Frances has lived in an apartment for ten years when she decides to buy a house. Her one-year lease will end on May 1. On April 15, she orally contracts to buy Smith's house for $100,000, with the closing (transfer of the deed) to take place on June1. Smith's lawyer, who is out of town on vacation, is to draft a written contract of sale on his return to his office on May 15. Because Frances's lease is terminating, Smith agrees to let her take possession of the house on May 1 if Frances gives him a "down payment" on the house of $5,000. Frances agrees and gives Smith the $5,000. She moves into the house on May 2, and the following weekend plants trees in the back yard. On May 10, Smith receives a written offer from Green to buy Smith's house for $120,000. Smith accepts Green's offer, asks

Question

Frances to move out of the house, and tries to return the $5,000 to Frances. Frances claims that she has an enforceable contract to buy the house. Smith claims that any such contract must be in writing to be enforceable under the Statute of Frauds. Who is correct and why?

What will be an ideal response?

Answer 1

This situation involves a contract for a sale of land, which in most circumstances must be in writing to be enforceable. In this case, however, the buyer has paid part of the price, taken possession, and made permanent improvements (planted trees), and arguably the parties cannot be returned to their pre-contract status quo. A court might therefore grant the remedy of specific performance to the buyer. Whether a court would enforce this oral contract would be determined by the degree of injury that the court perceived would be suffered if the court did not enforce it. Being homeless is a serious consequence.