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Remedies • Contract - Equitable Remedies
REM#063
Legal Definition
Where a party has rendered valuable part performance in reliance of an oral contract involving land, the contract is taken out of the Statute of Frauds and specific performance can be granted.
Valuable performance consists of 2 of the following 3: (1) payment; (2) possession; (3) valuable improvements.
Valuable performance consists of 2 of the following 3: (1) payment; (2) possession; (3) valuable improvements.
Plain English Explanation
People lie. A lot. Even though oral contracts are valid in many circumstances, because they lack physical evidence (like a written contract), it is harder to prove when someone is lying about the terms of the contract (or if a contract even existed at all). The law has identified four specific types of contracts that must be put in writing in order to ask a court for help. One type of contract that falls under the Statute of Frauds is a transfer of interest in real property.
In other words, even though it is the duty of the courts to help enforce and mitigate contract disputes between parties, the court will refuse to waste its time hearing certain types of contract cases without a written agreement that has been signed by the person that is supposed to perform under the agreement.
However, the courts ultimately want to be fair to parties. Thus, one exception to the Statute of Frauds is "part performance", which essentially says, "Even though there was no written contract for the sale or lease of land, we aren't going to overlook the fact that there is obvious evidence that a contract or agreement existed."
Some of that obvious evidence is 2 of the following: (1) evidence of some sort of payment; (2) evidence of possession of the land; and (3) valuable improvements on the land.
In other words, this exception acknowledges that people don't just randomly give people money for no reason, nor do they occupy and possess land without likely permission or agreements in place, and they definitely don't improve land they don't own or have the intention to own or possess. So showing two or more of these 3 factors are a pretty strong argument that there is in fact an agreement between the land owner and the apparent purchaser or renter even if no such contract exists to support the fact that the land was sold.
In other words, even though it is the duty of the courts to help enforce and mitigate contract disputes between parties, the court will refuse to waste its time hearing certain types of contract cases without a written agreement that has been signed by the person that is supposed to perform under the agreement.
However, the courts ultimately want to be fair to parties. Thus, one exception to the Statute of Frauds is "part performance", which essentially says, "Even though there was no written contract for the sale or lease of land, we aren't going to overlook the fact that there is obvious evidence that a contract or agreement existed."
Some of that obvious evidence is 2 of the following: (1) evidence of some sort of payment; (2) evidence of possession of the land; and (3) valuable improvements on the land.
In other words, this exception acknowledges that people don't just randomly give people money for no reason, nor do they occupy and possess land without likely permission or agreements in place, and they definitely don't improve land they don't own or have the intention to own or possess. So showing two or more of these 3 factors are a pretty strong argument that there is in fact an agreement between the land owner and the apparent purchaser or renter even if no such contract exists to support the fact that the land was sold.
Hypothetical
Hypo 1: Bob verbally agrees to sell a piece of land to Sam. Trusting Bob, Sam pays half the price and starts building a house on it. Bob then denies ever making such an agreement. Result: The court will enforce the verbal contract because Sam has made a payment and done valuable improvements to the land based on Bob's promise.
Hypo 2: Bob tells Sam he can live on his vacant land if Sam pays a monthly rent. Sam pays six months in advance and moves in. Later, Bob tries to evict Sam, claiming they never had an agreement. Result: The court might enforce the verbal agreement since Sam has made a payment and taken possession of the land.
Hypo 3: Bob and Sam verbally agree that Sam can buy a piece of land from Bob. Sam immediately starts farming on the land and also builds a barn. Bob later claims they never had a deal. Result: The court could enforce the contract because Sam has taken possession and made valuable improvements.
Hypo 5: Bob tells Sam he can buy a piece of land, but Sam only pays a tiny deposit and waits to see if the land value goes up. Bob later denies making the offer. Result: The court might not enforce the verbal agreement because Sam has only made a minor payment and hasn't taken possession or made any valuable improvements.
Hypo 2: Bob tells Sam he can live on his vacant land if Sam pays a monthly rent. Sam pays six months in advance and moves in. Later, Bob tries to evict Sam, claiming they never had an agreement. Result: The court might enforce the verbal agreement since Sam has made a payment and taken possession of the land.
Hypo 3: Bob and Sam verbally agree that Sam can buy a piece of land from Bob. Sam immediately starts farming on the land and also builds a barn. Bob later claims they never had a deal. Result: The court could enforce the contract because Sam has taken possession and made valuable improvements.
Hypo 5: Bob tells Sam he can buy a piece of land, but Sam only pays a tiny deposit and waits to see if the land value goes up. Bob later denies making the offer. Result: The court might not enforce the verbal agreement because Sam has only made a minor payment and hasn't taken possession or made any valuable improvements.
Visual Aids
Related Concepts
How does election of remedies affect a claim for rescission?
If a contract has a liquidated damages clause, is specific performance still an option?
What are common defenses to specific performance?
What are defenses to rescission?
What are equitable remedies in contract?
What are the defenses to formation?
What happens if a plaintiff is entitled to rescission but has already performed?
What is reformation?
What is rescission?
What is specific performance and when it is applicable?
What type of mutual mistake is sufficient for rescission?
When applying specific performance to a land purchase contract, what happens if a buyer breaches a "time is of the essence" clause with a forfeiture clause?
When applying specific performance to a land purchase contract, what happens if the quantity of land is in dispute?
When assessing reformation, what constitutes sufficient grounds?
When assessing specific performance, how do courts weigh feasibility of enforcement?
When assessing specific performance to acquire a unique piece of property, when is uniqueness tested?
When assessing specific performance, what must the status be of a plaintiff's contractual conditions?
When assessing specific performance, why are money damages sometimes an inadequate legal remedy?
When assessing whether money damages are inadequate for specific performance, why does it matter whether a piece of property is unique and what kind of property is always unique?
When is personal property considered unique enough to trigger specific performance?
Will courts grant rescission for a unilateral mistake?
