Ohio Supreme Court upholds Statute of Fraud Requirements of Signed Agreements

The Ohio Supreme yesterday held that "a party's breach of an alleged promise to sign an agreement does not eliminate the requirement under Ohio's statute of frauds that a contract is enforceable only if it is in writing and has been signed by the party against whom enforcement is sought."

The case involved a proposed business arrangement between a group of three title companies collectively known as Olympic Holding Company LLC and a New York-based reinsurance company, ACE Capital Title Reinsurance Company, the Court's summary related. Over a period of months, the parties negotiated terms of a business venture in which the Olympic companies would jointly acquire ownership of a separate Columbus-based company, the Olympic Title Insurance Company (OTIC), and ACE would then enter into a joint venture with OTIC to provide a new integrated system of title insurance and reinsurance that would be marketed nationally.

After exchanging multiple drafts of a proposed reinsurance agreement with ACE, the Olympic Holding companies went forward with the purchase of OTIC. When they informed ACE that the acquisition was complete, ACE advised them that it was likely to be spun off by its corporate parents and was unlikely to proceed with the reinsurance agreement. The day after learning of ACE’s cancellation, the Olympic Group signed and sent its own draft of the residential reinsurance agreement to ACE for signature. ACE refused to execute the agreement; the Olympic companies sued ACE and its parent companies .

Justice Evelyn Lundberg Stratton, in the majority's opinion, wrote that while courts in a number of other jurisdictions have held that, under various circumstances, promissory estoppel may be used to remove an agreement from having to comply with the statute of frauds, "(W)e decline to adopt that exception under the circumstances of this case because it is both unnecessary and damaging to the protections afforded by the statute of frauds."

Justice Stratton noted that the purpose of the statute of frauds is to prescribe a clear standard of what is needed to form a contract, and to strongly motivate parties to follow those requirements by establishing that "unless the parties adopt the prescribed mode of manifesting their wishes, they will be ignored. The reason for ignoring them, for applying the sanction of nullity, is to force them to be self conscious and to express themselves clearly."

"Courts have long recognized that a signed contract constitutes a party's final expression of its agreement," wrote Justice Stratton. ... "Thus, the statute of frauds is necessary because a 'signed writing provides greater assurance that the parties and the public can reliably know when such a transaction occurs.' ... If promissory estoppel is used as a bar to the writing requirements imposed by the statute of frauds, based on a party's oral promise to execute the agreement, the predictability that the statute of frauds brings to contract formation would be eroded. Parties negotiating a contract would no longer know what signifies a final agreement. Promissory estoppel used this way would open contract negotiations to fraud, the very evil that the statute of frauds seeks to prevent."



Ohio "statute of frauds" is embedded in Ohio Revised Code Chapter 1335
Olympic Holding Co., L.L.C. v. ACE Ltd., 2009-Ohio-2057