Northern Group, Inc., is a Wisconsin corporation that contracts with manufacturers and suppliers to develop marketing strategies and promotions to third-party retailers. In exchange for these services, Northern Group receives a commission based upon a percentage of total sales the manufacturer makes to the retailer.
Tech 4 Kids (T4K) is a firm based in Ontario, Canada, that produces children’s toys and entertainment products. In 2008, T4K entered into an oral agreement with Northern Group in which Northern Group would provide marketing services to T4K in exchange for commission. Part of the agreement involved Northern Group marketing T4K’s products to several American retailers, including Kmart, Walgreens, Kohl’s, and others. According to Northern Group, securing contracts with these retailers required significant time and effort.
Pursuant to the agreement, T4K was to pay Northern Group 4 percent of the net sales price of products purchased by the retailers on a quarterly basis. In 2016, T4K advised Northern Group in writing that it was terminating the agreement. T4K alleges that it sought termination after discovering that Northern Group started a competing company. Northern Group sued T4K for breach of contract. In response, T4K argued that this claimed that the oral contract was void because of Wisconsin’s statute of frauds. According to T4K, the contract could not have been completed within a year and, therefore, was required to be in writing.
JUDGE GRIESBACH Northern Group alleges that T4K is in breach of its oral agreement regarding commissions because T4K refuses to pay Northern Group the commissions it earned before T4K terminated the agreement. Northern Group also contends that T4K breached the duty of good faith and fair dealing that are implied in every contract under Wisconsin law. T4K, on the other hand, contends that Northern Group’s breach of contract claim, as well as its breach of the implied duty of good faith and fair dealing, fail because the underlying contract is void under Wisconsin’s statute of frauds.
Wisconsin’s statute of frauds states, “Every agreement that by its terms is not to be performed within one year from the making thereof” is void “unless such agreement or some note or memorandum thereof, expressing the consideration, be in writing and subscribed by the party charged therewith.” … There is no dispute that the contract Northern Group alleges T4K breached was oral. T4K argues that the allegations of the complaint, as well as Northern Group’s response to T4K’s counterclaims, establish that the agreement was not to be and could not have been performed within a year. It thus follows, T4K contends, that the alleged contract is void and Northern Group’s claims for breach fail.
The parties do not discuss choice of law issues here, so the court will apply the law of Wisconsin, the forum state. Under Wisconsin law, a contract that is not in writing is void if it could not have been performed within a year. In other words, the question is not whether the contract was performed within a year or even whether the parties anticipated that it would be performed within a year. The Wisconsin Supreme Court has long interpreted the language of the statute to mean “‘[if, by possibility, an agreement may by its terms, be executed within [one year], it is not within the statute.’” Only if the contract is by its terms incapable of being performed within a year is it void.
In Nelsen, the court held that an oral contract under which the plaintiff was to be paid commissions on policies of insurance he sold for the defendant company for as long as the company sold policies in the agent’s district was not void under the statute of frauds because it could have been performed within the year. The court explained:
Appellant contends that Nelsen’s own testimony establishes the fact that the parties were making a contract for long duration—that it was understood that the building up of the district agency was a slow process, that Nelsen would have no immediate substantial returns from his investment of time and money and that the only substantial returns were contemplated for years in the future. This does not mean, however, that the contract was incapable of performance within a year from the time it was entered into. The contract was to be continued until the Insurance Company discontinued writing insurance in Nelsen’s district or until Nelsen discontinued operating in the district. Conceivably, either of these contingencies might have occurred within the year.
In light of the foregoing authority, T4K’s argument that its contract with Northern Group is void under Wisconsin’s statute of frauds fails. Although the complaint does allege that the retailer agreements Northern Group arranged generally required a lengthy process and sometime took years, the question is not the time it actually took to perform the contract, but whether it could have been performed within a year. Northern Group could have arranged sales agreements with retailers within a year and been paid its commission. The fact that T4K had developed a practice of paying commissions quarterly, does not mean it was not possible to pay more promptly. By its terms, the contract was terminable at will by either party, and thus either party could have quickly concluded that continuation was not in its interest.
I conclude that the contract was capable of being performed within a year and it is therefore not void under the statute of frauds. T4K’s motion to dismiss Northern Group’s breach of contract claim is therefore denied, and there is no reason to address Northern’s alternative argument under the “procuring cause doctrine.” To the extent Northern Group’s breach of the duty of good faith and fair dealing constitutes a claim separate from its breach of contract claim, it also survives.
CRITICAL THINKING:
Can you think of any additional facts that, if true, would have made the oral agreement enforceable?
ETHICAL DECISION MAKING:
Which values are furthered by this decision? Which values are sacrificed?