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McBarron v. Kipling Woods L.L.C.

365 N.J. Super. 114, 838 A.2d 490 (App. Div. 2004)

CONTRACTS; STATUTE OF FRAUDS—An oral agreement for the sale of property is enforceable if a party, by clear and convincing evidence, can establish the agreement, the identity of the parties, the nature of the interest to be conveyed, and a sufficient description of the property.

A buyer and seller entered into an oral agreement for the purchase of land. The parties agreed that a document was to be drawn describing the transfer. However, the seller backed out before the document was created. Consequently, the lower court needed to determine the intent of the parties. Upon finding that it was an “oral agreement conditioned upon the drafting and execution of a written agreement,” it dismissed the complaint by way of summary judgment. Since both sides agreed that a form of writing was anticipated, the lower court concluded there was no valid oral contract.

On appeal, the Appellate Division pointed out that the mere anticipation of a written “memorialization” of an oral agreement does not, as a matter of law, invalidate an oral contract, if the elements of a contract are contained in the oral agreement. According to the Court, the parties could have intended not to be bound until a formal contract was signed, or they could have intended to be bound by their oral argument, even though they intend to later sign a formal document to “memorialize their undertaking.” Deciding which option applies is determined, in large part, by the credibility of the witnesses. Therefore, a court should be leery of granting summary judgment in such a circumstance, largely dependant upon an interpretation of facts.

During the negotiations, the seller repeatedly told the buyer that they were “like family” and that the buyer would be given the “first crack” at the lot once the price was determined. The seller continued by saying that he would speak to his brothers and then call the buyer later that day with the final price. Upon calling back, he indicated that he spoke with his brothers, and presented a price, which the buyer accepted. The buyer then repeatedly asked if it was a done deal, and each time the seller affirmed that it was. The buyer then asked if the seller wanted a written contract to memorialize the agreement that had been reached, or whether they would simply proceed to the closing. The seller said he would ask his attorney to draw up a contract.

However, once the seller received a higher offer, he reneged on the oral agreement, admitting that he was “out-voted” by his brothers regarding whether to honor the original agreement, again verifying that a deal had in fact taken place.

In 1996, the Statute of Frauds was amended to eliminate the requirement that a contract for the sale of real property must be in writing. Since then, an oral agreement can be binding if a party can establish, by clear and convincing evidence, the agreement, the identity of the parties, the nature of the interest to be transferred, and a sufficient description of the property. Therefore, viewing the facts in “a light most favorable to the buyers,” the Court found that the lower court should not have dismissed the buyer’s suit because there was enough evidence to raise genuine issues of fact.

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