Email Correspondence Concerning The Sale Of Real Estate Not Enough To Satisfy The Statute Of Frauds

• Posted on: Jun 16 2017

The New York Statute of Frauds provides that “[a] contract for the . . . the sale, of any real property, or an interest therein, is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing.” New York General Obligations Law § 5-703(2). “To satisfy the statue of frauds, a memorandum evidencing a contract and subscribed by the party to be charged must designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement.” Nesbitt v. Penalver, 40 A.D.3d 596, 598 (2d Dept. 2007) (citation and quotation omitted). The memorandum may be informal – it can be a series of emails – and therefore in compliance with the statute of frauds “where it identifies the parties, [and] describes the subject property, [and] recites all essential terms of a complete [real estate] agreement.” O’Brien v. West, 199 A.D.2d 369, 370 (2d Dept. 1993). “If the contract does not contain all the necessary terms, the law presumes that the parties have not reached an agreement as to such terms and, therefore the agreement is fatally flawed and unenforceable.” 3-32 Warren’s Weed New York Property § 32.10. In that instance, or if “it is necessary to resort to parol evidence to ascertain what was agreed to, the remedy of specific performance is not available.” Nesbitt, 40 A.D.3d at 598 (citation and internal quotation marks omitted).

Notably, an agreement as to price only is insufficient to create an enforceable real estate contract. See, e.g., DeMartin v. Farina, 205 A.D.2d 659, 660 (2d Dept. 1994) (quotation omitted). Instead, the agreement must also include “those terms customarily encountered in transactions of this nature, such as … [the deposit or down payment to be made on signing,] the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, adjustments for taxes and utilities, etc.” Nesbitt, 40 A.D.3d at 598 (citation and internal quotation marks omitted).

On June 7, 2017, in Saul v. Vidokle, 2017 NY Slip Op. 04485, the Second Department addressed the foregoing issues and held that the alleged sale violated the statute of frauds.

Background

In Saul, the plaintiff, Lewis Saul, sought specific performance of a purported oral agreement to purchase a condominium apartment owned by his neighbor, Anton Vidokle. The agreement was alleged to have been memorialized in email exchanges between the parties. Vidokle emailed his attorney with information regarding the sale, including the parties’ names, the purchase price ($1.3 million in cash), an agreement that no brokers would be involved in the sale and that the defendant would lease the property back from the plaintiff for $3,000 per month during the period of time it took to complete work on his new home.

Within days, however, Vidokle learned from a real estate broker that the apartment could be sold for a significantly higher amount. Acting on this information, Vidokle asked Saul to “wait” on moving forward with the execution of a formal contract. Saul refused, insisting that the parties were already bound by their emails.

Thereafter, Saul filed a complaint against Vidokle seeking specific performance of the alleged agreement. Vidokle moved to dismiss the complaint pursuant to CPLR 3211(a)(1), (5), and (7), in part, on the ground that the emails failed to satisfy the statute of frauds. The motion court denied the motion and Vidokle appealed. In a brief opinion, the Second Department modified the motion court’s ruling.

The Second Department Ruling

The Court found that the emails failed to satisfy the statute of frauds because they omitted the “essential” terms of the transaction:

The emails relied upon by the plaintiff to establish the alleged agreement among the parties for the purchase of the defendant’s apartment were insufficient to satisfy the statute of frauds, as they left for future negotiations essential terms of the contemplated contract, such as a down payment, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities, and were subject to the execution of a more formal contract of sale.  Contrary to the plaintiff’s contention, in the emails exchanged by and between the parties and the defendant’s attorney, the parties expressly anticipated the execution of a formal contract. Accordingly, the Supreme Court should have granted the defendant’s motion to dismiss the complaint.

Citations omitted.

Takeaway

As this Blog has noted in other postings, email correspondence can suffice to form an enforceable contract. (Here, here and here.) However, when the emails omit the essential terms of the proposed transaction, and indicate that the substance of the transaction is subject to continued negotiation and a formal written contract, there is no binding agreement and dismissal of the complaint is warranted as a matter of law.  In the real estate context, this means that the emails should include, among other things, a deposit or down payment, closing date, quality of title, escrow, risk of loss, right to inspect, terms for default, and adjustments for taxes and utilities.  As Saul learned, the absence of these terms was fatal to his claim and rendered the alleged agreement unenforceable under the statute of frauds as a matter of law.

Tagged with: Business Litigation, Commercial Litigation, Statute of Frauds