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Author Topic: Contracts - Statute of Frauds?  (Read 1599 times)

starlette

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Contracts - Statute of Frauds?
« on: November 07, 2005, 02:00:45 PM »
Hi everyone, I can't seem to nail all the issues for this practice hypo. It looks like there was consideration, but I'm not sure. I don't know if the parties have a valid agreement under Statute of Frauds. I'm stuck at trying to answer the questions below. Any help would be appreciated. Thanks!



George and Janice Burke want to buy a house in Riverside. Riverside is a sought-after

community and it is extremely difficult to purchase a house there due to the tight market.

On January 15th, they meet John Richards, a local realtor and real-estate lawyer, who

explains to them that he will help them “for as long as it takes” to find and purchase a

house that they like. He explains that he would be their agent and have a fiduciary duty

to them. All they have to do is agree not to work with another agent in their house search

in Riverside and to pay him 6% of the purchase price of the house. They orally agree and

shake on it.

Richards begins combing through listings and visits many potential homes, bringing the

Burkes to the ones he thinks are the most promising. He knows that, although the Burkes

are anxious to buy in Riverside, they would not be able to close a deal on a new house

before June 1. After two weeks of searching, on February 1 he brings them to a house on

Bay Street being sold by the Smiths. The Burkes love the house.

Richards enters into negotiations with the Smiths, who are not being represented by a

realtor or a lawyer. He correctly explains to them that, as is standard in real estate

transactions, if they choose to sell the house to the Burkes, while they would sign a

contract, the closing of the transaction would be at a later date.

Sandra Smith asks Richards when the Burkes would be able to close because the Smiths

want to close as soon as possible and no later than April.

“I don’t think that would be a problem,” Richards replies.

The Burkes and the Smiths agree on a price, Richards draws up a contract, and on

February 15th gives it to both parties and says, “Although no-one always gets everything

they want, I think you’ll both be happy with this deal. You can sign on the last page.”

He notes that conditions to closing include (a) the Smiths having an opportunity to

review the financial records of the Burkes to assure them that the Burkes will be able to

pay the full purchase price and (b) the Burkes depositing 10% of the purchase price in an

escrow account by February 19th. The Burkes are not worried because they know that

have an excellent credit rating and have enough money in the bank.

The contract further states that a party may terminate the contract without penalty

between the signing and closing if a condition to the closing is not met at the time of

closing, if the other party breaches the contract, or where a court would normally refuse

party.

The contract also contains the following clause:

The parties agree to provide to each other the required information and undertake

the required responsibilities in good faith to ensure a timely closing of this

transaction.

Both the Smiths and the Burkes immediately sign without reading the contract.

The next day, February 16th, Sandra Smith calls Richards in a fury. The contract states

that the closing would be on June 1. She refuses to close on that date and demands the

date on the contract be changed.

“This is the contract that you willingly signed,” says Richards.

Smith hangs up.

Richards does not notify the Burkes, on the assumption that the Smiths will calm down.

On February 18th, the Burkes send an e-mail to the Smiths, which the Smiths receive and

read on that day, stating that the full deposit will be in the escrow account on the

afternoon on the 20th due to bureaucratic delays at the Burkes’ bank. The Smiths do not

reply to the Burkes.

On the morning of February 20th, Sandra Smith calls Richards and says, “My husband

and I have reviewed the financial records of your clients and, especially given the fact

that they have not yet deposited the full down payment we think we would need to

terminate this contract.”

“Is there anything we can do to avoid termination of the contract?” Richards asks.

“Complete the deposit by the end of the day and change the closing date to April 1st,”

Smith replies.

Richards does not tell the Burkes about the phone call.

Later that day, Janice Burke calls Richards to let him know that the down payment was

deposited in the escrow account.

“Excellent,” he says. “By the way, we will need to keep some flexibility on the closing

date to keep the Smiths happy.”

“Sure, they were flexible about letting us put in the deposit a little late, we can be flexible

about the closing date,” she replies. They hang up.

Richards then changes the contract to reflect an April 1 closing date and he initials it on

behalf of his clients and sends it to the Smiths and the Burkes.

Upon noting the change the Burkes are furious. They refuse to close on April 1st. The

deal falls through. They find another realtor to help them in their search and tell Richards

they do not want to see him again.

Assuming that this case does NOT occur in New York State, please answer the

following:

a. Are there any Statute of Frauds issues between the Burkes and Richards?

