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Dear F. W.:

There are, in fact, a few exceptions to the long-standing rule of contract law known as the “Statute of Frauds”, which ordinarily requires agreements pertaining to the transfer of real property be in writing in order to be enforceable.

The underlying purpose of the Statute of Frauds is to prevent fraud in the execution of certain types of agreements deemed by society to be especially important. By requiring such important agreements to be in writing, the Statute of Frauds ensures that the rights and obligations of the parties can be more easily discerned and enforced in the event a legal dispute arises.

Every state’s laws include a version of the Statute of Frauds in one form or another. In California it is codified under Code of Civil Procedure, Section 1971 et. seq.

Specifically, California statute provides that:

“No estate or interest in real property, other than for leases for a term not exceeding one year...can be created, granted, assigned, surrendered, or declared...[,other] than by operation of law, or a conveyance or other instrument in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same, or by the party's lawful agent thereunto authorized by writing.”

The provisions of the California Statute of Frauds, generally, applies to real property purchase agreements, lease agreements for terms of more than one (1) year, and mortgage/deed of trust security agreements. The statute also addresses agreements that are arranged by a real estate broker with the expectation of compensation. Other types of agreements that are affected by the statute include those where a party is required to “personally guarantee” the financial obligation of another.

There are some exceptions to the Statute of Frauds, under which certain oral agreements may be held enforceable despite an absence of written terms.

For example, an oral agreement that has been fully carried out by all of the parties may withstand an attack on the grounds that it was not in writing. In the case of real property agreements, there would be exceptions where payment has been made and possession of the real property has already been transferred to the buyer. Another exception is where the other party is deemed to have been unjustly enriched by the partial performance of the agreement.

Where only one of the parties to an otherwise unenforceable oral contract has fully or partially performed his or her obligations under the agreement, the other party may be subsequently "estopped" (prevented) from asserting the Statute of Frauds as a defense.

In the real property context, “partial performance” could include a situation where title has not been transferred, but one of the party’s has taken possession of the property, and/or has made full or partial payment of the purchase price and/or has made valuable and substantial improvements upon the property.

Each real estate problem usually has its own distinct circumstances, and frequently is more complicated than realized by a layperson. Readers are also encouraged to consult with their own lawyers to obtain guidance concerning their problems when they first arise.

Readers are cautioned that these answers are not intended to be the basis for any action or reliance by the reader.
You are welcome to visit our web site at “www.dumanlaw.com”.

Some Contracts Must Be in Writing But There Are Exceptions