A Written Contract Is Set in Stone…or Is It?

by Michael J. Gelfand, Esq. / Published January 2015

Does “No” mean no, maybe, or even yes? When an association enters into a contract, can you expect the contract’s blatant “no oral modifications” statement to be followed? Think again. What you see may not be what you get!

A Florida appellate court recently ruled that a claimant could not rely on an “oral agreement” to extend a due date where the contract specifically prohibited oral modifications of the written contract. In Okeechobee Resorts, LLC v. E Z Cash Pawn, Inc., No. 4D13-2674 (Fla. 4th DCA, September 3, 2014), the dispute involved a pawn shop, hopefully far from how associations manage their finances. But the court’s holding can be applied to many other Florida contracts, including those made by community associations. Okeechobee pledged a truck as collateral to obtain a loan from E Z Cash. Although the written contract stated that any pawn “may be extended upon mutual agreement of the parties” the contract specifically provided that “[n]o oral representation shall in any way change or modify these written conditions and such oral representation shall in no way be binding upon the issuer of this pawn ticket… verbal agreements for additional days are non-binding.”

After Okeechobee timely failed to pay the loan, E Z Cash sold the truck. Okeechobee sued E Z Cash alleging that the parties orally agreed to extend the default date several times and that Okeechobee relied on the oral extensions to sell other property in order to obtain the funds to repay the loan. The trial court entered judgment in favor of E Z Cash.

The Florida appellate court agreed with the decision of the trial court. First, the appellate court explained that oral modifications of contracts are enforceable when the contract is silent on oral modifications. However, when a contract plainly states that any modification must be in writing, then following a 1956 Florida Supreme Court decision, the contract may still be modified by an oral agreement, but only if the oral agreement “has been accepted and acted upon by the parties in such manner as would work a fraud on either party to refuse to enforce it.”

In other words, there is a three-part test. A claimant must prove more than just a “mutual agreement” or “detrimental reliance.” The claimant must prove that:

• the parties agreed upon and accepted the oral modification;
• both parties performed consistent with the terms of the alleged oral modification; and
• due to the plaintiff’s performance under the contract as amended, the defendant received and accepted a benefit that it otherwise was not entitled to under the original contract.

The appellate court concluded that Okeechobee failed to prove that E Z Cash would unfairly reap a benefit that E Z Cash was not entitled to because E Z Cash received nothing more than it was entitled to under the contract—to sell the truck in the event of a default.

For Florida community associations, this decision identifies boundaries, sort of like commercial minefields, where a vendor or contractor can rely on an oral modification of a written contract and the dangers of associations not properly documenting their agreements. If you have any questions about the terms and conditions of specific contracts, contact your association’s attorney.

Lawsuit Continues Even After Tenant Vacates Unit

An association may find itself suing to remove a tenant and in mid-suit the tenant vacates. What happens to the lawsuit? Better yet, what happens to the association’s attorney’s fees claim? It may depend on what the association asked the court to do at the start of the lawsuit.

In Shteyn v. Grandview Palace Condo Assn., 3D14-1910 (Fla. 3rd DCA, September 24, 2014), a Florida appellate court ruled that a trial court did not have to dismiss a dispute between a condominium association and a tenant that vacated a unit. The facts of this case indicate that a condominium association sued the owner of a condominium unit and the unit’s tenants seeking the tenants’ eviction, ejectment, and to enjoin the defendants from violating the association’s rules and regulations.

After the lawsuit was filed, the tenants moved out of the unit. The tenants obtained a summary judgment on the eviction and ejectment claims because the two claims were rendered moot by the tenants’ vacating the unit; however, the trial court denied the tenants’ motion for summary judgment on the injunction claim.

The Florida appellate court denied the tenants’ petition to prohibit the trial court from continuing with the case. The tenants asserted that the Condominium Act’s jurisdiction for injunctive relief claims is limited to actions against a tenant, not a former tenant.

The tenants conceded that they were occupying the unit at the time that the lawsuit was filed. “Hence, pursuant to the unambiguous language of the subject statute [§718.303(1)], the circuit court plainly had subject matter jurisdiction at the time the action was brought,” the court stated. “The defendants’ act of moving out of the unit after the lawsuit was filed in no way divested the circuit court of such jurisdiction.” The court also remarked that the claim for injunctive relief sought a permanent injunction against the tenants from residing in any condominium unit governed by the association; thus, presumably the lawsuit would continue regardless of where the tenants lived.

This decision is likely helpful for Florida community associations seeking to avoid a claim from becoming moot when there has been compliance after a lawsuit has been filed. The reason this case survived is because the association sought injunctive relief in addition to eviction of the tenant. Perhaps of greater potential importance, the association may be able to seek attorney’s fees as the prevailing party.