Real Estate Contracts Must Be in Writing – Maybe

The Statute of Frauds was adopted in England in 1677 and has been carried forward to almost every state in one form or another. The Statute of Frauds makes certain contracts unenforceable if not in writing and signed by the parties. Chapter 725 Florida Statutes is Florida’s statutory version of the Statute of Frauds.

The Statute of Frauds is intended to prevent fraud. At the time the Statute was adopted in England, a growing number of people were falsely claiming they had oral contracts. The King and Parliament agreed on the need to stop such false claims through a law requiring certain types of contracts be written and signed.

The Statute of Frauds was inherited by the United States under what is known as the common law of England. That common law remained the law when the United States broke away from England. Louisiana was purchased from France and did not inherit the common law of England but, instead, moved forward with the civil law of France. Louisiana did not inherit anything similar to the Statute of Frauds.

The English Statute of Frauds requires six categories of contracts be in writing: marriage, agreements that take more than one-year to complete, purchase and sale of real estate, goods worth $500 or more, claims against an executor and agreement to pay the debt of someone else. Florida added newspaper subscriptions, leases longer than one year and certain claims against health care providers. The most frequent Florida application of the Statute of Frauds is real estate sales.

Modern statutes allow electronic signature and electronic writing to meet the Statute of Frauds requirements. However, Florida cases have made it clear that electronic signature does not include text. That is particularly painful for Generation Z, who famously prefer use of smart phones and texts over communication through all other media. When attempting to amend a contract by text, subsequent litigation to enforce the agreement has been shut down when the Statute of Frauds is raised in defense.

The genesis of many real estate contract lawsuits is simply greed. One or both parties want a better deal than the one they made. The better deal may be a different interpretation of the contract between them, an effort to avoid the contract between them or even effort to get out of the deal to sell to another buyer for more money. The recent case of Stav Software, LLC v. Lederman Investments, LLCis a good example of the latter with an interesting twist.

Lederman Investments had a written contract to sell property to Stav Software. But Lederman Investments ended up conveying property under a later contract to 5979 Alton Road Land Trust (Trust) claiming Stav Software defaulted.

Some of the facts were undisputed. The parties agreed that in the days prior to the Stav Software scheduled closing date, Lederman Investments contacted Stav Software and asked for closing to be extended so it could negotiate a better payoff arrangement with the mortgage holder. Copies of texts were produced at trial confirming the discussions, but no written agreement was ever signed by the parties. The closing date was apparently made time of the essence by the contract, which means missing it by even one day was an absolute default. Closing did not take place on the date set by contract and Lederman Investments ultimately sold to the Trust (probably for more money).

Stav Software sued the Trust. Stav Software’s representative testified that the closing did not take place because the parties agreed to extend the closing date. The representative provided texts which indicated a new closing date had been agreed including one in which the seller’s representative thanked him for rescheduling. The Trust provided a text in which the seller refused to extend the closing date (a bit odd since the seller had asked for the extension).

The trial court granted summary judgment to the Trust. Summary judgment is granted before trial when a judge decides there is no genuine dispute of fact or law. The judge in this case apparently felt that the Statute of Frauds required the contract be amended in writing signed by the parties to extend the closing date.

The appellate court disagreed and reversed, sending the case back for trial, where all evidence could be considered. The appellate court agreed that the Statute of Frauds requires a contract for sale of real estate be in writing signed by the parties and even that the contract in this case required any modification be “in writing and executed by the parties.”

But the court explained that under certain circumstances, written contracts can be modified by oral agreement even if the written contract prohibits such modification. The appellate court did not decide the case but explained whether or not an oral agreement modified this contract is a fact question to be determined after full presentation of evidence by both sides. The case was sent back to the trial judge to conduct a trial.

To reach its decision, the appellate court had to not only allow modification of the closing date by oral agreement but also waiver of the contract’s own requirement that any such modification be in writing signed by the parties. The decision confirms an apparent exception to the Statute of Frauds. Parties to a contract that must be in writing and signed under the Statute can apparently modify the contract orally or even by text. 

The Stav Software decision should not lead anyone to think a written contract does not matter. Proving oral modification can be difficult. The party wanting to enforce an oral modification will have the burden of proof and must establish modification by greater weight of the evidence. If the evidence is a “tie,” effort to enforce it will fail.

Real estate sales involve a lot of money. For most people, a real estate purchase is the largest financial transaction in their life. Even without the Statute of Frauds, such transactions should be in writing signed by the parties and modified the same way. Arguing an oral agreement to a written contract is not the place to be.