Business Litigation: Contracts And Statute Of Frauds

Businesses enter into contracts with independent contractors, vendors, executives, employees, and other parties. These contracts can be verbal or informal. In the event of a dispute, these verbal agreements may not be enforced under the Statute of Frauds. Bonardi & Uzdavinis, LLP, is a Tampa litigation law firm. As a trusted Tampa Business Lawyer, the firm represents business owners and businesses in litigation involving breach of contract and fraud claims, non-compete agreements, trade secrets, trademark infringement, employment law, and other legal disputes.

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The Statute of Frauds

A legal principle, requires that certain contracts be in writing before they can be enforced. This statute is found in section 725.01 of the Florida Statutes and includes a list of contract subjects that must be reduced to writing to be legally enforceable. These include real estate transactions and certain medical contracts. The Statute of Frauds is only applicable to “agreements that are not to be carried out within one year of their making.”

Is a Verbal Agreement Still Valid

In Business Litigation, a key consideration is whether a contract must be in writing to be enforceable. Florida courts have addressed this through the “one-year rule.” In the seminal case Browning v. Poirier, 165 So. 3d 663 (Fla. 2015), two romantic partners verbally agreed in 1993 to pool their lottery winnings. In 2007, one partner won the lottery, fourteen years after the agreement. The lottery winner argued that the verbal contract was unenforceable because it wasn’t in writing and more than a year had passed since the agreement was made. However, the Florida Supreme Court ruled that despite the passage of time, this contract was not covered by the Statute of Frauds because “the contract’s full execution is possible within one (1) year of its inception.” This case illustrates the complexities that can arise in Business Litigation regarding contract enforceability and the Statute of Frauds.

 

Browning shows us that contracts that would otherwise be subject to the Statute of Frauds do not have to be written if they can be performed within one year. This “rule of possible performance” has been used in business disputes as well. In New Dirt, Inc. v. Harrison, 182 So. 3d 728 (Fla. 5th DCA 2015), a lawsuit was filed between a company and its founder. The founder claimed that the corporation hadn’t paid him a salary as agreed or repaid a loan. The trial court ruled in favor of the corporation, but the Florida Fifth District Court of Appeals overturned the ruling, finding that repayment of the loan was still possible within a year.

A More Recent Case

Movie Prop Rentals, LLC v. Kingdom of God Global Church, 2023 WL 8275922 (S.D. Fla. Nov. 30, 2023), illustrates this point further. In Movie Prop Rentals, the parties had an oral agreement to finish constructing a prop within three months. The project ended up taking more than a year to complete, and the defendants paid for it throughout. The court found that the Statute of Frauds did not apply because, according to Browning, the contract only needed to be capable of being performed in full within a year. Even though verbal agreements may be enforceable if they are completed within a year, it’s far better to document all agreements in writing. Verbal contracts are difficult to prove, and the parties often dispute the terms. Reducing a verbal contract to writing clarifies its content and helps avoid potential conflicts.

The Bonardi & Uzdavinis, LLP

Is a Tampa litigation law firm representing clients in contract disputes in St. Petersburg and Tampa and throughout the State of Florida. This article is not intended to replace legal advice specific to your situation.

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