BBP Successfully Defends Real Estate Developer

June 20, 2011

 

CHICAGO _ The Statute of Frauds is one of the oldest principles in jurisprudence, dating back to the mid-1600s in England.  Even today in the 21st century, it remains a cornerstone of American contract law with all 50 states having some version of it on the books.

In essence, the Statute of Frauds requires that in order to be enforceable in a court, certain types of contracts must be signed by the parties.  The idea is to prevent bogus claims by requiring the parties to get the agreement in writing - and signed - at the time of formation.  Real estate contracts for a term of more than one year are among those typically held to be within the Statute of Frauds.

The Illinois Appellate Court provided a resounding affirmation of this long-established legal principle last week when it unanimously upheld a lower court's decision to grant summary judgment for the defendant in a case involving a prospective condominium purchaser and a real estate developer.

In Bison v. Invsco Group, Ltd., plaintiffs Jerome and Eftychia Bison sued the defendant real estate developer for breach of contract after the defendant's management company sold two condominium units in Millennium Centre Tower, a preconstruction condo development on Michigan Avenue, to third parties.  The plaintiffs argued they had made a deal with the defendants to purchase the units themselves.  The defendants countered that the plaintiffs' source of financing had dried up, and that since the parties had never signed a contract, the defendants were free to sell the units to third parties upon return of all deposit money to the plaintiffs.

With the help of Burke Burns & Pinelli, Ltd., the defendant, Invsco Group, Ltd., was able to convince the Cook County Circuit Court that the Statute of Frauds prevented the Bisons from stating a claim because there was no signed document between the parties evidencing an agreement to sell the properties to them.  Since there was no issue of material fact regarding the lack of a signed writing, the Court granted the defendant's motion for summary judgment.

On appeal, the Bisons acknowledged they could not produce a formal signed written agreement between the parties.  However, they pointed to the Illinois version of the Statute of Frauds (740 ILCS 80/2), which provides: "No action shall be brought to charge any person upon any contract for the sale of lands, tenements or hereditaments or any interest in or concerning them, for a longer term than one year, unless such contract or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized in writing, signed by such party."

The Bisons argued that the parties had reached agreement in the form of unsigned purchase agreements leading up to a formal sale.  These purchase agreements, along with various letters that they had received from Invsco agents regarding upgrades to the units, they argued, constituted the "memorandum or note thereof" referenced in the statute.  Thus, they contended, the parties had established the existence of a contract for the purchase of the two condo units.

Once again, however, Burke Burns & Pinelli, Ltd. attorneys were able to show that these correspondences, even taken together, did not form a valid contract.  As partner Vincent D. Pinelli pointed out in the appellate brief, the purchase agreements expressly provided that defendants had 15 days to sign the agreement and deliver it to the plaintiffs before "the offer shall be deemed accepted and the Condominium Purchase Agreement made." Since Invsco Group never executed those agreements, Pinelli argued, no contract had ever been formed. 

As for the correspondences, Pinelli and BBP associate Christopher Hales showed that one of the three letters offered as evidence by the plaintiffs was sent 13 months before the plaintiffs allegedly signed any purchase agreements.  The other two letters did not make reference to any purchase agreements between the parties.  To support their argument, Pinelli and Hales cited the 1990 Illinois case of Prodomos v. Poulus, in which the appellate court held that "when several writings are used to satisfy the statute of frauds in support of a contract, each writing must refer expressly to the other writing or be so connected to the other writing as to show by internal evidence that they relate to the same contract."  Prodromos v. Poulus, 202 Ill.App.3d 1024, 1029 (1990). 

In a unanimous 3-0 decision, the First District Appellate Court agreed.  Noting that the plaintiffs could not even provide a single purchase agreement that was signed by either party, the Court said the record showed that the defendant never accepted the plaintiff's offer to purchase the condo units.  The various correspondences, meanwhile, either did not reference the purchase agreements or were mailed well before any purchase agreements could have been signed by the plaintiffs.

"We cannot say that these writings, taken together, amounted to an enforceable real estate sales contract," the Appellate Court agreed, in an opinion written by Justice Cahill.  "In the absence of an enforceable contract, plaintiffs' action for specific performance and breach of contract cannot overcome the requirements of the Illinois statute of frauds."