When Oral Business Contracts Are Enforceable in Georgia: Exceptions to the Statute of Frauds
In our previous blog post, Enforceability of Oral Business Contracts in Georgia, we explained the types of contracts that must be in writing to be enforceable under Georgia law. The law requiring these types of contracts to be in writing is called the Statute of Frauds. There are, of course, exceptions to this rule. Under O.C.G.A. § 13-5-31, the following types of cases are excluded from the requirement that they must be in writing in order to be enforceable:
- When the contract has been fully executed;
- Where there has been performance on one side, accepted by the other in accordance with the contract;
- Where there has been such part performance of the contract as would render it a fraud of the party refusing to comply if the court did not compel a performance.
That means that an oral contract is enforceable even if it falls under the Statute of Frauds as long as it meets one of the 3 requirements above.
Atlantis Realty Co., Inc. v. Morris, 142 Ga. App. 470, 236 S.E.2d 163, (Ga. Ct. App. 1977), provides an example of how the exception to the Statute of Frauds is applied.
Atlantis, a real estate firm, hired 3 salesmen to find tenants for a shopping center managed by Atlantis. Atlantis agreed to pay the 3 salesmen 75% of the management commission and the remaining 25% would go to Atlantis for as long as the tenants continued to occupy the leased premises. This agreement was oral. The commissions were paid for 10 years when suddenly Atlantis unilaterally changed its policy and notified the salesmen that it would stop paying them any further commissions. The salesmen sued Atlantis.
Atlantis argued that because the contract could not be performed in less than 1 year, it fell within the statute of frauds. Therefore, the contract was not enforceable because it was oral and not written.
The court held in favor of the salesmen because all of the tenants recruited by the salesmen were still occupying the premises when Atlantis decided to stop paying commissions. Atlantis had agreed to pay the commissions so long as the tenants continued to occupy the leased premises. The salesmen were responsible for finding the tenants. Once the salesmen found tenants, they had completed their performance under the contract. Since there was full compliance by the salesmen, the oral contract was not within the Statute of Frauds.
If you have any questions whether your oral contract is enforceable, please contact V&T Law today.