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Oral Agreement and the Statute of Frauds: Bonfire LLC v. Zacharia

August 5, 2020

Plaintiff, Bonfire, LLC, brought a breach of contract action against defendants, Michael R. Zacharia and 1132 19th Street NW, LLC, arising out of a 2014 lease agreement in which Bonfire agreed to rent property located in the District of Columbia in order to operate a restaurant.
Plaintiff alleges that the defendants verbally granted it a right of first refusal to purchase the property if defendants intended to sell the property, but that the defendants breached the oral agreement and sold the property without notifying the plaintiff. Plaintiff also alleged that the defendants committed fraud by failing to honor the right of first refusal, and by misrepresenting an ownership stake in the property.
The defendants argued that an oral promise to grant a right of first refusal does not constitute a valid contract because any promise related to real estate would need to be in writing under the statute of frauds.  The Court examined District of Columbia law as it related to the statute of frauds and also examined exceptions to the statute and agreed.
Defendants also argued that the integration clause in the contract disclaimed reliance on prior oral promises. The Court, examining the contractual language, also agreed, finding that the contract was fully integrated as the parties had agreed “not to be bound by any terms, conditions, oral statements, warranties or representations not herein contained.”
As for the misrepresentation argument by the plaintiff, the Court held that there were not sufficient facts to state a claim for misrepresentation where plaintiff’s alleged reliance was not reasonable and where plaintiff had not alleged it relied on the misrepresentation to its detriment, nor pled any facts to show that it was damaged by the misrepresentation.