MIAMI BUSINESS LITIGATION: STATUTE OF FRAUDS

Businesses often enter contracts with vendors, independent contractors, executives, employees, and others. But sometimes, these contracts may be verbal and unformalized. If a dispute arises regarding one of these verbal contracts, it may not be enforceable under the Statute of Frauds. Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The Statute of Frauds is a legal principle requiring certain contracts be in writing to be legally enforceable. The statute can be found at section 725.01, Florida Statutes and contains a list contract subject that must be reduced to writing to be enforceable. The subject matters include certain medical contracts and real estate contracts. Fla. Stat. § 725.01. However, the Statute of Frauds only applies to an “agreement that is not to be performed with the space of one year from the making thereof.”

If a verbal contract is not completed within one year, is it still enforceable? Florida courts established the one-year rule to address this question. The seminal case is Browning v. Poirier, 165 So. 3d 663 (Fla. 2015). In Browning, romantic partners entered into a verbal agreement in 1993 whereby they agreed to pool lottery winnings. One partner won a lottery in 2007, fourteen years after entering the verbal agreement. The other partner sued to enforce the verbal agreement, but the lottery winner argued the verbal agreement was not enforceable because it was not in writing and more than one year had passed since they entered into the verbal agreement. The Florida Supreme Court held that, despite the long passage of time, the contract did not come within the Statute of Frauds because the “contract’s full performance is possible within one year from the inception of the contract.”

Browning teaches us that a contract otherwise susceptible to the Statute of Frauds does not need to be in writing if that contract could be performed within one year. The possibility of performance rule has been applied in business dispute lawsuits. For example, in New Dirt, Inc. v. Harrison, 182 So. 3d 773 (Fla. 5th DCA 2015), a lawsuit arose between a corporation and its founder. The founder claimed the corporation had not paid him an agreed upon salary or repaid loans. The trial court held that the statute of frauds barred the claim for repayment of loans, but the Florida Fifth District Court of Appeals reversed because repayment was possible within one year. The more recent case of Movie Prop Rentals LLC v. Kingdom of God Glob. Church, 2023 WL 8275922 (S.D. Fla. Nov. 30, 2023) also illustrates the point. In Movie Prop Rentals LLC, the parties entered an oral contract intending to complete construction of a stage prop within three months. The project was delayed more than a year and the defendants continued paying for the project throughout the delay. However, the court determined the statute of frauds did not apply because Browning simply requires that it be possible the oral contract’s full performance be completed within one year.

Although verbal contracts might be enforceable despite their possible completion within one-year period, it is far more advantageous to memorialize all agreements. It is difficult to prove the terms and conditions of verbal contracts and parties usually dispute these facts. Reducing the contract to writing could alleviate disputes concerning the contract’s content.

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.