Citation. 222 Minn. 141, 23 N.W.2d 362, 166 A.L.R. 435 (Supreme Court of Minnesota, 1946)
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Brief Fact Summary.
Individual 1 contracted to lease a piece of real property from individual 2 for a one-year period, with an option to buy at the end of the year. Individual 1 attempted to exercise the option, but individual 2 refused to draw up the requisite paperwork.
Synopsis of Rule of Law.
"[A]cts of taking possession and of making part payment, when they are performed under or in reliance upon the oral contract as to be unequivocally referable to the vendor-vendee relationship and not referable to any other relation between the parties, are sufficient to remove the contract from the statute of frauds."
The Plaintiffs, Mr. and Mrs. Saughnessy (the "Plaintiffs"), by oral agreement leased a home from the Defendant, Bernt Eidsmo (the "Defendant"), on April 5, 1943. The term of the lease was one year. As part of the consideration for making the lease, the Plaintiffs were given an option to purchase the property at the end of the lease for between $4,750 and $5,000. The Plaintiffs were also allowed to apply their lease payments to the purchase price of the home. The Plaintiffs also contracted to purchase the Defendant's stove. At and before the end of the lease term, the Plaintiffs sought to exercise their option to buy the property. During both occasions, the Defendant said he did not have time to draft the relevant paperwork. The Plaintiffs continued in possession of the property past the end of the one year lease term and continued making payments. The Defendant refused to tender the deed and the Plaintiffs brought suit. The trial court found there was a valid contract, and the Defendant was ordered to give the Plaintiffs the deed.
Does an oral contract for the sale of real estate violate the Statute of Frauds ("SOF") if there is partial performance?
The court first observed that a valid oral contract existed when the Plaintiffs notified the Defendant they wished to exercise their option. The contract was clearly within the SOF unless the partial performance exception was satisfied. Section 197 of the Restatement sets forth the part performance doctrine: "Where, acting under an oral contract for the transfer of an interest in land, the purchaser with the assent of the vendor (b) takes possession thereof or retains a possession thereof existing at the time of the bargain, and also pays a portion or all of the purchase price, the purchaser or the vendor may specifically enforce the contract." In other words, "acts of taking possession and of making part payment, when they are performed under or in reliance upon the oral contract as to be unequivocally referable to the vendor-vendee relationship and not referable to any other relation between the parties, are sufficient to remove the contract from the statute of frauds." Unlike past cases, the party arguing that the SOF does not apply, does not need "proof of irreparable injury through fraud."
• Here, the elements of possession and part payment are both satisfied. As to possession, the court finds that although the original agreement was one of landlord tenant, the parties intended their relationship from the beginning to inevitably be one of vendor-vendee. The purchase of the stove demonstrates this intent. So does the fact that when the Plaintiffs approached the Defendant about exercising the option, evidencing the vendor-vendee relationship, the Defendant did not reject their attempts, but instead said only that he did not have time to draw up the paperwork and that his word was good.
This case offers a very interesting discussion about the history of the part performance doctrine and how it is an exception to the SOF in the context of oral agreements to sell and lease real estate. For example, Samuel Williston observed " * * * Courts of equity early adopted the doctrine that such acts as the taking of possession, making of improvements, and the like by the purchaser with consent of the vendor make the contract enforceable though there is no written memorandum. This doctrine has been rested upon two main reasons: (1) that the rule of the Statute of Frauds is an evidential rule and that any acts clearly and solely referable to the existence of the contract satisfy in equity the purpose of the Statute; (2) that equity should relieve against the operation of the Statute in cases where it would be unconscionable for the vendor to rely upon it in defense."