Schwedes v. Romain

Supreme Court of Montana · Contracts

ContractsStatute of FraudsSpecific PerformancePart PerformancePromissory Estoppelsale of landstatute of fraudsspecific performance

Facts

The sellers sent the Schwedes a letter stating they would sell certain Flathead County land for $60,000 cash, subject to an assumable contract, and Lawrence Schwedes later orally accepted by telephone. The sellers' attorney then ordered a title commitment, prepared deeds, and discussed closing dates, and Schwedes offered by phone to send the purchase price, but no money was paid. No writing was signed by the Schwedes, they never took possession, made no improvements, and paid no taxes or other sums on the property. Before closing, the sellers sold the property to a third party for $64,000.

Issue

Whether the alleged agreement for the sale of land was an enforceable contract supporting specific performance or damages, despite the absence of a writing signed by the buyers and despite the buyers' claimed part performance and estoppel theories. The case also presented whether the sellers' attorney's acts could bind the sellers absent written authority.

Rule

A contract requires legally capable parties, consent, a lawful object, and consideration. For a sale of real estate, the contract or some note or memorandum must be in writing and subscribed by the party to be charged; a mere oral promise to pay is not sufficient consideration where it is not legally binding. An attorney or other agent cannot bind a party to such a land transaction unless the agent's authority is in writing subscribed by the principal. Part performance sufficient to remove an oral land contract from the statute of frauds must consist of acts unequivocally referable to the contract and performed by the party seeking enforcement, not merely acts undertaken in contemplation of eventual performance. Promissory estoppel does not apply where doing so would effectively repeal the statute of frauds, absent circumstances in which the statute would otherwise perpetrate a fraud.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Missoula, Montana, Nina Porter mailed Evan Cole a signed letter offering to sell him a lakeside parcel for $180,000. Evan called Nina the next day and said he accepted and would pay in full at closing, but Evan never signed any writing and paid nothing before Nina sold the parcel to someone else.

If Evan sues for breach of contract, what is the strongest basis for denying enforcement under the majority rule?

Explanation. The majority treated the buyer's oral promise to pay for land as not legally binding where there was no writing subscribed by the buyer, the party to be charged on that promise. Because that oral promise imposed no legal duty, it did not supply consideration necessary for an enforceable contract. (Derived from Schwedes v. Romain (n.d.).)