Question

Roberta Sacks has been negotiating with Mrs. Samantha Muldoon, the owner of a 7 acre parcel of undeveloped property located on the outskirts of town. Ms. Sacks hopes to create a small equine center, one that can be used for riding lessons, horse boarding, and summer camps.

After several weeks of negotiation, Ms. Sacks and Mrs. Muldoon finally agree on the terms of the purchase and sale of the property, the total cost of which will be $895,000.00. Although the parties have agreed in principle, the written contract, however, is still in the process of being drafted by Mrs. Muldoon's attorney. And, although the parties have not yet signed any written documents, upon reaching an agreement in principle, Ms. Sacks pays, and Mrs. Muldoon accepts, $250,000.00 to bind the deal.

The following week, also, before receiving any contract documentation, Ms. Sacks hires a contractor who enters upon the land and begins to clear trees from the area that will ultimately house the indoor riding arena. This work continues for two weeks, until one day, Mrs. Muldoon visits Ms. Sacks at home, hands Ms. Sacks the $250,000.00 check, and claims the sale is off.  

Explain what the Statute of Frauds is as it relates to written contracts and under what circumstances the Statute of Frauds applies generally.

Against the backdrop of your explanation, does Mrs. Muldoon have the legal right to walk away from the agreement with Ms. Sacks and keep the land that she promised to sell. Why or why not?

Answer 1

A. The Statute of Frauds, to combat Frauds in contracts, is a legal concept that requires that the contracts are written. It requires that contracts be in written to be legally binding.

The Statute of Frauds applies to 6 following types of contracts to be written to be legally binding -

1. The contracts related to promise of Marriage, including gifts like engagement rings

2. Contracts that cannot be settled in less than a year

3. Contracts related to sale of Land

4. When promise is made to pay Estate's debt from personal funds of the executor.

5. Contracts related to sale of goods above $500

6. When one person makes promise to pay another person's debt, it is called as Surety and comes under Statute of Frauds.

B. According to the explanation above, it may seem that Mrs. Muldoon has a legal right to walk away from the agreement as there is no written contract available in scenario.

But there are exceptions to this law, mainly admission(person admits in court that there was a contract), performance and Promissory Estoppel.

Under the Performance exception, if a party has made part or full performance under the contract, it will be deemed as enforceable even without written contract. This means that a party has moved ahead with contract and performed the contract partly or fully.

For example in the given scenario, Ms. Sacks has made part payment for the land and hence, performed the oral contract.

Promissory Estoppel - When a party believing that the contract be enforceable moves ahead with contract and puts themselves in a position that they would suffer loss if promise is not fulfilled, the court would consider contract enforceable under doctrine of Promissory Estoppel.

Here, Ms. Sacks believed in the oral contract and hired contractors to clear land for the building of arena. This would come under Promissory estoppel.

Thus, Mrs. Muldoon does not have legal right to walk away from contract due to Part Performance and Promissory estoppel.

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