Wednesday, November 12, 2008

Statute of Frauds

The statute of frauds is a legal doctrine that requires that certain types of contracts be reduced to a writing in order to be enforceable. While the statute of frauds varies from one jurisdiction to another, in general it requires that the following types of contracts must be in writing and signed by the party against whom the contract is asserted in order to be enforceable: contracts which cannot be performed in one year, contracts involving real property, contracts involving a promise by the executor of a will to pay debts of an estate out-of-pocket, contracts for the sale of goods above a certain minimum value, and contracts wherein a party guarantees the debt of obligation of another party.

A statute of frauds defense is an affirmative defense and will be waived if not asserted in a timely fashion. In some cases a contract that would otherwise be void for meeting one of the above criteria will be held enforceable. If a party takes action in reliance on the contract, part performance can take the contract out of the statute of frauds and render it enforceable. If a party relies to his detriment on a promise that would ordinarily be void under the statute of frauds, a showing of promissory estoppel can render the contract enforceable.

The following are some cases and articles that include issues related to the statute of frauds.

In Big G Corp. v. Henry, in the original trial court action which gave rise to the appeal, the plaintiff had made the argument that the admission of certain testimony offered by the defendant violated both the parol evidence rule and the Statute of Frauds. Defendants had premised their waiver claim on a promissory estoppel argument. The court decided to admit the evidence and issued a special instruction to the jury to determine whether or not the parties had made an oral agreement such that the plaintiff would receive the title to the property in satisfaction of the debts of the defendant. The jury returned a verdict and decided that the side deal had in fact taken place and gave the verdict in favor of the defendant.

Boone v. Coe was a case in which a party tried to sue the other for damages because that party would not complete a real estate transaction. The contract fell within the statute of frauds and the court held that the plaintiff had not rendered part performance and had not relied on the promise to his detriment. The contract was therefore invalid.

In Borchardt v. Kulick the defendant contended that the oral contract fell under the scope of authority of the statute of frauds and that the trial court below was incorrect in failing to grant her a directed verdict. However, the defendant had not made any objection to the introduction of evidence of an oral contract at commencement of the trial and in fact there had been no mention of the statute of frauds. The defendant also had not made any motion to dismiss or for a directed verdict until after the plaintiff had rested its case.

In Chomicky v. Buttolph, the court was faced with the decision of whether an admission to the existence of an oral contract for the sale of certain real property can remove the contract from the Statute of Frauds. The court held that it could not. The party can admit making the oral promise and still be able to raise the defense that the contract is void under the statute of frauds. The court held that only part performance could remove it and mere preparation for purchase was not sufficient.

Another employment contract that involved an issue related to the statute of frauds was Crabtree v. Elizabeth Arden Sales Corporation. In that case the plaintiff was hired for a two year period but the agreement was never placed into a single writing. There were however several documents which, if taken together, would have met all of the requirements of a contract. The issue was whether or not the agreement had to be embodied in a single document or could be pieced together from several.

The court held that he court held that the writings combined contained all of the essential terms of the contract - the parties to it, the position that P was to assume, and the salary that he was to receive - except a term relating to the duration of P’s employment. The contract was held to be enforceable.

In Davis v. Meyer, the court articulated the rule that an oral sales contract that is not placed in writing and where none of the price has been paid is invalid unless the buyer accepts and receives part of the object being sold. It is not sufficient for the seller merely to deliver the object. There must be receipt and voluntary and unconditional acceptance by the buyer. If there is a contract for the sale of goods, and the object hasn’t been paid for, and the object hasn’t been received by the buyer, the contract is void.

DF Activities Corp. v. Brown was a case that related to the requirement that contracts for the sale of goods above a certain value be placed in writing. In that case the parties made an oral agreement to purchase a chair for $60,000. The seller denied making the promise. The court held that if the defendant denies making the oral promise, the plaintiff cannot pursue the case on the hope that evidence of the oral contract will arise during discovery.

In Easton v. Wycoff, the court held that the doctrine of estoppel which relates to a misrepresentation made regarding a past or present fact might be invoked in that case to preclude the respondent from asserting his lack of title to the property if the elements of estoppel were shown. For this case however the court noted that it could view the respondent as the owner in fact of the property and therefore had to deal with the more complex issue of whether the appellant was legally entitled to enforce or sue upon the contract.

