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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 27, 2020

Settlement Agreement Involving the Sale of Real Property Unenforceable Under Statute of Frauds

On November 12, 2020, the Second Department issued a decision in Ehrenreich v. Israel, 2020 NY Slip Op. 06499, holding that a settlement agreement requiring the sale of real property was unenforceable under the Statute of Frauds, explaining:

We agree with the defendants that the causes of action in the complaint, all of which are based on the alleged contract, are barred by the statute of frauds. Pursuant to General Obligations Law ยง 5-703(2), a contract for the sale of real property 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. A writing satisfies the statute of frauds if it identifies the parties to the transaction, describes the properties to be sold with sufficient particularity, states the purchase price and the down payment required, and is subscribed by the party to be charged. Moreover, 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. In a real estate transaction, the essential terms of a contract typically include the purchase price, 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, and adjustments for taxes and utilities.

Here, the alleged contract did not satisfy the statute of frauds, as it did not contain the essential terms typically included in a contract for the sale of real property, including the purchase price, the time and terms of payment, the required financing, the closing date, the risk of loss during the sale period, and adjustments for taxes and utilities. Additionally, the alleged contract was not signed by the defendant Michael Israel, and it indicated that several of the properties were co-owned by other individuals who also were not signatories to the document.

Further, the emails relied upon by the plaintiff to demonstrate that the parties reached a complete agreement were between the parties’ attorneys, and there was neither an allegation in the complaint nor any evidence in the record that the attorneys were authorized in writing to bind the parties to a contract of sale. Moreover, the deeds relied upon by the plaintiff purported to convey the properties between corporate entities not identified in the contract and the plaintiff admittedly rejected the deeds pending a further agreement on the purchase price and quality of title. Therefore, the deeds, when viewed together with the alleged contract, did not evidence a complete agreement between the parties. Furthermore, the plaintiff’s allegations that he partially performed under the contract are insufficient to remove the agreement from the statute, since the conduct relied on was not unequivocally referable to the alleged agreement. Accordingly, the Supreme Court should have granted the defendants’ motion pursuant to CPLR 3211(a) to dismiss the complaint.

Inasmuch as there was no binding contract for the conveyance of real property between the parties, the defendants’ motion to cancel the notice of pendency pertaining to the properties also should have been granted..

(Internal quotations and citations omitted).

New York contract law–usually straightforward–has traps for the unwary, like the requirement that some contracts be in writing (the statute of frauds). There are ways to escape from those traps, but the exceptions are narrow and difficult to meet. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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