A long-standing rule is that certain types of contracts must be in writing to be enforceable. The rule is known as the “Statute of Frauds” and dates back to a 1677 enactment of the English Parliament. One type of contract that must be in writing to be enforceable is when the subject matter involves an interest in real estate. In Iowa, a listing agreement to sell property is subject to the rule and must be in writing to be enforceable. But, what about a verbal agreement to find a buyer for a property - is that a “listing agreement” that is subject to the rule?
Here, the defendant owned a restaurant and contacted the plaintiff, a broker, about selling the property. The defendant told the broker how much he wanted for the property and that he would pay the broker 10 percent of the selling price if the broker found a buyer. But, the defendant didn’t want to list the property for fear he would lose sales and value if the public knew he was trying to sell. The broker found a potential buyer and the property was eventually sold to this party, but was done so directly by the defendant without notifying the broker. The broker sued for breach of contract (as well as fraudulent and reckless misrepresentation, breach of implied contract and unjust enrichment) and the defendant moved to dismiss the case because the agreement between them had never been reduced to writing. The district court dismissed all of the broker’s claims and, on appeal, the Iowa Court of Appeals reversed and sent the case back to the district court. On the merits, the district court ruled against the broker on the basis that the oral agreement was subject to the Statute of Frauds and was, therefore unenforceable.
On further review by the Iowa Supreme Court, the case was reversed. While the Court noted that “listing agreements” must be in writing to be enforceable, what was involved here - an agreement to find a buyer without listing the property – was not a listing agreement. While “brokerage agreements” (an agreement between the parties as to the services to be performed) must also be in writing to be enforceable, the defendant did not raise the Iowa writing requirement for brokerage agreements as a basis for denying enforcement of the agreement. Thus, the district court did not rule on the issue and the Supreme Court could not consider it. So, the case goes back to the district court for a determination of the merits of the broker’s allegations. Stewart v. Sisson, 711 N.W.2d 713 (Iowa 2006).