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The Tennessee Statute of Frauds Can Apply to Contract Modifications

The Tennessee Statute of Frauds requires several types of contracts to be memorialized in a writing (or combination of writings) and signed in order to be enforceable. The three most important types of contracts covered by the Statute of Frauds, at least from a commercial standpoint, are contracts for the sale of land and leases longer than one year; agreements to pay the debts of another; and contracts that cannot possibly be performed within one year.

If a contract is covered by the Statute, does a modification of that contract also have to meet the requirements of the Statute? There is Tennessee case law to support that argument.  The case of Davidson v. Wilson is such a case, and one that demonstrates the ability of the Statute of Frauds to cause what many would describe as an inequitable result in a breach of contract case.

Here are the key facts of that case:

  • Buyer and Seller entered into a written contract providing that Seller would sell a specific 50 acre tract to Buyers for $124,750
  • The closing date for the sale in the written contract was December 5, 2005
  • On the closing date of December 5, the Seller sent, by U.S. mail, a warranty deed to the Buyers
  • The warranty deed recited that the tract was 50 acres “more or less”
  • The warranty deed also provided that the legal description of the tract was provided “without the benefit of a survey”
  • Buyers were concerned, as they should have been, about the deed
  • According to Buyers, after they received the deed, they had numerous conversations with the Seller which resulted in an oral modification of the terms of the written contract
  • According to Buyers, the oral modification was an agreement to extend the closing date until the Buyers had obtained a survey
  • The Seller denied that any such agreement modifying the written contract had been reached
  • The facts of the case strongly compelled the conclusion reached by the trial court: That the Seller’s version of events was not credible and that he had taken the position that the Buyers had breached by not closing on time only after he was able to obtain a contract for a significantly higher price for the tract from a third party

The Court of Appeals of Tennessee reversed the trial court. It did not challenge the trial court’s findings about the respective testimony of the litigants. It held that, since the alleged oral agreement changed the “essential terms” of the contract, it had to be in a writing which complied with the Statute of Frauds.

Tennessee courts have, in many, many cases, found ways, sometimes creative, to prevent the Statute of Frauds from causing inequitable results. Therefore, just because of this case, do not assume that, under similar facts, the trial court or court of appeals will reach a similar result.

One way to distinguish this case is to argue that the modification in your particular case did not alter the essential terms of the contract. I think a good argument can be made that the modifications made in the Davidson case did not change the essential terms, although the court in that case would probably not have bitten on that argument.