Court rules handshake is valid jewelry contract

A Superior Court judge in Providence, R.I., has ruled that a deal sealed only by a handshake between two jewelry executives is as enforceable as a written contract, the Providence Journal-Bulletin reported.

Judge Francis J. Darigan let stand recently a jury verdict and judgment for $11,374,812 against FAF Inc., a Smithfield, R.I.-based jewelry manufacturer, the newspaper reported. It had been sued by BHG Inc., a company that helps jewelry manufacturers sell directly to retailers, because it claimed that FAF broke an oral agreement the two firms struck in 1990.

Robert Corrente, an attorney who represented BHG, told the newspaper the decision “reinforces the notion that the courts and juries are mindful of the fact that this is the way that business gets done in the real world.” A lot of business “transpires on oral contracts and handshakes,” he reportedly said.

Corrente also said the $11-million award is believed to be the largest commercial judgment by a Rhode Island Superior Court in more than five years.

BHG, based in Providence, works as a sales agent for jewelry manufacturers, helping to hook them up directly with retail stores, allowing them to bypass wholesalers—the middlemen.

Back in 1990, Arthur Fiorenzano, of FAF, and Phil Frankenberg, of BHG, struck a deal. They were presidents of their respective companies at the time. BHG agreed to help introduce FAF to retailers that might be interested in FAF’s costume jewelry. The company makes various lines of earrings, bracelets, rings, pins and other items designed for teenagers. Each item typically sells for less than $10, according to Corrente.

FAF agreed to give BHG a 10% commission on FAF’s net sales on accounts generated by BHG. BHG contended that the agreement would continue as long as FAF sold jewelry to the retailers BHG helped find.

BHG said that FAF went along with the deal for about five years, paying the 10% commission. FAF landed several large accounts through BHG, including a multimillion-dollar deal to sell jewelry to retail giant Wal-Mart.

In 1995, FAF terminated the contract after BHG refused to work exclusively for FAF. FAF also refused to pay any more commissions, according to court documents.

BHG filed suit in Superior Court in 1995 and it took several years for the case to finally be heard. FAF argued, among other things, that because there was no end date associated with the agreement, the deal was considered a perpetual contract and therefore could not be enforced. BHG countered that it wasn’t a perpetual contract but would end if FAF stopped selling jewelry to the accounts BHG helped it land.

In late April, the jury sided with BHG. FAF filed a motion asking for a new trial, arguing that an oral contract couldn’t be enforced. Darigan disagreed, and on Aug. 7, denied the motion. FAF has until the end of the month to appeal to the Rhode Island Supreme Court.