Contracts involving an interest in real estate must be in writing to be enforceable. That rule is known as the “Statute of Frauds.” But, there are exceptions to the rule. One of those is for contracts that can be performed within one year. That’s why oral farm leases don’t violate the rule – they are presumed to be successive one-year contracts that can be terminated by giving 6-months notice of termination (notice to be given by September 1 to terminate the lease effective the following March 1). Another exception is where one party justifiably relies on the oral statements of the other party to their own detriment. That is known as promissory estoppel, and the party against whom the contract is sought to be enforced will not be able to raise the Statute of Frauds as a defense to a claim that the oral contract is enforceable.
Here, a tenant and landlord entered into an oral contract for the raising of hay. They didn’t reduce their agreement to writing, but rather agreed to continue the arrangement until the land could be developed. They agreed to split the hay crop evenly, and the tenant was to provide the necessary machinery, fuel and labor necessary for cultivating and harvesting the crop. Although it was disputed, the landlord claimed that the parties had agreed that the tenant would either purchase the landlord’s share of the hay crop or arrange for its sale and remit the proceeds to the landlord.
The crop was harvested and baled and the tenant tried to sell the round bales, but was unable to find a buyer. The next year, the landlord told the tenant that the land would be rented to someone else. The landlord claimed that the lease was only a one-year agreement with an option to renew, while the tenant claimed that the lease was to run for four to seven years. The trial court agreed with the tenant on the breach of contract claim and awarded the tenant $8,400.
On appeal, the court affirmed. While the landlord claimed that the lease was invalid because of the Statute of Frauds, the court reasoned that the promissory estoppel exception applied – the tenant had sufficiently demonstrated the existence of an oral contract and reasonable reliance on its terms. Akers v. Oak Hill Plantation, L.C., No. 7-625/07-0318, Iowa App. LEXIS 1229 (Iowa Ct. App. Nov. 29, 2007).