Question

Sutton v. Warner (Cal.).

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Facts.  In 1983, Arlene and Donald Warner inherited a one-third interest in a home at 101
Molimo Street in San Francisco. The Warners bought out the other heirs and obtained a
$170,000 loan on the property. Donald Warner and Kenneth Sutton were friends. In
January 1984, Donald Warner proposed that Sutton and his wife purchase the residence.
His proposal included a $15,000 down payment toward the purchase price of $185,000.
The Suttons were to pay all mortgage payments and real estate taxes on the property for
five years, and at any time during the five-year period they could purchase the house. All
this was agreed to orally. The Suttons paid the down payment and cash payments equal
to the monthly mortgage ($1,881) to the Warners. They paid the annual property taxes
on the house. The Suttons also made improvement to the property. In July 1988, the
Warners reneged on the sales/option agreement. At that time the house had risen in value
to between $250,000 and $320,000. The Suttons sued for specific performance of the
sales agreement. The Warners defended, alleging that the oral promise to sell real estate
had to be in writing under the Statute of Frauds and was therefore unenforceable. The trial
court applied the equitable doctrine of part performance and ordered specific
performance. The Warners appealed.

Issue.
Does the equitable doctrine of part performance take this oral contract for the sale of real
property out of the Statute of Frauds?

Why was the doctrine of part performance developed?

Who would have won if the statute of frauds were applied to this ?

Issue.
Does the equitable doctrine of part performance take this oral contract for the sale of real property out of the Statute of Frauds?

Answer 1

1) As per the Part Performance Doctrine an oral contract can be authorized and sanctioned by the court as a legal contract regardless of its contractual inadequacies. If a party under a contract implements Part Performance Doctrine it can certainly prove in the court that the contract legally existed in spite of the absence of any written documentation of the contract.

When we talk about real estate contracts the Part Performance Doctrine is mostly applied by the buyers and it acts as an exception to the ‘Statute of Fraud’ rule enforced under sale of real estate.

Since Suttons paid the down payment amounting to $15000, paid cash amounting to $1,881 per month due under loan of $170,000 taken by Warners, paid taxes for Warner’s property and even made certain improvements in the property by itself it will be correct to state that all these acts performed by Suttons were an essential part of the contract.

The acts performed by Suttons were as per the oral agreement between both the parties and as Warners asserted that there was an oral agreement between the two, it provides sufficient evidence in the court to take off this oral contract from the ‘Statute of Fraud’.

2) Doctrine of Part Performance was developed because certain acts of Suttons were in reliance to the oral agreement entered by Suttons with the Warners under the sale of property and since these acts provided sufficient evidences of part performance by Suttons the oral contact was considered as a legal contract despite of the absence of written proofs.

3) If ‘Statute of Fraud’ was applied to this case Warners would have won since they would have proved that there was no written agreement or evidences of the contract which is required as per the ‘Statute of Fraud’ regulation.