Wednesday, March 18, 2026

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C.A. Declares Statute of Frauds Applies to Implied, Oral Joint Venture Agreements

Opinion Distinguishes Cases Suggesting Otherwise, Says Rule Requiring Contracts to Be in Writing Applies if Performance Cannot Be Accomplished in One Year

By a MetNews Staff Writer

Div. One of the Fourth District Court of Appeal has held that a purported oral or implied joint venture agreement must be in writing in order to be enforced if the contractual terms cannot be performed within one year from its asserted inception.

At issue is whether the statute of frauds, codified in California at Civil Code §1624, governs agreements to share control and profits of a business entity. That section provides that an oral contract “that by its terms is not to be performed within a year from the making thereof” is “invalid, unless [it], or some…memorandum thereof, [is] in writing and subscribed by the party to be charged or by the party’s agent.”

Justice Jose S. Castillo authored Monday’s opinion, joined in by Presiding Justice Judith McConnell and Justice Julia C. Kelety, acknowledging jurisprudence suggesting that the statute does not govern implied joint venture agreements but distinguishing the cases as lacking any indication that the contracts at issue involved terms under which performance would extend beyond the one-year mark. He declared:

“Plaintiffs contend the statute of frauds does not apply to either oral or implied joint venture agreements. Yet Plaintiffs offer no caselaw, and we are aware of none, that categorically exempts oral or implied joint ventures from the statute of frauds. We publish this opinion to clarify that an oral or implied joint venture agreement is subject to the statute of frauds if the agreement, by its terms, cannot be performed within a year from its making.”

Complaint Filed

Seeking to enforce an asserted implied joint venture agreement was venture capitalist John Clarke, who filed a complaint in May 2023 against two professors of chemistry, Jin-Quan Yu and Benjamin Cravatt, and their employer, Scripps Research Institute, asserting claims including breaches of an implied or oral joint venture agreement and associated fiduciary duties as well as one for quantum meruit. He asserted:

“Beginning in December 2021,…Mr. Clarke and Dr. Yu formulated a plan to start a new venture utilizing Dr. Yu’s revolutionary Carbon-Hydrogen (C-H) activation research…for the creation of new and enhanced drug molecules….Soon thereafter, [they] brought in Dr. Cravatt to serve as the second scientific founder for the company.”

Clarke claimed that he offered “to fund the company with a $4 million…investment” but that Yu and Cravatt unilaterally decided to go in a different direction to seek a “better deal.” In the pleading, the plaintiff alleged:

“[I]n August 2021, Dr. Yu and Dr. Cravatt suddenly repudiated the very existence of the parties’ joint venture. At the same time, Scripps refused at the last minute to execute a negotiated Sponsored Research and License Agreement for Dr. Yu’s research, leaving [the company formed by Clarke for the venture] without…assets and support….”

In January of last year, San Diego Superior Court Judge Gregory W. Pollack granted the defendants’ motion for summary judgment, finding that the agreement was barred by the statute of frauds and that there was no mutual assent as to essential terms. Clarke appealed the order only as it relates to Yu and Cravatt.

1964 Decision

Clarke cited the 1964 decision in Simpson v. Winkelman, in which Div. Two of this district’s Court of Appeal rejected an assertion that an oral agreement to dissolve an earlier contract to share in the profits and losses of a construction project was invalid because a joint venture agreement “need not be in writing under the statute of frauds but may be formed and dissolved by oral agreement.”

Saying that “[w]e do not read Simpson [as] broadly” as the plaintiff, Castillo remarked:

“Although Simpson does not specify the ground on which the plaintiff invoked the statute of frauds, nothing in Simpson indicates it was based on the agreement’s performance—which was to dissolve an earlier agreement— extending beyond one year….Simpson does not justify ignoring the statutory requirement to put in writing an agreement that, by its terms, cannot be performed in one year.”

Continuing, the jurist said:

“Several other states have held that ‘a joint venture that is to continue for more than a year is within the statute’ of frauds….We discern no reason why the same should not apply under our state law. We thus hold that oral and implied joint ventures are subject to the statute of frauds if the agreement, by its terms, cannot be performed within a year from its making.” Applying those principles, he noted that “[t]he parties agree they contemplated multiple years of work” and opined:

“We…conclude no genuine disputed issue of material fact exists as to whether this alleged joint venture agreement could, by its terms, be performed within one year because it would take longer than a year to develop the C-H activation technology….As a result, the statute of frauds renders both joint venture claims unenforceable….”

Addressing the other causes of action, he pointed out that “[t]he breach of fiduciary duty claim hinges on a duty arising from an enforceable joint venture agreement” and added:

“[A]s for the quantum meruit claim, caselaw indicates plaintiffs must perform the at-issue services based on the expectation the defendants would compensate them….Because Plaintiffs concede Clarke expected compensation ‘in the form of his interest in [the purported joint venture], rather than payment from [Defendants],’ summary judgment in Defendants’ favor was appropriate.”

The case is Clarke v. Yu, 2026 S.O.S. 709.