It's The Law
Real Estate Contract Modification Must Be Written
I have a contract to buy a home. The contract gives me 15 days to arrange for inspections of the property and to cancel the contract if the inspections are unacceptable. I was traveling and asked the seller in a telephone call if I could extend the inspection period an extra 7 days. The seller said that was okay. I got the inspections done during the extension period and did not like the results, so I tried to cancel the contract. The seller told me I am stuck with the deadline in the written contract and, if I do not close, I will lose my deposit. Is he right?
The recent case of DK Arena, Inc. v. E.B. Acquisitions 1, LLC, decided by Florida's Supreme Court a few weeks ago, answers your question. Review of that case will explain your plight.
Your problem is Florida's Statute of Frauds, which requires all contracts for the sale of real property be written and signed by the parties or their lawful representatives. Your contract modification is oral. Same was true in the DK Arena case.
DK Arena and EB had a contract for sale of property for $23,000,000.00, with a $1,000,000.00 initial deposit. If cancelled within due diligence period, buyer got back the deposit. The contract provided a due diligence period of 60 days, later extended 14 days by written agreement. On the day the due diligence period was to expire, the buyer and seller met with their attorneys to negotiate other matters and the buyer expressed concern that the due diligence period was set to expire. The buyer claims the seller orally agreed to hold the due diligence period in definite abeyance until the collateral matters could be completed. The seller claimed it orally agreed to extend the due diligence period only a week.
As the transaction unraveled, the buyer attempted to cancel and obtain refund of deposit, claiming the parties had agreed to indefinitely extend the due diligence period. The buyer sued claiming breach of contract and seeking return of the $1,000,000.00 deposit. The seller counter-claimed.
The trial court ruled for the buyer. The trial court acknowledged the contract contained a provision requiring all amendments be in writing, but concluded a written contract could be modified by oral agreement if the parties accepted and acted upon the oral agreement in a matter that would work a fraud on either party if it was not enforced. Further, the trial court ruled the seller could not take advantage of the delay in the buyer's performance which the seller approved.
The seller appealed. The appellate court also acknowledged the Statute of Frauds required all contracts for sale of real estate be in writing, but ruled the seller was barred from relying on that provision because the buyer had changed its position in reliance upon the oral agreement to extend the due diligence period.
In a 5 to 1 decision, Florida's Supreme Court disagreed with both the trial judge and the intermediate appellate court.
The Court first explained that the purpose of the Statute of Frauds is to "intercept the frequency and success of actions based on nothing more than loose verbal statements or mere innuendos. Consequently, the Statute should be strictly construed to prevent the fraud it was designed to correct."
The Court explained that promissory estoppel was not an exception to the Statute of Frauds. Promissory estoppel is enforcement of a promise or agreement to prevent injustice if the promissor should have reasonable expected the promissee to rely on the promise, the promissee did rely and failure to enforce the promise would harm the promissee. Although courts in some other states have carved out a promissory estoppels exception to the Statute of Frauds, Florida has not and refused to do in the DK Arena case. Instead, it opined that such an exception would be a matter for the legislature to adopt.
The Court also explained that waiver could not excuse the buyer's performance. It explained that in some cases, waiver has been an exception to the Statute of Frauds, but not here. The Court noted its decision in Gilman v. Butzloff was an example. In
Gilman, closing took place long after the contract deadline and, after closing, the buyer sued the seller for damages due to the delay. The Court ruled waiver barred the buyer's claim.
DK Arena was not a simple delay in performance, but an agreement which created an extended due diligence period. During the due diligence period, the buyer had an unqualified right to terminate the contract. This agreement was an effort to modify the contract and the agreement had to be in writing under the Statute of Frauds as a modification of the written contract.
The Supreme Court ruled that the oral extension of contractual due diligence was unenforceable in DK Arena. It is likely a court will reach a similar conclusion in your case. Albeit it is late in the game, you should discuss the facts of your case with an experienced attorney to see if there are any other possible avenues to success.
By: William G. Morris, Esquire
William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.
Questions for this column can be sent to: William G. Morris, e-mail: firstname.lastname@example.org or by fax, (239) 642-0722 or
The Marco Island Eagle
Other articles of interest can be viewed at our website, www.wgmorris.com.