Contracts The Statute of Frauds and Contract Law

The "Statute of Frauds" (commonly abbreviated as "SOF") is a rule of law requiring certain kinds of contracts to be written (not oral or "verbal") and be signed by all parties to an agreement in order to be binding. The types of contracts and rules that comprise of the Statute of Frauds can vary from state to state and within each jurisdiction. In the United States, there are some general principles which will be covered by this article.

The Purpose of the Statute of Frauds

This statute was created to aid society in preventing injury from fraudulent conduct. Oral agreements are vague and frequently don't provide sufficient proof of what terms were agreed by parties to a contract, leaving one party to make fraudulent or false claims and forcing the other party to prove the lie. But written agreements, which include signatures, create a firm "record" of the deal and provide greater assurances and evidence of the actual terms that were agreed to by the parties when the deal was struck. By requiring certain types of important agreements be contained in a signed writing, it further helps reduce the chances of litigation, creates clarity of the terms and intentions of agreements, and also provides people with the opportunity to review the terms and conditions of an important deal one last time before making the contract final.

What Types of contracts are Governed by a Statute of Frauds

Marriage

Year

Land

Executors

Goods

Suretyship

The Formal Requirements of the Statute of Frauds

• be in written form
• identify the subject matter of the contact so it is reasonably understood (e.g. the purchase of "bowling balls")
• provide the essential terms of the agreement (with sales of goods it is the quantity and price of the goods)
• have the signature of both parties or, per the UCC for sales of goods, the signature of "the party to be charged" (the party contesting the validity of a contract.)

The Application and Effect of the Statute of Frauds

If the Statute of Frauds defense is raised successfully against an agreement, it makes the contract cancellable or "voidable" at the option of the party pleading the Statute of Frauds. Just because an agreement may not comply with the Statute of Frauds does not render it "void" or automatically terminated, for example, an illegal agreement to purchase cocaine. That agreement is considered not a valid agreement at all since it is illegal. If the parties had an oral agreement for the purchase of $800 of beer, both parties can agree in court that a valid contract exists which can be enforced.

Exceptions to the Statue of Frauds

Specially Manufactured Goods

Written Merchants Confirmation

Admission in Court

Partial Performance

Promissory Estoppel

• • A clear and definite offer was made (there was an offer of $700 to paint the house)
  • There was a reasonable expectation of reliance on the offer (Jill reasonably expected Bill to rely upon the offer - it was clear Jill wasn't joking.)
  • There was a reasonable reliance on the offer by the party receiving the offer (in our example, Jill's promise to pay Bill $700 to paint the house
  • There was detrimental reliance on the offer (Bill's spending $300 to purchase paint for the job)

  Conclusion and Suggestion

  Even if the Statue of Frauds may not apply to a specific agreement, it is always excellent practice to try to reduce the essential terms of any contract to a written, signed document. Even if an oral contract is valid and cannot be invalidated by the Statute of Frauds, the terms are usually very difficult to prove in absence of a written agreement and there will frequently be disputes later as to the exact terms of the deal.