Learning Outcomes
This article explains how the statute of frauds governs real estate contracts and related exam issues, including:
- Identifying which contracts for the sale or transfer of interests in land, as well as longer-term leases, must satisfy the statute of frauds and which land-related agreements fall outside it
- Determining whether a particular document or collection of documents constitutes a sufficient signed memorandum by checking for parties, property description, essential terms such as price, and an adequate signature
- Applying the equal dignity rule to questions involving agents who sign land contracts on behalf of buyers or sellers and assessing when a lack of written authority makes the contract unenforceable
- Analyzing when otherwise unenforceable oral land contracts can be enforced under the doctrines of part performance, estoppel (detrimental reliance), or full performance, and recognizing the classic PIP pattern on MBE fact patterns
- Evaluating how oral modifications affect written land contracts, including when a modification itself must be in writing and how courts treat partial performance or reliance on an unenforceable modification
- Assessing the consequences of noncompliance with the statute of frauds, including the unavailability of specific performance or expectation damages, the continued use of the contract as evidence for limited purposes, and the availability of restitution or other equitable remedies
MBE Syllabus
For the MBE, you are required to understand real estate contract enforceability and the statute of frauds, with a focus on the following syllabus points:
- Identification of contracts for the sale or transfer of interests in real property that fall within the statute of frauds
- Content and form required for a sufficient signed writing (memorandum) in land sale contracts
- Doctrines that allow enforcement of oral land contracts: part performance, estoppel, and full performance
- Interaction between the statute of frauds and agency (equal dignity rule) in real estate transactions
- Effect of oral modifications on written land contracts and when modified terms must be in writing
- Consequences of noncompliance: unenforceability, use of restitution, and limits on specific performance
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which of the following contracts must be in writing to be enforceable under the statute of frauds?
- A lease for 8 months
- A contract to sell a house
- An agreement to paint a house
- A contract for landscaping services
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Which is NOT a recognized exception to the statute of frauds for real estate contracts?
- Part performance
- Detrimental reliance (estoppel)
- Full performance by the seller
- Oral modification increasing the price
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A buyer orally agrees to purchase land, pays the full price, and takes possession. The seller refuses to convey title. Which is the buyer’s best argument for enforcement?
- The contract is enforceable because it was for land
- The contract is enforceable under the part performance exception
- The contract is void because it was not in writing
- The contract is enforceable under the parol evidence rule
Introduction
A contract for the sale of real estate is subject to special enforceability rules. Unlike many everyday contracts, a land sale agreement usually must be evidenced by a writing to be enforceable. That writing does not need to be a formal contract, but it must contain core terms and be signed by the party to be charged.
At the same time, rigid application of the statute of frauds can produce obvious unfairness—especially when one party has already acted in reliance on an oral agreement. Equity therefore recognizes narrow exceptions that allow specific performance or damages despite the lack of a writing.
On the MBE, you must be able to:
- Spot when the statute of frauds applies to a real estate transaction
- Decide whether the writing (or set of writings) is sufficient
- Recognize when an exception such as part performance, estoppel, or full performance saves an otherwise unenforceable oral contract
- Analyze how oral modifications and agency authority interact with the statute
Key Term: Statute of Frauds
A legal rule that requires certain types of contracts—including contracts for the sale or transfer of an interest in land—to be evidenced by a writing signed by the party to be charged in order to be enforceable in court.
When the Statute of Frauds Applies
For real estate, the statute of frauds covers contracts for the sale or transfer of any interest in land, including:
- Contracts to convey full ownership (fee simple)
- Options to purchase land
- Contracts to grant easements, profits, or restrictive covenants
- Contracts to grant mortgages and most other significant interests in land
- Leases longer than one year (leases for one year or less are typically outside the statute)
The key is whether the contract transfers an interest in land, not simply whether the subject matter involves land in some way.
Examples:
- A contract to sell Blackacre is within the statute of frauds.
- A contract to construct a house on land the owner already owns is a services contract; it is not a land sale contract (though it might fall within the one-year provision of the statute of frauds if it cannot be completed within a year).
