Legal Memorandum: Damages for Breach of Unenforceable Contract

Issue: Does a contract that is unenforceable under the statute of frauds afford any basis for an action to recover damages occasioned by its breach?

“It is elementary, of course, that a contract unenforceable under the statute of frauds affords no basis for an action to recover damages occasioned by its breach.”  Mildfelt v. Lair, 561 P.2d 805, 813 (Kan. 1977).  An “impermissible attempt to recharacterize the breach of contract claim” into an independent tort, Wade v. EMCASCO Ins. Co., 483 F.3d 657, 675 (10th Cir. 2007) (applying Kansas law), “would thereby thwart [the statute of fraud’s] basic purpose of preventing the subjection of real property to the jeopardy and hazard of oral agreements and would defeat and bring to naught the remedy for the very mischief the statute was enacted to provide against.”  Mildfelt, 561 P.2d at 567 (quoting Cohen v. Pullman Co., 243 F.2d 725, 728-29 (5th Cir. 1957)).

Additionally, an independent fraud must cause damages distinct from those claimed under a breach of contract.  Heller v. Martin, 14 Kan. App. 2d 48, 782 P.2d 858 (1989); Wade, 483 F.3d at 675 (“the fraud must have resulted in damages greater than those caused by the breach of contract alone”). 

“‘It is a well accepted general rule that an unjustified breach of a contract does not entitle a party to punitive damages.'”  Atkinson v. Orkin Exterminating Co., Inc., 5 Kan. App. 2d 739, 745, 625 P.2d 505, 511 (1981) (quoting Hess v. Jarboe, 201 Kan. 705, 708-9, 443 P.2d 294 (1968)). 

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