In a case recently handed down by the California Supreme Court, it was held that a party to an oral agreement to pay a commission on the sale of real estate may be estopped from asserting the statute of frauds to avoid paying the commission if unconscionable injury or unjust enrichment would result.
The statute of frauds provides that a contract for the sale of real property is unenforceable unless the essential terms of the agreement are in writing. The statute of frauds also applies to an agreement to pay commission on the sale of real property.
Simply stated, the doctrine of estoppel provides that if a person has in good faith performed his part of the bargain, the other party cannot refuse to perform by using the statute of frauds as a shield against liability. If the rule were otherwise, the party refusing to perform would be unjustly enriched, i.e., he would enjoy the benefits of the bargain but not have to perform his obligations thereunder.
The concepts behind the doctrines of estoppel, unjust enrichment and the statute of frauds may be difficult to comprehend in a short article. What is important to know, however, is that as a general proposition, contracts pertaining to the sale of real property must be in writing. The estoppel exception would not apply in most cases, but should not be overlooked in a proper case.