We have all heard this at least 1,000 times: “Don’t rely on an oral promise; get it in writing!” Yet, time and again, parties to an agreement will not reduce the agreed upon terms to writing thereby creating unintended ambiguities and consequences in the transaction. Worse, with respect to the sale of real property, an action on a contract cannot be brought unless the promise upon which such action is brought is in writing and signed by the party (or his authorized agent) who made the promise. See Section 725.01(2004), Florida Statutes, which is known as the “Statute of Frauds”. Thus, an oral contract to sell land is not enforceable.
What about an oral modification to a written and signed contract to sell land? Is that enforceable under some theory of law? The Florida Supreme Court recently reversed a Florida District Court of Appeal decision which had upheld an oral modification to a written and signed contract to sell land. The District Court of Appeal ruled that the party attempting to enforce the oral modification had reasonably relied upon the other party’s oral promise by taking action on the oral promise thereby making it unjust if the oral promise was not enforced. This legal theory is called the doctrine of “promissory estoppel”. Specifically in that case, the seller had orally promised to extend the due diligence period in the contract. The buyer relied upon the promise and did not cancel the contract prior to the end of the original due diligence period. Instead, the buyer sought to cancel the contract during the orally extended due diligence period and then demanded the return of its deposit. The seller refused to return the deposit and defended on the basis that its oral promise to extend the due diligence period was unenforceable in violation of the Statute of Frauds, and the doctrine of promissory estoppel was not a valid exception to the Statute of Frauds. The Florida Supreme Court agreed with the seller. See DK Arena, Inc. v. EB Acquisitions I, LLC, 38 Fla.L.Weekly S187a (Fla. March 28, 2013).
As is not uncommon in other cases, the Florida Supreme Court’s decision left some questions unanswered. What weight, if any, did the Court give to the fact that the written contract contained a clause which stated that any modifications to the contract would not be binding unless in writing, signed and delivered by the party to be bound? If the contract did not contain that clause, would the result be the same (the Statute of Frauds does not require any anti- oral modification language in a contract)? The Court also remanded the case to the District Court for the District Court to determine whether the seller “waived” any of its rights in the contract or materially breached the contract itself, thereby entitling the buyer to receive the return of its deposit. So while there still may be hope for the buyer, had the buyer reduced the seller’s oral modification to writing and required the seller to sign the written modification, years of litigation and uncertainty could have been avoided (the original contract was signed in 2004, and the trial was held in 2008).
Update September 2013: On remand, the District Court of Appeal allowed the seller to retain the buyer’s deposit as liquidated damages due to the buyer’s failure to cancel the contract within the original due diligence period.