In Johnson v. Lewis, the court held that an easement is a liberty, privilege, or advantage which a party may have in the real property of another without profit and it must be under a deed or via prescription. The court held that although the grant of an easement is ordinarily subject to the statute of frauds and must be in writing, a parol grant that has been executed will be upheld just as a parol contract for the sale of lands would be. The court did not agree that the plaintiffs' complaint sufficiently defined such a right of way as would eventually ripen into a vested right.

Ludke Elec. Co. v. Vicksburg Towing Co. involved a suit filed by the Ludke Electric Company in the County Court of Warren County against the Vicksburg Towing Company. The plaintiff sought $1,421.35 alleged to be due it because of an order placed by the Vicksburg Towing Company for certain parts of a pneumatic propulsion control. The court heard the issue joined on the statute of frauds and entered judgment for the defendant towing company.

A case that involved the statute of frauds in the context of an employment contract was McIntosh v. Murphy. In that case the defendant made an oral promise to hire the plaintiff for a year to work in his car dealership in Hawaii. The plaintiff sued when he was fired two months later. In that case the court held that an oral promise is enforceable if the promissor should reasonably expect it to induce either action or forbearance by the other party. If the party to whom the promise was made took steps in relying on that promise, the promise was removed from the statute of frauds.

In Miller v. Lawlor, the court stated that the question in cases involving the statute of frauds is not which party will suffer the greater detriment if the other party wins. The rule for promissory estoppel is that it arises when an innocent promisee relies to his disadvantage on a promise that was intended or reasonably calculated to induce action by him.

When such cases arise, equity is first concerned with the innocent promisee if the promissor were to be allowed protection under the statute of frauds. The court held that in this case the record showed that the plaintiffs bought the Vander Wal home on the strength of the defendant's promise as to how he would build. If the defendant were to build as he threatened later, a real value would be subtracted from plaintiff's premises. The court held that in light of this the plaintiff won.

Mossman v. Hawaiian Trust Co. involved a case in which in a suit seeking specific performance brought by a husband and wife alleging a gift or real property by decedent to them, the defendant executor pleaded the Statute of Frauds. The issue for the court to resolve in that case was whether there was any written memorandum in writing. The defendant elicited testimony from the husband that the alleged donor wrote a letter to his wife which could not be found but which may have been a memorandum sufficient to satisfy the Statute of Frauds.

In Piedmont Life Ins. Co. v. Bell, the defendant filed his answer together with both general and special demurrers. The substance of the demurrers was that the petition did not state a cause of action upon which relief could be granted. The defendant contended that the contract as alleged was required to be in writing under the statute of frauds and was therefore void. The defendant also alleged that the action was barred by the statute of limitations or that regarding any breaches occurring four years or more before the plaintiff filed his complaint, any claims filed with respect to those breaches would also be barred by the statute of limitations.

One case that demonstrated the meaning of “within one year” in terms of contracts that exceed one year being held unenforceable was Professional Bull Riders, Inc. v. AutoZone, Inc. In that case one party promised to sponsor another for two years, but the agreement also contained a clause that allowed the party to withdraw from the contract at any time. The court held that since the party could withdraw at any time the contract could be performed within one year and it was therefore enforceable.

In Radke v. Brenon, the court specified precisely what must be included in a writing in order for it to not fall under the statute of frauds. The court held that a writing for the sale of land must contain at least an express statement of consideration, a description of the land to be conveyed, which must be signed by the party to be bound, and the identities of the parties to the contract. In that case the court held that all of these elements were clearly present in the letter written by the defendant and the court ruled in favor of the plaintiff that the contract was valid.

Sullivan v. Porter was an example of the statute of frauds at work in a real estate transaction. In this case the plaintiff had moved onto the land and made improvements on it after the defendant assured him that he would prepare the paperwork to complete the transaction. The court held that this contract was valid. The defendant’s actions induced part performance by the plaintiff and the plaintiff won.

In Winternitz v. Summit Hills Joint Venture, the issue was whether a contract affecting third parties who were not parties to the contract would be enforceable. In that case the court held that contracts that affect third parties are not within the statute of frauds and can be enforced insofar as it affects such parties.