Legal Memorandum: Enforceability of an Oral Promise

Issue: Is a corporation’s oral promise to sell a mortgage at fair market value enforceable?

Area of Law: Business Organizations & Contracts, Litigation & Procedure, Real Estate Law
Keywords: Oral promise; Statute of frauds; Mortgage at fair market value
Jurisdiction: Minnesota
Cited Cases: 271 N.W.2d 436; 23 N.W.2d 362; 222 Minn. 141
Cited Statutes: Minn. Stat. § 513.04; Minn. Stat. § 513.05; Minn. Stat. § 513.33; Minn. Stat. § 513.33, subd. 2
Date: 03/01/2012

If an oral promise is construed as an option contract, it likely falls outside the statute of frauds.  Under the statute of frauds,

No estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing, subscribed by the parties creating, granting, assigning, surrendering, or declaring the same, or by their lawful agent thereunto authorized by writing. This section shall not affect in any manner the power of a testator in the disposition of real estate by will; nor prevent any trust from arising or being extinguished by implication or operation of law.

Minn. Stat. § 513.04.  And,

Every contract for the leasing for a longer period than one year or for the sale of any lands, or any interest in lands, shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, is in writing and subscribed by the party by whom the lease or sale is to be made, or by the party’s lawful agent thereunto authorized in writing; and no such contract, when made by an agent, shall be entitled to record unless the authority of such agent be also recorded.

Minn. Stat. § 513.05. 

But, oral options to purchase an interest in real […]

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