Commercial Litigation and Arbitration

The Judicial Admission Exception to the Statute of Frauds — Sufficient for Party to Admit Essential Facts, Not Necessarily the Conclusion That a Contract Exists

Packgen v. BP Exploration & Prod. Co., 957 F. Supp. 2d 58 (D. Me. 2013):

2. The Judicial Admission Exception

The statute of frauds contains a "judicial admission" exception that applies:

   If the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted[.]

11 M.R.S. § 2-201(3)(b); see generally Corbin on Contracts § 14.2 (Dec. 2012). The Maine Law Court explained:

   Although limited in scope, this provision of the Code was intended to deny the benefit of the statute of frauds to one who in court, whether by pleading, testimony or otherwise, admits the existence of the oral contract sued upon. The ultimate design of this legislation is to limit the use of the statute of frauds as a shield against unfounded fraudulent claims resting in parol, while removing from the arsenal of an unscrupulous litigant an unrighteous defense against a just claim.

Dehahn v. Innes, 356 A.2d 711, 717 (Me. 1976). In other words, the judicial admission exception prevents a defendant from thumbing its nose at a plaintiff by admitting an oral agreement while at the same time raising a statute of frauds defense. The admission need not be of a "contract" or an "agreement" per se; an admission of "the existence of the facts necessary to the formation of the oral agreement" is sufficient. Paris Utility Dist. v. A.C. Lawrence Leather Co., 665 F. Supp. 944, 957 (D. Me. 1987) (citing Dehahn, 356 A.2d at 717-18); see also Fitzwilliam v. Flood, Civil Action Docket No. CV-90-176, 1990 Me. Super. LEXIS 120, *3-5; Corbin on Contracts § 14.2[4] (Dec. 2012) ("an admission of the facts upon which the allegation of contract rests is sufficient"); Lawrence's Anderson on the Uniform Commercial Code 2-201:304 (Dec. 2012) ("It is not necessary that there be an express statement that the party 'admits' the making of an oral 'contract.' It is sufficient that the party's words or conduct reasonably lead to that conclusion"). The Seventh Circuit explained:

   [A]n admission . . . need not expressly acknowledge the existence of a contract, nor need it describe all of its terms. The admission need only describe conduct or circumstances from which the trier of fact can infer a contract. Whether the defendants' statements admit the existence of a contract is a question of fact. Thus, summary judgment should not be granted if there is a genuine issue whether the statements admit the existence of a contract.

Gruen Industries, Inc. v. Biller, 608 F.2d 274, 278 (7th Cir. 1979). Similarly, a leading treatise advises:

   Dismissal should not be granted where controversy appears to relate, not to the facts themselves, but rather to their implications or to the applicable rule of law. If the defendant, though denying having entered a "contract," admits facts which may reasonably be held to verify plaintiff's allegations, the statutory defense should be barred, even though reasonable persons might differ as to the meaning of the facts admitted. The statute does not give a party the privilege of imposing its private interpretations or conclusions upon the court. . . .

On the other hand, if the critical facts themselves are the focus of controversy, summary judgment for defendant is proper . . . . Issues of credibility are precisely the domain of the statute, and this is true even where plaintiff's version of the facts is as credible as defendant's. The survival of such issues beyond the discovery period should preclude trial on the merits. In this way, defendant has the benefit of the statute commensurate with its fundamental purpose, while plaintiff is protected from defendant's good faith misapprehension of law and, perhaps, to a lesser extent, from perjury and misrecollection of fact as well.

Corbin on Contracts § 14.2[4].

Although the statute explicitly requires that the admission be made "in [the defendant's] pleading, testimony or otherwise in court," a treatise reports that "[t]he majority of courts" has nonetheless held "that a person who makes a non-judicial admission of a contract cannot plead noncompliance with the statute of frauds as a defense to its enforcement. Thus, it is said that, when the defendant admits making an oral contract, it may be enforced, although the requirements of the statute of frauds have not been satisfied." Lawrence's Anderson on the Uniform Commercial Code 2-201:310.

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