Michigan has longstanding law that requires certain agreements or contracts be in writing to be considered legally enforceable. This is known as the statute of frauds. The land sale contracts and certain lease agreements are included under this statute of frauds, which require these types of agreements be in writing. Specifically, under Michigan’s statutory law, MCL 566.108, the sale of any lands or interest in any lands, along with leases that are for a period longer than one year, must be executed through written agreements and signed by the party by whom the sale is to be made. Does that consequently mean all oral contracts for these types of leases or sale of property are rendered completely invalid and unenforceable? Not necessarily, given the recent decision by Michigan’s Court of Appeals.
In this recent decision under, Moore v. Wilbur, Case no. 358982 (January 26, 2023), the Court of Appeals addressed a quiet title action for the sale of land and reversed a ruling that an oral contract for property is unenforceable. The Court of Appeals reversed such ruling based on the doctrine of partial performance. This legal doctrine applies where a party’s performance may be sufficient to remove an agreement from the statute of frauds. In other words, the doctrine of partial performance may render an oral land sale contract enforceable where it would otherwise fail because it was not a written agreement. The Michigan Supreme Court explained the basis for the doctrine of partial performance in Dumas v. Auto Club Ass’n., 437 Mich. 521 (1991). The Court reasoned that where one party to an oral contract, in reliance on said contract, has performed their contractual obligations, it would be unfair to allow the other party to rescind the contract because it was not in writing.
Thus, in order to prevail under the doctrine of partial performance and remove requirements within the statute of frauds, the existence of an oral contract must be established. In the Moore v. Wilbur matter, the Court of Appeals found numerous submissions of evidence that supported the existence of an oral contract, which warranted a denial of judgment as a matter of law.
The basis for the doctrine of partial performance is to promote equity or fairness. As mentioned, where two parties have executed an oral contract and one party performed their contractual obligations, it would be unfair to allow the other party to rescind this oral agreement solely based on its failure to be executed in writing. It is not a stretch to state that executing land sale contracts or complex lease agreements do not always proceed according to plan, or potentially according to the statute of frauds. However, attorneys at Dalton & Tomich anticipate the pitfalls and disputes that may arise in these property transactions. If you wish to speak to one of our attorneys regarding a related issue, please contact (313) 859-6000, we would be happy to speak with you!