Does the statute of frauds apply to oral joint venture agreements? The answer to that question is “yes,” according to the Court of Appeal’s recently published decision in Clarke v. Yu, 119 Cal. App. 5th 199 (2026). Specifically, a plaintiff cannot prevail on a claim for breach of an unwritten or implied joint venture agreement when the agreement cannot be performed within one year from its making.
But implied joint venture agreements can also be used to prove a defendant’s vicarious liability for the tort of his joint venturer. While Clarke says nothing about this separate use of joint venture, it presents a new angle for defense counsel opposing vicarious liability, and plaintiff’s counsel should be familiar with it.
Background
John Clarke (a venture capitalist) had previously worked with Defendants Jin-Quan Yu and Benjamin Cravatt (both scientists) on two successful biopharmaceutical companies. In late 2021 and early 2022, the parties discussed forming CHange Pharma, Inc. to develop and commercialize Yu’s carbon-hydrogen bond activation technology.
The parties never reduced their agreement to writing. When disagreements arose over the amount of initial funding needed, the scientists ultimately secured funding from other sources. Clarke and CHange sued, asserting claims for breach of oral and implied joint venture agreement, breach of fiduciary duty, promissory estoppel, and quantum meruit. The trial court granted summary judgment against all claims. The Court of Appeal affirmed.
The statute of frauds bars claims for breach of an oral or implied joint venture agreement that cannot be performed within one year
California Civil Code section 1624(a)(1) renders invalid any oral agreement “that by its terms is not to be performed within a year from the [agreement’s] making” unless it is in writing and signed by the party to be charged.
Plaintiffs argued that the statute of frauds does not apply to oral or implied joint venture agreements under Simpson v. Winkelman where the court held that a joint venture agreement “need not be in writing under the statute of frauds but may be formed and dissolved by oral agreement and proved by parol evidence.” 225 Cal. App. 2d 746, 750 (1964).
The Clarke court rejected this reading of Simpson, explaining that Simpson did not address whether the agreement at issue could be performed within one year, so Simpson was “not authority” for the proposition advanced by Plaintiffs. Ginns v. Savage, 61 Cal. 2d 520, 524 n.2 (1964). (For similar reasons, the court rejected Plaintiffs’ reliance on April Enterprises, Inc. v. KTTV, 147 Cal. App. 3d 805, 819 (1983), the holding of which was more opaque.)
In contrast, the Clarke court could not locate “any case that expressly exempts from the statute of frauds an oral or implied joint venture that by its terms cannot be performed within a year,” observing that several other states have held that those joint ventures are within the statute of frauds. 9 Richard A. Lord, Williston on Contracts § 24:1 (4th ed. 2025) (collecting cases).
The only evidence that the agreement could be performed within one year came from the plaintiff’s self-serving declaration
The court then applied that rule to the facts, holding that “[e]vidence shows the technology could not be developed within one year.” The evidence consisted of both defendants and a third scientist declaring that developing and commercializing the technology could not be achieved within one year. Although Clarke himself declared that Change “could have (and did) develop Yu’s technology in . . . less than a year,” the court held that “[t]he statement sits untethered to either Clarke’s experience or any evidence that development of the C-H activation technology was in fact completed.” The court therefore rejected Clarke’s statement as “uncorroborated and self-serving.” King v. United Parcel Serv., Inc., 152 Cal. App. 4th 426, 433 (2007).
After rejecting Plaintiffs’ claims for breach of the joint venture agreement, the court also held that the trial court properly granted summary judgment against Plaintiffs’ “derivative” claims for breach of fiduciary duty and promissory estoppel. (In an unrelated portion of the opinion, the court also rejected Plaintiffs’ claim for quantum meruit.)
Clarke gives defendants an argument against joint venture as a theory of vicarious liability
Clarke addressed the enforceability of an oral joint venture agreement between the parties to that agreement. But joint venture can also be used to prove vicarious liability. “Where a joint venture is established, the parties to the venture are vicariously liable for the torts of the other in furtherance of the venture.” Cochrum v. Costa Victoria Healthcare, LLC, 25 Cal. App. 5th 1034, 1053 (2018).
Clarke did not address the use of joint venture for vicarious liability. If extended to vicarious liability, however, Clarke appears inconsistent with earlier cases that upheld vicarious liability based on oral joint venture agreements without determining whether the agreements could be performed within one year. See, e.g., Myrick v. Mastagni, 185 Cal. App. 4th 1082, 1091-92 (2010); Rickless v. Temple, 4 Cal. App. 3d 869, 893-94 (1970). A broader application of Clarke may also be inconsistent with CACI No. 3712, which provides for vicarious liability of joint venturers and instructs the jury that “[a] joint venture can be formed by a written or an oral agreement or by an agreement implied by the parties’ conduct.”
Whether or not Clarke should apply to vicarious liability under a joint venture theory, Clarke creates a new angle for defense counsel. Clarke concluded that an oral joint venture agreement that cannot be performed within one year cannot be enforced between the parties and that “derivative” claims for breach of fiduciary duty and promissory estoppel fail as a matter of law. Defendants may argue that vicarious liability is “derivative” of the joint venture agreement and fails as a matter of law when the joint venture agreement itself is unenforceable.
It is an open question whether the trial courts will apply Clarke narrowly to limit claims for breach of joint venture agreements or more broadly to claims for vicarious liability brought against joint venturers.
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If you are evaluating raising joint venture issues in California, contact us to discuss your specific situation.
