The Problem with Promises and Handshakes?
A buyer and seller can always agree to change contract terms to get a transaction to closing. However, a handshake agreement generally won’t change the existing contract until it’s in writing and signed.
ORLANDO, Fla. – A buyer and seller can always agree to change contract terms to get a transaction to closing. However, a handshake agreement generally won’t change the existing contract until it’s in writing and signed.
In the case of DK Arena, Inc. v. EB Acquisitions I, LLC, 112 So.3d 85 (2013), a buyer and seller were at the end of the inspection period. According to the executed contract, if the buyer terminated during the inspection period, the buyer would be entitled to a return of the deposit.
There was an unresolved issue regarding local government approval of a project, so the seller verbally promised to extend the inspection period while both parties sought approval. After the approval didn’t materialize, the buyer attempted to cancel the contract and get the deposit back. The buyer argued that the promise to extend the inspection period was clear and witnessed by multiple people.
The seller, however, argued that the agreement to extend the inspection period was not enforceable due to Florida’s Statute of Frauds. This centuries-old rule requires that contracts for purchase and sale of real property (and certain other types of contract) be in writing and have proper signature(s) before they become enforceable. The Florida Supreme Court agreed with seller’s argument and held that promissory estoppel does not act as an exception to the Statute of Frauds.
Takeaways for Buyers, Sellers, Realtors
- When it comes to contracts for sale and purchase of real property, parties should always ensure their contracts and amendments are in writing and signed.
- Parties shouldn’t get ahead of themselves while negotiating contracts or amendments.
We regularly hear from members who feel cheated when promising negotiations don’t lead to a signed contract or amendment. There’s not much to say beyond discussing the Statute of Frauds. Even if a buyer and seller verbally agree to every single point of negotiation and shake hands, if one of them won’t sign a written document, there’s not much the other side can do.
The reason for refusing to sign is irrelevant. It doesn’t matter if someone changed their mind about signing due to a family emergency or just realized they’d be financially better off. Either way, promising negotiations aren’t binding until the parties cross that finish line of signing a document.
- Parties should always orient themselves on the signed contract they have until they have a fully executed amendment. If a party misses a deadline, as in the case above, that party could be penalized even though they were in the process of negotiating an amendment.
As a final note, please remember that the Statute of Frauds only applies to specific types of contracts, such as purchase and sale contracts. Many common contracts are enforceable despite their verbal nature. That said, parties would be well advised to get most agreements in writing to avoid confusion and fights over how each side remembered specific terms.
Joel Maxson is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication
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