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Tuesday, November 29, 2005

Statute of Frauds Trumps Promissory Estoppel

Indiana_flag_3 A plaintiff home builder’s complaint against buyers who backed out of a deal was properly dismissed on the pleadings, because the complaint on its face showed that the alleged contract was not in writing, according to a recent decision by the Indiana Court of Appeals.

In the case, a home builder e-mailed a purchase agreement to prospective buyers.  The buyers never actually executed it.  When the buyers backed out of the deal, the builder sued.  Its complaint

adequately alleged the existence of an oral contract for the sale of real property.  It alleged that the parties agreed on the identity and location of the property to be sold, the purchase price, the date of closing, and the down payment.  And in their answer, the [buyers] admitted to all allegations in the complaint for purposes of the Rule 12(C) motion.  Thus, in this appeal, we conclude that the parties entered into an oral contract for the sale of real estate.

     But the [buyers] also pleaded the statute of frauds as an affirmative defense with their answer.  The statute requires that contracts for the sale of real property be in writing. . . .  The statute is intended to preclude fraudulent claims that would probably arise when one person's word is pitted against another's and that would open wide the flood-gates of litigation. . . .  Nevertheless, oral contracts for the sale of real property are voidable, not void. . . .  Oral contracts for the sale of real property are excepted from the statute of frauds where there is part performance, . . . or promissory estoppel . . . .

The builder argued that it did in fact rely on the oral contract, and thus that it could not be said as a matter of law that the contract would be unenforceable.  Trouble was, it did not raise any exceptions to the statute in its complaint.  Since on its face the contract set forth in the complaint was unenforceable, it had to be dismissed.

Fox Development, Inc. v. England, 2005 Ind. App. LEXIS 2131 (2d Dist. Nov. 14, 2005).

[Frank Snyder]

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