Caseflicks

Supreme Court of Colorado • 2005

Professional Bull Riders, Inc. v. AutoZone, Inc.

113 P.3d 757 | 2005 Colo. LEXIS 559

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Takeaway

In short, this case holds that an oral agreement is outside Colorado's one-year statute of frauds when its terms provide a genuine alternative form of complete performance that can be finished within one year.

Background

Professional Bull Riders (PBR) prepared a proposed written sponsorship agreement under which AutoZone would sponsor PBR events for the 2001 and 2002 seasons. The agreement began December 29, 2000, and ended December 31, 2002, but allowed AutoZone to end both the agreement and its sponsorship obligation after the 2001 Finals by giving written notice by August 15, 2001. AutoZone never signed the document, but PBR alleged that AutoZone's conduct created an oral agreement with the same terms.

In January 2002, AutoZone informed PBR that it would not sponsor PBR events during 2002. PBR sued AutoZone for breach of the asserted oral sponsorship agreement. AutoZone and its subsidiary, Speedbar, also asserted trademark-related counterclaims concerning PBR's continued use of the AutoZone name and mark.

The federal district court granted summary judgment to AutoZone on PBR's contract claim. It concluded that the alleged two-year oral agreement could not be performed within one year and was therefore void under Colorado's statute of frauds, section 38-10-112(1)(a). The Tenth Circuit certified to the Colorado Supreme Court whether the one-year provision invalidates an oral agreement with a term exceeding one year when the party to be charged has an unexercised option to terminate by a date within the first year.

Issues

Issue #1

Whether Colorado's one-year statute of frauds voids an oral two-season sponsorship agreement when AutoZone could elect, within the first year, to end the agreement after sponsoring one season, even though it did not exercise that option.

Holding

No. The agreement was not void under section 38-10-112(1)(a) because its terms reasonably created alternative performance obligations, one of which—sponsoring PBR for one season—could be fully performed within one year.

Reasoning

Colorado construes the one-year provision of the statute of frauds narrowly. The provision reaches only agreements that, by their own terms, exclude the possibility of complete performance within one year. Whether the parties actually completed performance within a year does not control; the question is whether the contract could have been performed within that period.

A contract containing alternative methods of performance falls outside the one-year provision if any alternative can be fully performed within one year. The central distinction is between a contractual choice that defines what performance is required and a mere excuse or release from performance. That distinction depends on the agreement's terms and the parties' contemplated purposes.

Here, the agreement did more than give AutoZone a general right to escape a two-year deal. It expressly allowed AutoZone, by timely notice, to terminate both the agreement and its sponsorship obligation effective after the 2001 Finals. Thus, the agreement fairly and reasonably established two contemplated ways for AutoZone to perform: sponsor PBR for two seasons, or elect to sponsor it for one full season.

Because the one-season alternative would completely satisfy AutoZone's obligation in less than one year, the agreement was capable of performance within one year. It did not matter that AutoZone did not effectively exercise the option. The statute's applicability turns on the contractual alternatives available under the agreement's terms, not on which alternative ultimately occurred.

The Court did not decide that every contractual termination option always constitutes alternative performance. Its conclusion was limited to this agreement, whose language expressly made termination after one season a means of limiting AutoZone's required sponsorship to that one season.