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Agreement Terminable at Will Not Subject to Statute of Frauds

By Francis G.X. Pileggi

Dweck v. Nasser, C.A. No. 1353-VCL (Del. Ch. March 10, 2010), read letter decision here.

Prior decisions of the Court of Chancery involving this matter have been highlighted on this blog here.

This short three-page letter decision refused to apply the Statute of Frauds to an oral agreement that was terminable by either party at any time "upon performance of an act which is within the control of one of the parties." The Court reasoned that because the "performance of the agreement could be completed within one year without breach by either party", the Statute of Frauds did not bar its enforcement. 

In a previous decision in this matter, the Court of Chancery ruled that the oral agreement still being disputed in the instant ruling, (which is based in part on an unsigned draft shareholders' agreement), could not serve the purpose of a "voting agreement" due to the requirement of DGCL Section 218(a) that voting agreements or voting trusts be in writing. Nonetheless, the Court observed, nothing prevents the application of another state's contract law, such as New York in this case, to issues such as contract formation at the same time that the DGCL governs the validity of the corporate governance implications of the contract.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 14, 2010 (boomark / email).