When it comes to legal terminology, even the simplest words and phrases can be confusing.
For example, a “contract” is most basically defined as a set of promises made by two or more people involved in a transaction. But to be defined as a legal contract or legally enforceable contract, this set of promises must meet certain criteria. Namely: they must be made for a legal purpose; there must be mutual agreement; such agreement must be reached freely; each party must agree to provide something of value (such as a service or payment); and each person must be legally competent.
By definition, a legal con
tract may be made orally or in writing. And this begs an important question. When is a verbal contract sufficient, and when should you put everything in writing?
In Florida, the answer is fairly straightforward, largely because the “Statute of Frauds” specifies which contracts must be in writing (and signed by the party facing enforcement, or the representative for said party) to be enforceable.
Keep reading to learn more.
What is the Statute of Frauds?
The statute of frauds is a legal tenet set forth in § 725.01, Fla. Stat. (2019). It was specifically created to protect people from dishonest conduct by mandating that certain contracts be made in writing. The reasoning was that written contracts not only eliminate the confusion and opportunities for duplicity associated with verbal contracts, but also eliminate the need for any ensuing litigation.
To date, this approach has proven effective, especially with regards to eliminating fraud in real estate transactions and lengthier business deals. This may be because putting these agreements in writing forces the parties to scrutinize all of the details before closing the deal.
When does the statute of frauds apply?
In Florida, the statute of frauds applies to the following:
- Real estate contracts including those for/pertaining to land sales, easements, and mortgages.
- Contracts that cannot be fulfilled within one year. However, the one-year period pertains solely to the fulfillment of the contract; it is not applicable to contracts with an unspecified timeframe.
- Contracts for payment of someone else’s debts.
- Leases in effect for more than one year.
- Guarantees by health care providers for any pledge, warranty, or assurance regarding the outcome of certain medical procedures.
- Contracts for the sale of goods with a total value equal to or exceeding $500.
Exceptions to the rule
Of course, as with anything else in life, there are exceptions to the rule. For example, the statue of frauds may no longer apply to your South Florida real estate contract if you can successfully prove partial performance. To do so, you must prove that:
- You have made partial or full payment for the real estate in question
- You have assumed ownership of the property
- You have improved the property with the seller’s permission
- Or, (if you haven’t made any improvements with the seller’s consent), there are other facts demonstrating that you would be a victim of fraud if the contract weren’t enforced.
However, you should be aware that partial performance only applies in this context if you are seeking a court order requiring the other party to fulfill a contractual obligation. It does not apply if you are only seeking financial compensation.
You should also be aware that partial performance does not apply to contractual agreements for personal services.
Other circumstances in which the statute of frauds may not apply are when a contract can be and is fulfilled within a year; or when there is a verbal renewal of a verbal one-year employment agreement, beginning on the same day as the renewal was made.
The bottom line
Clearly, this is a vitally important, but complicated issue. If you have questions about the statute of frauds, or whether it applies to your business or real estate transaction, the legal team at Eskander Loshak LLP is here to help. Contact us online or call (954) 334-1122 to schedule an appointment with one of our experienced business and real estate attorneys today.