Promissory Estoppel & the Statute of Frauds

Mar 3, 2015 by

Missouri law includes a Statute of Frauds, which requires all transactions involving real estate to be made in writing.[1] The purpose of the statute is two-fold. First, it encourages the parties to take such agreements seriously by requiring them to formalize their agreement into writing. Second, the requirement ensures that there is good evidence relating to the transaction, because the sale of land is a significant exchange. A written agreement provides the greatest proof when a dispute arises.

However, shortly after the drafting of the Statute of Frauds, Missouri courts recognized that there are situations which need to be excepted from the written requirement of the statute. These exceptions fall into three broad categories: first, when it is necessary to prevent individuals from using the statute to defraud one of the parties; second, when the doctrine of promissory estoppel may be used to remove an oral contract from the statute’s written requirements; and finally, when there has been full or partial performance by one of the parties.[2] These three categories are closely linked, as most situations will trigger multiple concerns.

The doctrine of promissory estoppel can be used to enforce an agreement when one party has partially fulfilled their portion of the agreement. Specifically, promissory estoppel requires four elements: First, there must be a promise made between the parties. Second, one of the parties must rely on the promise to their detriment. Third, the non-relying party must have reasonably expected the other party to rely on the promise. Finally, there must be an injustice in allowing the non-relying party to escape from enforcement of the promise. The focus of promissory estoppel is that it would be unjust to allow one party to breach the oral contract after the other party has already fulfilled their portion of the agreement. Promissory estoppel is derived from the court’s equitable power to grant relief even when there may not be a written agreement.

In Missouri, an oral contract can be valid and enforceable, even if it would normally violate the Statute of Frauds, if one person has partially fulfilled their responsibility under the contract.[3] This approach recognizes that the second goal of the State of Frauds (providing good evidence of an agreement) can be met by showing that one party has acted to their detriment in reliance upon the contract. For example, if a party has already conveyed a portion of real estate, the court will consider that as strong evidence that an agreement existed, even if it was not made in writing. It also recognizes that Missouri courts possess great power in equity to craft remedies to address issues of significant injustice.

[1] RSMO § 432.010 (A contract for the sale of land is one among several types of contracts that must be made in writing under this statute.)

[2] Mika v Central Bank of Kansas City, 112 S.W.3d 82, 88 (Mo. App. W.D. 2003)

[3] Shumate v. Dugan, 934 S.W.2d 589, 592 (Mo. App. S.D. 1996)

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