Statute of Frauds
Definition
The statute of frauds is a legal doctrine that requires certain types of contracts to be in writing and signed to be enforceable. Its purpose is to reduce misunderstandings and prevent fraudulent claims about the existence or terms of important agreements.
Purpose
- Evidentiary: Provides written proof of the parties’ agreement and its terms.
- Cautionary: Encourages parties to consider and formalize serious transactions before committing.
Brief history
Originating in the English Act for Prevention of Frauds and Perjuryes (1677), the statute was designed to curb perjury and fraud in high‑value transactions by requiring written documentation. Many common‑law jurisdictions, including the United States, adopted similar rules; states may vary in details.
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Contracts commonly covered
Although specifics vary by jurisdiction, the statute typically applies to:
– Agreements for the sale or transfer of real estate (land).
– Contracts that cannot be performed within one year from the date of making the contract.
– Promises made in consideration of marriage (e.g., certain marital agreements).
– Promises by an executor to pay estate debts from personal funds.
– Contracts to answer for the debt or duty of another (suretyship/guarantees).
– Contracts for the sale of goods at or above the statutory dollar threshold (under the Uniform Commercial Code, generally $500 or more).
Formal requirements
To satisfy the statute of frauds, a writing usually must:
– Identify the parties.
– State the essential terms with reasonable certainty (e.g., price or quantity for goods, description of land).
– Be signed by the party to be charged (or by that party’s authorized agent).
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Practical notes:
– Electronic messages, emails, and invoices can satisfy the writing requirement if they meet the content and signature standards under applicable law.
– Under the UCC (sale of goods), a written confirmation from one merchant sent to another can bind the receiving merchant unless objection is made within a set period (commonly 10 days).
Common exceptions and doctrines that allow enforcement of oral agreements
Even when the statute would normally require a writing, courts often enforce oral promises in certain situations to prevent injustice:
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- Partial performance: When one party has substantially performed (e.g., taken possession of real estate and paid part of the purchase price), a court may enforce the agreement to the extent necessary to avoid unfairness.
- Promissory estoppel: If one party reasonably relies on the other’s promise and suffers a substantial detriment as a result, a court may enforce the promise to prevent injustice.
- Specially manufactured goods: If goods are specially made for a buyer and cannot be resold in the ordinary course, an oral order may be enforceable once the seller has started work or made commitments.
- Payment or delivery: If the buyer has paid for goods or the seller has delivered goods, that conduct may support enforcement despite lack of a signed writing.
- Judicial admission: A party’s admission in pleadings or testimony that an agreement existed can remove the statute-of-frauds defense.
Examples
- Real estate sale: A verbal agreement to sell land is generally unenforceable unless reduced to a signed writing or partial performance establishes the deal.
- One‑year contract: An oral employment agreement that cannot possibly be completed within one year typically must be in writing.
- Sale of goods: A phone order for goods worth $600 generally falls under the statute unless an exception applies (e.g., specially manufactured, partial payment).
Practical tips
- Get important agreements in writing and signed by the parties involved.
- Include essential terms (parties, subject matter, price/quantity, duration, signatures).
- Preserve emails and written confirmations; they may qualify as the required writing.
- If relying on an oral promise, document any partial performance, payments, or reliance to support an exception.
- Check local law: statutes and case law vary by jurisdiction and can affect how the doctrine is applied.
Key takeaways
- The statute of frauds requires certain contracts to be written to be enforceable, primarily to prevent fraud and clarify important transactions.
- Typical categories include sales of land, contracts not performable within one year, certain marriage-related promises, surety contracts, and sales of goods above a statutory threshold.
- Exceptions such as partial performance, promissory estoppel, specially manufactured goods, and judicial admissions can allow enforcement of otherwise unwritten agreements.
- Because rules and dollar thresholds vary, obtain written contracts and local legal advice for significant transactions.