Statute of frauds and promissory estoppel (update)

Last month, I had a post about a recent Ohio Supreme Court case, Olympic Holding Co., L.L.C v. Ace Ltd. (2009), 122 Ohio St.3d 89, 2009-Ohio-2057, in which the Court rejected a claim that promissory estoppel removed an agreement from the statute of frauds in the context of negotiations between sophisticated business entities concerning a proposed five-year agreement. The Eighth District Court of Appeals has issued an opinion in which it relied on the Olympic Holding case, holding that promissory estoppel did not remove a case from the statute of frauds in a transaction involving a proposed sale of real estate. Seaman v. Fannie Mae, Cuyahoga App. No. 92751, 2009-Ohio-4030 (affirming motion to dismiss under Civ. R. 12(B)(6)). In Seaman, the plaintiffs-appellants alleged that Fannie Mae “represented to appellants that the price and terms were agreed and instructed appellants to execute the purchase agreement attached to the complaint and to pay the earnest money to appellee,” and that they detrimentally relied on the promise “‘by paying the earnest money, foregoing the purchase of other properties and spending time and resources on the purchase of the subject property.’” Fannie Mae never signed the agreement. The Eighth District unanimously held, “[i]n most negotiations for transactions included within the statute of frauds, the parties contemplate that the contract will be reduced to writing. If a written agreement is contemplated, reliance upon statements made before an agreement is signed will be unreasonable as a matter of law, particularly when sophisticated business parties are involved in the negotiations.” (emphasis added).

Tags: Contracts, Statute of Frauds