- A lease for 18 months must be in writing; a lease for 8 months ordinarily does not.
Key Term: Writing (Memorandum)
Any written record—such as a formal contract, letter, email, or set of documents—that states the essential terms of an agreement and is signed by the party against whom enforcement is sought. It can satisfy the statute of frauds even if it is not intended as a formal contract.
Requirements for a Sufficient Writing
A writing satisfies the statute of frauds for a land contract if it:
- Identifies the parties to the contract (buyer and seller)
- Describes the property with reasonable certainty
- States the essential terms of the deal (most commonly the price and basic payment terms)
- Is signed by the party to be charged (the party against whom enforcement is sought)
Important details for exam purposes:
- Property description: It need not be a full legal description, but it must identify the parcel well enough that it can be located (e.g., “Seller’s farm in X County, State” where the seller owns only one such farm).
- Price term: Many courts—and the MBE—treat the price as an essential term of a land sale contract, so its absence in the writing will usually make the writing insufficient.
- Multiple documents: Several writings can be read together to satisfy the statute if they clearly relate to the same transaction and at least one is signed by the party to be charged.
- Signature: Any mark intended to authenticate the writing can suffice (typed name, initials, letterhead, even an email “from” field, depending on context).
Key Term: Equal Dignity Rule
A rule that when a contract must be in writing under the statute of frauds, the agent’s authority to sign that contract on behalf of a principal must also be evidenced by a writing signed by the principal.
Agency wrinkle: If an agent signs the land contract for the seller, the equal dignity rule requires a signed writing authorizing the agent to do so. Without written authority, the seller can invoke the statute of frauds to avoid enforcement.
Effect of Noncompliance
If a real estate contract falls within the statute of frauds and there is no sufficient signed writing, the contract is unenforceable, not void:
- The agreement is still a valid contract between the parties in a technical sense.
- However, a party can raise the statute of frauds as a defense to block enforcement (e.g., to defeat a specific performance action).
Consequences:
- A court will not grant specific performance of the oral land contract (absent an exception).
- A court will not award expectation damages on the oral contract.
- If both parties perform, the statute of frauds cannot be used later to unwind the completed transaction.
The statute does not bar all uses of the oral contract. For example, an oral contract may be used as evidence of the character of a party’s possession (e.g., to rebut a claim of adverse possession), even if the contract itself is unenforceable.
Worked Example 1.1
Seller and buyer orally agree that the buyer will purchase a parcel of land for $250,000. The buyer pays $50,000 as a deposit, takes possession, and builds a fence. The seller later refuses to complete the sale, claiming the agreement was not in writing. Can the buyer enforce the contract?
Answer:
Yes, likely. The contract itself is within the statute of frauds, and there is no sufficient writing. However, the buyer has (1) paid part of the price, (2) taken possession, and (3) made improvements (the fence). Those acts together are strong evidence of an agreement and typically satisfy the part performance exception, allowing specific performance of the oral contract.
Exceptions to the Statute of Frauds
There are several important doctrines that may allow enforcement of an oral real estate contract despite noncompliance with the statute of frauds.
Part Performance
Key Term: Part Performance
An equitable doctrine that allows enforcement of an oral land contract when the buyer has taken substantial, unequivocal steps in reliance on the agreement—typically involving payment, possession, and/or improvements—such that failure to enforce would be unjust.
Courts enforce an oral contract for the sale of land under part performance if the buyer’s actions clearly point to the existence of the agreement. The classic test (reflected in many exam questions) requires at least two of three factors:
- Payment of all or part of the purchase price
- Possession of the property by the buyer
- Valuable improvements made to the land by the buyer
These are often summarized as PIP: Payment, Improvements, Possession.
Key points:
- No single act is automatically enough, but possession plus either payment or improvements is frequently sufficient.
- The acts must be unequivocally referable to the alleged contract—ordinary rent payments and minor repairs, for example, might just indicate a landlord–tenant relationship, not a purchase agreement.
- Part performance is most commonly used by buyers seeking specific performance of an oral land sale contract.
Exam warning:
Payment of the price by itself is usually not enough to take an oral land contract out of the statute of frauds. Look for possession and/or improvements.
