Generally speaking a party can enforce an oral agreement. However, courts will not enforce certain contracts unless they are in writing. For example, under Virginia Code § 11-2, commonly known as the Statute of Frauds, an agreement or contract for services to be performed in the sale of real estate by a real estate broker or real estate sales person is not enforceable “[u]nless a promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, is in writing and signed by the party to be charged or his agent . . . .”
Most real estate agents and brokers understand the importance of having written listing agreements with their sellers. However, a recent decision of the Supreme Court of Virginia points out that even in the absence of a written listing agreement, an oral listing contract may be enforceable if there is sufficient documentation to remove it from the bar to enforcement of the Statute of Frauds. The Virginia Supreme Court, in the case of C. Porter Vaughan, Inc., Realtors v. Most Reverend Francis X. DiLorenzo, Bishop of The Catholic Diocese of Richmond, 279 Va. 449, 689 S.E.2d 656 (2010), better defined what is meant by “sufficient documentation.”
The purpose of the Statute of Frauds is to ensure that there is reliable evidence of the existence and terms of certain types of contracts in order to prevent acts of fraud. In the case of contracts for services related to the sale of real estate, the Virginia Supreme Court previously stated that a major purpose of the statute is to protect the public from unscrupulous real estate agents and brokers. H-B Ltd. Partnership v. Wimmer, 220 Va. 176, 179, 257 S.E.2d 770, 773 (1979).
In Vaughn, the recent Supreme Court case, a Richmond broker sued a seller with whom the broker alleged an oral contract to employ the broker to sell certain property. The Circuit Court for the City of Richmond held that the suit was barred by the statute of frauds, finding that various writings offered by the broker were not sufficient to overcome the statute’s bar to enforcement of an oral contract. The Supreme Court reversed the Circuit Court and remanded the case for a trial to determine the precise terms of the oral contract.
The Court held that a writing is sufficient to remove the bar of the statute of frauds if it “contains the essential terms of the agreement.” In this case, the writing that the Court held to be sufficient was a previous, failed contract for the sale of the same property to a party different from the ultimate purchaser. That contract identified the seller and buyer, identified the property at issue, gave an “approximate” purchase price, and provided for a brokerage commission to be paid to the broker at closing. The Court held that “[t]his writing alone is sufficient written evidence of an oral agreement between [the broker and the seller] to remove the bar of the statute of frauds.” The Court noted in closing that “[o]f course, [the broker] will bear the burden of proof concerning the oral agreement at trial.”
It is always better to have your written agreements because the terms are defined and definite. Furthermore, certain contracts must be in writing. However, when in doubt, contact an attorney experienced in real estate litigation to answer your questions.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
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