifically how Castle LLC was to be compensated for its work. According to Colao, Castaldi agreed that Castle LLC’s compensation would be a reduction of the balance due on the promissory note in an amount equal to Castle LLC’s costs and expenses, including labor, materials, overhead, general conditions, and profit. According to Castaldi, Castle Inc. would purchase any materials needed to complete its work, and Castle LLC would supply the labor. Castle Inc. would pay Castle LLC’s employees directly for the work performed or reimburse Castle LLC for the cost of the labor. Castle LLC would then bill the owners of the projects for the work and deliver the payments it received from the owners to Castle Inc. According to Castaldi, Castle Inc. never agreed to pay Castle LLC for any mark-ups, including overhead, profits, and general conditions.
The statute of fraud applies when, as here, the parties acknowledge an oral agreement, but dispute its terms and conditions. The effect of the statute of frauds is to render an oral contract coming within its operation unenforceable, and such a contract cannot form the basis or foundation for an action. Accordingly, the alleged oral agreement between the plaintiff and Castle Inc. is unenforceable, and there can be no recovery thereunder.
The result is the same even if the statute of frauds does not apply. To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound. Even if parties intend to be bound by a contract, it is unenforceable if there is no meeting of the minds. The meeting of the minds must include agreement on all essential or material terms. The consideration to be paid under a contract is a material term. If the parties understand the contract’s material terms differently, there is no meeting of the minds. Here, the parties clearly disagreed on how Castle LLC was to be paid for its work. Since the parties never reached a meeting of the minds on that material term, the alleged oral agreement is unenforceable.
(Internal citations omitted).