Worked Example 1.2
A buyer orally agrees to buy a house, pays the full price, and moves in. The buyer also renovates the kitchen. The seller later refuses to sign a deed. Is the contract enforceable?
Answer:
Yes. The buyer has taken possession, paid the full price, and made substantial improvements. These acts together constitute part performance sufficient to remove the contract from the statute of frauds. The buyer can seek specific performance to compel conveyance of title.
Worked Example 1.3
An investor orally agrees to purchase Blackacre from Owner. The investor wires the full price to Owner but does not take possession and does not make improvements. Owner refuses to convey. Can the investor enforce the contract?
Answer:
Probably not. Although the contract is within the statute of frauds, and the investor has fully paid, payment alone is typically insufficient for part performance in land sale cases. Without possession or improvements, a court is unlikely to find acts unequivocally referable to a purchase contract. The investor may, however, seek restitution of the payment.
Estoppel (Detrimental Reliance)
Key Term: Estoppel (Detrimental Reliance)
An equitable doctrine that prevents a party from asserting the statute of frauds as a defense when the other party has reasonably and foreseeably relied on an oral promise and would suffer serious hardship if the promise is not enforced.
Even where part performance is absent or incomplete, a buyer (or sometimes a seller) may invoke estoppel:
Elements (as commonly tested):
- A clear oral promise regarding a land transaction
- Reasonable, foreseeable reliance by the promisee (e.g., moving a business onto the land, building a structure)
- Substantial detriment if the promise is not enforced
- Injustice that can only be avoided by enforcement (or other appropriate equitable relief)
Estoppel is often applied where the relying party’s actions are substantial but do not precisely fit the PIP pattern, or where the reliance occurred before the acts that would count as part performance.
Full Performance by the Seller
Key Term: Full Performance
Complete fulfillment of contractual obligations by one party (for example, delivery of the deed by the seller in a land sale contract), such that that party can enforce the agreement despite noncompliance with the statute of frauds.
If the seller has fully performed by delivering and recording a deed conveying the property, the statute of frauds is no longer a bar:
- The buyer cannot invoke the statute of frauds to avoid paying the price after accepting the deed.
- Courts reason that once the land has changed hands, the dangers that the statute of frauds is meant to address (fraudulent claims about the contract’s existence) are minimal.
Note the asymmetry:
- Full performance by the seller (delivery of deed) is enough to bypass the statute.
- Full performance by the buyer (full payment) is not, by itself, enough unless accompanied by other acts (possession/improvements) or estoppel.
Worked Example 1.4
Seller and buyer orally agree that buyer will purchase a farm for $500,000. Seller executes and delivers a deed to buyer, and buyer takes possession but then refuses to pay, asserting the contract was not in writing. Can seller enforce the contract?
Answer:
Yes. Seller has fully performed by conveying title. Buyer cannot use the statute of frauds as a sword to avoid payment. Seller may sue for the price or for restitutionary and contract damages, and the lack of a written contract will not bar recovery.
Additional (Less Common) Exceptions
Some jurisdictions also recognize that a judicial admission—for example, a statement in pleadings or testimony admitting the existence of the contract—may satisfy the statute of frauds. The MBE focuses far more heavily on part performance, estoppel, and full performance than on admission-based exceptions in the real property context.
Exam Warning
Oral agreements to sell land are unenforceable unless an exception applies. Do not assume that payment alone is enough—on exam questions, look carefully for possession or improvements, or strong facts supporting detrimental reliance.
Oral Modifications and the Statute of Frauds
Real estate transactions often begin with a written contract that satisfies the statute of frauds and are later modified orally. The question is whether the modification must itself be in writing.
Key Term: Oral Modification
A subsequent change to a contract agreed orally. If the contract as modified falls within the statute of frauds, the modification must generally be evidenced by a writing signed by the party to be charged.
General rule:
- Ask whether the contract as modified would be within the statute of frauds.
- If yes, the modification must satisfy the statute (i.e., be in a signed writing).
- If no, the modification need not be in writing, even if the original contract had to be.