Why or why not?

b. Could the Burkes have terminated the contract without penalty on June

16th? Why or why not?

c. Do the Smiths have any causes of action against the Burkes? What are their

strengths and weaknesses, what are the possible defenses, and what damages

would a court likely assign? Who should win each claim? If there is no cause

of action, explain why not.

d. Do the Burkes have any causes of action against Richards? What are their

strengths and weaknesses, what are the possible defenses, and what damages

would a court likely assign? Who should win each claim? If there is no cause

of action, explain why not.

e. Does Richards have any causes of action against the Burkes? What are their

strengths and weaknesses, what are the possible defenses, and what damages

would a court likely assign? Who should win each claim? If there is no cause

of action, explain why not.

jacy85

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Re: Contracts - Statute of Frauds?
« Reply #1 on: November 07, 2005, 05:31:09 PM »
After a quick reading, and just looking at the statute of frauds issue, I'd say that the parties do have a valid agreement.  The Burkes' contract w/ Richards is for his services as a real estate agent and attorney (so common law restrictions on sale of goods or land don't apply.  Also, the performance can be rendered Richerds w/in 1 year.  He said "as longs as it takes" but since it was possible for him to find them a house the very next day (unlikely, yes, but still possible), then that restriction does not apply.  And this isn't an surety agreement, nor is it a contract for a dowery.

Therefore the Burkes/Richards contract is likely valid under the statute of frauds.

(and hopefully someone else agrees with me, since I just outlined it and I'm hoping that I understand at least the basics)

lipper

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Re: Contracts - Statute of Frauds?
« Reply #2 on: November 07, 2005, 05:45:09 PM »
statute of frauds only apply to transactions in goods.
check the footnotes ya'll

Krisace

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Re: Contracts - Statute of Frauds?
« Reply #3 on: November 07, 2005, 09:54:22 PM »
Statutw of Frauds applies to:
1)   Sales or transfers of land
2)   A contract that cannot be performed within one year
3)   Goods valued at over $500

VirtualJD

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Re: Contracts - Statute of Frauds?
« Reply #4 on: November 07, 2005, 10:12:43 PM »
Statute of Frauds requires certain contracts to be in writing to be enforceable.  Those contracts include 1. contracts for marriage where there are agreements such as pre-nuptials, 2. Contracts that can not be performed within one year, 3. contracts involving the transfer of land, 4. Executors of an estate, 5. Suretyship, and 6. Sale of goods over $500 (modernly this is covered under the UCC).

Here SoF does apply because we have an interest in land.  After a quick read and skim of the call, as I recall, there are a lot of issues around ethics, maybe fraud, Parol Evidence, waivers, breach, and felony stupidity by the Realtor/attorney that could be argued to invalidate the contract.

jacy85

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Re: Contracts - Statute of Frauds?
« Reply #5 on: November 07, 2005, 11:36:45 PM »
statute of frauds only apply to transactions in goods.

If you're talking about the UCC statute of frauds, right?.  The common law statute of frauds still exists and applies to other Ks, not solely sale of goods.

lipper

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Re: Contracts - Statute of Frauds?
« Reply #6 on: November 08, 2005, 01:20:46 AM »
statute of frauds only apply to transactions in goods.

If you're talking about the UCC statute of frauds, right?.  The common law statute of frauds still exists and applies to other Ks, not solely sale of goods.

that explains my B- in contracts last year.
check the footnotes ya'll

starlette

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Re: Contracts - Statute of Frauds?
« Reply #7 on: November 08, 2005, 01:55:37 AM »
Thanks for the help everyone! If possible, can I get some help & explanations on how to answer questions A - E?

Wild Jack Maverick

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Re: Contracts - Statute of Frauds?
« Reply #8 on: November 08, 2005, 05:17:56 AM »
would it matter if Richards deliberately withholds information? First, the Smiths make it clear that they want to close by the end of April. Richards does not inform them of the impossibility. He does not inform the Burkes that the Smiths were not previously aware of the closing date.

Would it matter if the Burkes breach the contract by not depositing the 10% by the date stated in the contract?

Would it matter if the Burkes do not inform Richards that they are unable to make the deposit by the 19th because of bureaucratic delays at the bank, which might be considered as factors beyond their control? Would it matter if the Smiths do not inform Richards that they had been contacted by the Burkes on the 18th?

Would it matter if Richards does not inform the Burkes of the new actual closing date? How is it that the deal could not previously be closed before June 1, but now there is the possibility of closing on April 1st? Was the June 1 date chosen by the Burkes or was it a matter of the amount of time required for closing?

Would it matter if, after the terms of the contract are not met, that Richards does not draw up a new contract, but simply changes the original and initials on behalf of the clients?
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plumbert

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Re: Contracts - Statute of Frauds?
« Reply #9 on: November 08, 2005, 05:19:30 AM »
*A contract for the sale of land or any interest in land must be in writing to be enforceable, according to the SoF.

*The couple didn't buy land from the realtor--they hired him to assist them in their search for land.

*All other contracts concerning that couple were in writing.

*The contract between the couple and the realtor for the realtor's assistance in finding them land could have been performed in less than a year.

*Unless professional realtors' assistance in finding land is considered "an interest in land," then I don't see the SoF applying to the hypo.