The Supreme Court of Colorado has long construed the one-year provision narrowly, to bring within the statute only those agreements that exclude, by their very terms, the possibility of performance within one year. If the agreement "could have been performed" within one year, the statute is inapplicable. That an agreement was not actually performed within one year of its making is, by this construction, clearly of no consequence in determining the applicability of the statute of frauds.
Plaintiff event organizer prepared a written agreement to provide for defendant sponsor's sponsorship. By its own terms, the sponsorship agreement was to run for two seasons, unless sooner terminated as contemplated by the agreement itself. The sponsor never signed the agreement. However, the organizer alleged that the sponsor accepted its terms and that, as a result, the parties entered into an oral agreement mirroring the written terms. The district court reasoned that the purported oral contract provided for a term of two years and was thus unenforceable. On appeal, the court disagreed.
Is an oral agreement void when: (1) the agreement contemplates performance for a definite period of more than one year but (2) allows the party to be charged an option to terminate the agreement by a certain date less than a year from the making of the agreement and when (3) the party to be charged has not exercised that option to terminate the agreement?
Finding that the contract about which the question was asked actually set out alternate performance obligations, requiring AutoZone to sponsor Professional Bull Rider's events for either one or two seasons, at AutoZone's option, the supreme court held that the contract was performable within one year, and therefore was not rendered void by the statute of frauds. Moreover, the court stated that as it is here in this case, the word "terminate" not only applies to the agreement itself but expressly limits the electing party's performance obligation to a specific task - sponsorship for one season - an interpretation of the election as defining alternate obligations is not only fair and reasonable, it is clear.