Examples:
- Written contract to sell Blackacre for $300,000. Parties orally agree to reduce the price to $290,000. The transaction is still a land sale, so the contract as modified remains within the statute of frauds. The change in price is an essential term and must be in writing to be enforceable.
- Written contract to sell Blackacre and Whiteacre. Parties orally agree that buyer will purchase only Blackacre. If the new arrangement substantially changes the property being conveyed, the modification is material and, because it still conveys an interest in land, must be in writing.
Common law versus UCC:
- Real estate is governed by common law, not the UCC, but the same conceptual approach applies: material modifications that leave the deal within the statute must be written.
Key Term: Restitution
A remedy that restores to a party the value of benefits conferred (such as payments made or improvements constructed) when a contract is unenforceable or has been rescinded, to prevent unjust enrichment of the other party.
Even when an oral modification is unenforceable, conduct in reliance on that modification may support waiver or restitution in appropriate cases.
Worked Example 1.5
Seller and buyer sign a written contract for the sale of Greenacre, satisfying the statute of frauds. They later orally agree that seller will include an additional adjoining parcel for an extra $50,000. Buyer pays the extra $50,000, but seller refuses to convey the extra parcel. Can buyer enforce the modification?
Answer:
Probably not as a contract claim. The modification adds an additional interest in land, so the contract as modified is still within the statute of frauds. The new term (the additional parcel and price) is material, and there is no signed writing reflecting it. However, buyer can seek restitution of the additional $50,000 paid and, depending on the jurisdiction and facts, may argue estoppel if the reliance was substantial.
Remedies and Consequences of Noncompliance
When a contract is unenforceable due to the statute of frauds—because there is no sufficient writing and no exception applies—courts still try to avoid unjust enrichment.
Available remedies:
- Restitution: A party who has conferred a benefit (e.g., made payments, rendered services, or made improvements) may recover the reasonable value of those benefits.
- A buyer who paid a deposit on an oral land sale contract may recover the deposit.
- A buyer who made improvements in reliance on an unenforceable oral contract may sometimes recover the value of those improvements, especially if the seller seeks to keep the land and the improvements.
- Reliance damages: Occasionally, courts award reliance-type damages where a party incurred costs in reliance on the oral contract, but these are often limited.
- No expectation damages: Courts generally will not enforce the bargain itself (no specific performance, no lost profits) when the statute of frauds applies and no exception exists.
Worked Example 1.6
Owner orally agrees to sell a vacant lot to Builder. Builder pays a $20,000 deposit but does not take possession or make improvements. Owner then refuses to sell and successfully asserts the statute of frauds. What can Builder recover?
Answer:
Builder cannot obtain specific performance or expectation damages because the land sale contract is unenforceable under the statute of frauds and no exception applies. Builder can, however, recover restitution of the $20,000 deposit to prevent Owner’s unjust enrichment.
Key Point Checklist
This article has covered the following key knowledge points:
- The statute of frauds applies to contracts for the sale or transfer of interests in land, including most leases longer than one year.
- A sufficient writing (memorandum) must identify the parties, describe the property, state essential terms (especially price), and be signed by the party to be charged.
- Agent authority to sign a land contract must itself be in writing under the equal dignity rule.
- An oral land contract is unenforceable unless an exception applies; the contract is not void but cannot be enforced over a statute of frauds objection.
- Part performance (typically any two of payment, possession, and improvements) can remove a contract from the statute of frauds and allow specific performance.
- Estoppel (detrimental reliance) can bar a party from invoking the statute of frauds when the other party has reasonably and substantially relied on the oral contract.
- Full performance by the seller—delivery of the deed—prevents the buyer from using the statute of frauds to avoid paying the price.
- Oral modifications of land contracts must be in writing if the contract as modified remains within the statute of frauds and the change is material.
- When a contract is unenforceable under the statute of frauds, restitution is usually available to recover benefits conferred, even though the bargain itself cannot be enforced.
Key Terms and Concepts
- Statute of Frauds
- Writing (Memorandum)
- Part Performance
- Estoppel (Detrimental Reliance)
- Full Performance
- Equal Dignity Rule
- Oral Modification
- Restitution