Florida’s Statute of Frauds – Part I
In order to be enforceable, “Florida’s Statute of Frauds provides that all contracts for the sale of land must be memorialized in a written document signed by the parties to the contract or their lawful representatives.” DK Arena, Inc. v. EB Acquisitions I, LLC, 112 So. 3d 85, 86 (Fla. 2013). Specifically, the Statute of Frauds provides in relevant part:
No action shall be brought … upon any contract for the sale of lands … or of any uncertain interest in or concerning them … unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith ….
Fla. Stat. § 725.01 (emphasis added). Although not the focus of this article, the Statute also requires that contracts, which cannot be performed within one year, must be in writing to be enforceable. See Fla. Stat. § 725.01.
In Tanenbaum v. Biscayne Osteopathic Hosp., Inc., 190 So. 2d 777, 778 (Fla. 1966), a medical doctor moved from Pennsylvania to Florida to become a osteopathic radiologist at the defendant’s hospital. “The parties entered into an oral contract providing for his services for a period of five years terminable only after the expiration of that period ….” Id. Less than one year later, the hospital terminated the doctor. Id. The doctor filed suit against the hospital for breach of the oral contract. Id.
The defendant’s principal defense was that the oral contract, which could not be performed within one year, was barred by the Statute of Frauds. Tanenbaum, 190 So. 2d at 778. The trial court granted the defendant’s motion for a directed verdict. Id. “The trial judge found that the Statute of Frauds had been properly pleaded and that the contract was ‘within’ the statute.” Id. The trial court “observed that the plaintiff … had opposed the motion on the ground that the respondent was estopped from resorting to the statute.” Id.
“The judge rejected this view and entered judgment for the defendant ….” Tanenbaum, 190 So. 2d at 778. On appeal, this Court affirmed the trial court’s decision. Id. The case then went to the Florida Supreme Court. Id. at 779. The Court noted, “[t]he question that emerges for resolution by us is whether or not we will adopt by judicial action the doctrine of promissory estoppel as a sort of counteraction to the legislatively created Statute of Frauds.” Id. However, the Court then stated, “[t]his we decline to do.” Id. (emphasis added).
The Supreme Court agreed with the conclusions of the lower courts “in rejecting the so-called doctrine of promissory estoppel ….” Tanenbaum, 190 So. 2d at 779. The Court reasoned, the plaintiff “had but to follow the provisions of the Statute of Frauds to secure his rights under the arrangement with the [defendant] instead of taking the position, rather tardily that they did not apply to him.” Id.
In 2013, the Florida Supreme Court reaffirmed Tanenbaum in DK Arena, Inc. v. EB Acquisitions I, LLC, 112 So. 3d 85 (Fla. 2013). There, EB entered into a written contract with DK Arena to purchase certain property for $23 million. Id. at 87. “The contract required EB to place an initial deposit of $1 million into an escrow account.” Id. The contract provided a due diligence period of sixty days. Id. “If EB gave notice of cancellation to DK Arena within the sixty-day due diligence period, the contract called for the return of EB’s deposit.” Id. at 87–88.
On October 4, the day the sixty-day due diligence period was to expire, EB, DK Arena, and their respective attorneys met. DK Arena, Inc., 112 So. 3d at 88. By that time, the parties had also discussed entering into a joint venture regarding the use of the property after the sale. Id. EB alleged that during the meeting DK Arena “agreed to hold the due diligence period in indefinite ‘abeyance’ until the joint venture agreement could be completed.” Id. DK Arena alleged it only agreed to a one-week extension with the escrow deposit being due October 11. Id. It was undisputed that the parties failed to make any written memorandum of this alleged agreement. Id.
The contract was not canceled by October 11 and the parties later disputed entitlement to the escrow deposit. DK Arena, Inc., 112 So. 3d at 89. DK Arena filed suit alleging a single count of breach of contract and seeking the release of the $1 million escrow deposit. Id. “In its final judgment, the trial court first rejected DK Arena’s claim that EB breached the contract by failing to release the deposit, determining, as a question of fact, that the due diligence period was extended for an indefinite period of time at the parties’ meeting on October 4.” Id. DK Arena appealed to the Fourth District. Id. at 90.
“As to the trial court’s conclusion that EB was entitled to the return of its escrow deposit, DK Arena argued in part that [the] agreement to hold the due diligence period in abeyance was unenforceable under the Statute of Frauds.” DK Arena, Inc., 112 So. 3d at 90. “The Fourth District rejected DK Arena’s argument, holding: ‘[T]he doctrine of estoppel prevents DK Arena from relying on the statute to invalidate its agreement to extend the due diligence period.’” Id. “The Fourth District acknowledged that under the Statute of Frauds, all contracts for the sale of land must be in writing.” Id.
The Fourth District “reasoned, however, that in this case ‘EB changed its position in reliance upon the oral agreement to extend the due diligence period ….’” DK Arena, Inc., 112 So. 3d at 90. “Because EB relied on the parties’ agreement to extend the due diligence period, the [Fourth District] held that DK Arena was estopped from arguing that the agreement was invalid under the Statute of Frauds.” Id. “On that basis, the Fourth District affirmed the trial court’s finding that EB was entitled to the return of the deposit.” Id. at 90–91.
The case went to the Florida Supreme Court, which stated at the outset, “[n]early fifty years ago, in Tanenbaum … this Court held that the doctrine of ‘promissory estoppel’ is not an exception to the Statute[] [of Fraud’s] requirements under Florida law.” DK Arena, Inc., 112 So. 3d at 86. The Supreme Court ultimately concluded, “the Fourth District incorrectly relied on the doctrine of promissory estoppel as an exception to the Statute of Frauds.” Id. at 91.
“In Florida, it has long been recognized that the Statute of Frauds is a legislative prerogative, grounded in a policy judgment that certain contracts should not be enforced unless supported by written evidence.” DK Arena, Inc., 112 So. 3d at 93. The Court held, “Tanenbaum remains this Court’s governing precedent on the question of whether promissory estoppel is an exception to the Statute of Frauds.” Id. (emphasis added).
Thus, the Court “conclude[d] that the Fourth District improperly applied the doctrine of promissory estoppel in upholding an oral modification to the contract between EB and DK Arena.” DK Arena, Inc., 112 So. 3d at 96. The Court reasoned, “the Fourth District based its decision on [DK Arena’s] representation that the due diligence period would be held in indefinite ‘abeyance,’ followed by EB’s reliance on the representation.” Id. “Thus, the district court held that the due diligence period was validly extended, and that EB retained an unqualified right to ‘terminate the contract … and obtain the return of its deposit.’” Id.
“This amounted to a modification of the terms of the contract under a promissory estoppel theory.” DK Arena, Inc., 112 So. 3d at 96. The Court noted, “EB does not ask this Court to recede from Tanenbaum, nor do we find any justification for doing so.” Id. at 97 (emphasis added). The Court observed, “[t]his case, if any, illustrates the usefulness of a writing requirement.” Id. “At trial, the facts surrounding the modification were heavily disputed.” Id. “Much confusion could have been avoided had the parties simply placed their agreement in writing.” Id.