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United States Court of Appeals for the Seventh Circuit - 851 F.2d 920
Tags: Statute of Frauds
tl;dr:
Denying the existence of an oral contract to sell a Frank Lloyd Wright chair is sufficient to raise a statute of frauds defense.Video Summary
Case Summary
In the 1988 case of DF Activities Corp. v. Brown in the Seventh Circuit Court of Appeals, DF Activities Corp. sued former Frank Lloyd Wright house and chair owner, Dorothea Brown, for breach of contract. DF accused Brown of agreeing to sell a Wright-designed chair to them for $60,000 over a phone call with art director Sarah-Ann Briggs. DF sent a letter and a $30,000 check to Brown, but Brown returned them, saying she made other arrangements for the chair, which she later sold for $198,000. DF then sued for the difference between the agreed price and sale price.
Brown requested the lawsuit be dismissed due to the statute of frauds, which mandates written contracts for sales over $500. Brown denied agreeing to any sale or recalling the phone call with Briggs. She submitted letters showing both parties withdrawing their offers. The district court dismissed the suit, and the appeals court upheld the dismissal, saying the statute of frauds defense stood.
The court stated an exception to the statute of frauds when the opposite party admits to a contract, but found that Brown's handwritten note was a denial, not an admission. They also rejected DF's request for further discovery through deposition, which they argued would undermine the purpose of the statute of frauds.
The case is important for demonstrating the statute of frauds, which requires certain contracts (like sales over $500, under the Uniform Commercial Code Section 2-201) to be in writing to be enforceable. The statute aims to prevent fraud and mistakes by requiring written records, but exceptions exist, such as party admissions, partial performance, and others that validate oral contracts with sufficient evidence.
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DF Activities Corporation sued Dorothy Brown for breach of contract after she denied agreeing to sell a Frank Lloyd Wright chair to them for $60,000. Brown argued that the statute of frauds in the Uniform Commercial Code barred the suit. DF sought to depose Brown to prove that the alleged oral contract may be within the statutory exception if Brown admits in court that a contract for sale was made. The district judge dismissed the suit, and DF appealed. The court believes that when a defendant swears in an affidavit that there was no contract, there is no point in keeping the lawsuit alive. The judicial-admission exception to the statute of frauds began as a common-sense recognition that if the defendant admitted in a pleading that he had made a contract with the plaintiff, the purpose of the statute of frauds was fulfilled. However, the courts later rejected the exception due to concerns of perjury. The exception is now firmly established, but the concern with perjury supports the position taken by Mrs. Brown in this case.
The dissenting opinion in this case disagrees with the majority's decision that additional discovery is not allowed when a defendant raises a statute of frauds defense and denies forming an oral contract with the plaintiff. The dissenting opinion believes that district courts should have the discretion to determine the limits of permissible discovery in these cases. However, the district court in this case abused its discretion in denying additional discovery, especially since the defendant's affidavit did not provide a conclusive denial of contract formation. The dissenting opinion believes that district courts should have the authority to limit discovery in these cases, but they should also have the discretion to determine when additional discovery is necessary and when it is being sought solely to harass a defendant who is entitled to the protection of the statute of frauds.
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