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A STATUTE OF FRAUDS

Justice in Old England was not even-handed. Accounts from the 1600s show the court system suffered from an absence of truthfulness. Whoever could tell the best story was the winner.

The problem was exacerbated by development of the "professional witness". The professional witness was a well known person of stature in the community whose testimony was usually given far more weight than a typical person. The number of court cases grew and witnesses got better at telling stories, with some even paid based on the success of the case.

Things were so bad that King Charles II asked one of his supporters, Sir Leo Jenkins, to draft a law to solve the problem. Parliament adopted the Statute of Frauds and Perjuries in 1677 to prevent fraud. The law was intended to stop fraud. Parliament recognized it could not stop all fraud, so the statute was limited to what were considered the most important subjects of fraud. The new statute required things such as all contracts for interest in real property, conveyances and leases for real property and contracts not to be performed in less than one year be in writing and signed by the party to be charged.

The statute of frauds became a part of American law in 1776 and has been adopted in similar form by all 50 states. Florida has more than one statute of frauds, some dealing with limited types of contracts. The general statute of frauds is Section 725.01, Florida Statutes. That statute provides that no action may be brought on a contract for the sale of real property or an interest therein or for the leasing of real property for periods longer than one year unless the contract or a note or memorandum thereof is in writing signed by the party to be charged or his or her agent. That means an oral contract to buy and sell real estate or to lease for more than one year is rendered unenforceable even when it is clear the parties had an agreement.

Florida courts have been asked to draw a line between contracts to convey an interest in real property and those which are merely related to real property. For example, a seller's promise to provide sewers to land being sold was enforceable, as the provision of sewers was not conveyance of an interest in land. Statute of frauds has also been held to not bar a lawsuit for enforcement of an agreement between two or more persons to go into the business of buying and selling real estate as partners or as joint venturers and sharing profits and losses unless there is a provision for the transfer of title to specific real property from one of the parties to another.

In another case, a buyer agreed to terminate a purchase contract in exchange for the seller's oral agreement to enter a contract to sell other property to the buyer. The court determined the oral agreement was not for the sale of real property but was to enter a contract and therefore not within the statute of frauds.

A contract to pay a Realtor commission on successful sale or leasing of property need not be in writing. Proving terms of that contract might be difficult, but because commission contracts are not for conveyance of real property or leasing of same, they are not governed by the writing requirement unless the services to be performed without question take more than one year to complete.

If the contract is fully performed, the statute of frauds will also not apply. Applying the statute in that situation would allow one party to unfairly escape performance. Partial performance is not enough to escape the statute of frauds, even when partial performance provides a substantial benefit to the other party.

The statute applies to agreements to pay debts of another. A promise to pay of someone else defaults, even if it is part of the basis for loaning money or entering a contract, will not subject someone to liability unless the promise was signed. That means, guarantors must sign a written document to be obligated.

The statute does not require a specific form. The writing can be handwritten, typed, a form, memo and even telegram, facsimile or email. Actual signature may not be required, as long as the mark affixed by the principal or agent was intended to represent signature.

Even when an oral promise induces someone to act or not act, the person relies on that promise and is substantially damaged, the statute of frauds bars claims against the promissor. Florida's Supreme Court has made that painfully clear. In one case, a Pennsylvania physician entered an oral agreement with Miami Hospital. The hospital agreed to employ the doctor for a minimum of 5 years. Relying on the agreement, the doctor quit his job and moved to Florida. Seven months later, the doctor was fired. The doctor sued and argued that he relied on the hospital's promise and even though the contract would take more than one year to perform it would be unjust for the statute of frauds to bar his claim. Florida's Supreme Court acknowledged it was unfair, but ruled the statute of frauds barred the claim.

In a later case, a property owner leased space to a tenant, which in turn subleased the space to a subtenant. The subtenant claimed that the property owner assured him during his negotiation of the sublease that even if the original tenant was evicted the subtenant could continue to occupy the property. The landlord evicted the original tenant and the subtenant's effort to rely on the oral promise of the property owner was rejected as an agreement which would take more than one year to perform and therefore barred by the statute of frauds.

The writing requirement is so strong that Florida courts even hold an agreement that must be in writing cannot be orally modified.

The statute of frauds is powerful, with almost no carved out exception to insure fairness and "justice." If dealing in an area within the ambit of the statute, proceeding without writing and signature can be the equivalent of no agreement at all.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.