The doctrine of estoppel to assert the statute of frauds is applied by California courts to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the unconscionable injury that would result from denying the contract's enforcement after one party has been induced by the other to seriously change his position in reliance on the contract or in the unjust enrichment that would result if a party who has received the benefits of the other's performance were allowed to rely upon the statute. In many cases both elements are present. Thus, not only may one party have so seriously changed his position in reliance upon the contract that he would suffer unconscionable injury if it were not enforced, but the other may have reaped the contract's benefits so that he would be unjustly enriched if he could escape its obligations.
A couple orally promised a child that if he stayed with them and worked, he would receive the bulk of their estates when they died. Upon the child's compliance, the couple placed their property in joint tenancy and executed wills leaving the majority of their property to the child. However, one member of the couple secretly revised his will, leaving his part of his joint tenancy to a third party. Thus, after the couple's death and the probation of the wills, the third party brought an action for partition of the joint tenancy. The trial court found that the third party was a constructive trustee of the property he received as a breach of the couple's agreement with the child. On appeal, the third party argued that the statute of frauds barred enforcement of the oral agreement. The case was appealed to the Supreme Court of California.
Was the statute of frauds applicable?
The court held that the child's detrimental reliance on the terms of the agreement, combined with the unjust enrichment that would result if the agreement were invalidated estopped the third party's use of the statute of frauds to strike the agreement.