Statutory requirement that certain kinds of Contracts must be in writing to be enforceable. Contracts to answer to a creditor for the debt of another, contracts made in consideration of marriage, contracts for the sale of real estate or affecting any interest in real estate, and contracts not to be performed within one year of their making normally must be in writing and signed by the party sought to be bound by the contract.
Statute of Frauds
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A state law that provides that certain Contracts must be in writing in order to be enforceable. Applied toDeeds, Mortgages and other Real Estate contracts, with the exception of Leases for periods shorter than one year.
Example: An oral contract for the sale of land is considered unenforceable under the statute of frauds.
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n
A requirement that, for legal validity, contracts for conveying real property or contracts for the performance of personal services requiring a year or more to perform must be in writing.
| Columbia Encyclopedia: Statute of Frauds |
Statute of Frauds, basis of most modern laws requiring that certain promises must be in writing in order to be enforceable; it was passed by the English Parliament in 1677. In the United States, although state laws vary, most require written agreements in four types of contracts: contracts to assume the obligation of another; contracts that cannot be performed within one year; contracts for the sale of land; and contracts for the sale of goods.
| Law Encyclopedia: Statute of Frauds |
This entry contains information applicable to United States law only.
A type of state law, modeled after an old English law, that requires certain types of contracts to be in writing.
U.S. law has adopted a 1677 English law, called the Statute of Frauds, which is a device employed as a defense in a breach of contract lawsuit. Every state has some type of statute of frauds; the law's purpose is to prevent the possibility of a nonexistent agreement between two parties being "proved" by perjury or fraud. This objective is accomplished by prescribing that particular contracts not be enforced unless a written note or memorandum of agreement exists that is signed by the persons bound by the contract's terms or their authorized representatives.
The statute of frauds is invoked by a defendant in a breach of contract action. If the defendant can establish that the contract he has failed to perform is legally unenforceable because it has not satisfied the requirement of the statute, then the defendant cannot be liable for its breach. For example, suppose that a plaintiff claims that a defendant agreed to pay her a commission for selling his building. If the defendant can demonstrate that no commission contract was signed, the statute of frauds will prevent the plaintiff from recovering the commission.
The English Statute of Frauds, which was enacted by Parliament in 1677, applied to only specific types of contracts. These included promises to a creditor of another to pay that individual's debts when they became due, a marriage contract or promise to marry, other than the mutual promises of a man and woman to wed, a contract for the sale of real estate, and a contract that cannot be performed within one year of its formation and has not been completely performed by one side.
States have expanded the application of the statute to other categories of contracts, such as a life insurance contract that is not to be performed within the lifetime of the person making the promise. It also applies to a contract to bequeath or devise property by will and to a contract that authorizes an agent to sell real property for a commission.
A strict application of the statute of frauds can produce an unjust result. A party, who in good faith believes a contract exists and therefore spends time and money to perform the contract, would be unable to force the other party to perform because the agreement was not in writing. Therefore, courts often employ the term part performance to determine whether a plaintiff's conduct based on her belief that a contract exists justifies enforcement of the contract even though it has failed to comply with the statute of frauds. Part performance refers to acts performed by the plaintiff in reliance on the performance of the duties imposed on the defendant by the terms of the contract. The plaintiff's actions must be substantial in order to demonstrate that he actually has relied on the terms of the contract.
When the alleged contract involves real property, the acts of taking possession and making part payment — when performed in reliance upon an oral contract under circumstances that clearly show a buyer-seller relationship — are usually sufficient to remove a contract from the requirements of the statute of frauds. The oral contract, therefore, would be enforced. However, payment or possession alone generally will not suffice to overcome the statute of frauds.
Where services have been performed based upon a contract that is unenforceable because of the statute of frauds, the value of those services can nevertheless be recovered on the basis of quantum meruit, or the reasonable value of those services. If a person performs services in reliance on an oral promise that he will inherit certain property and that promise is not fulfilled, that individual can sue the decedent's estate on a quantum meruit basis for the reasonable value of his services.
If a contract is unenforceable, a person can recover expenses incurred at the other party's request even though they pertain to the unenforceable contract. The recovery of expenses is not affected because the law implies a promise by the defendant to pay for expenses incurred at her request, and liability is not based upon breach of contract.
If one party has performed in reliance on an oral contract and will be irreparably harmed if the contract is not enforced, some courts apply the theory of equitable estoppel to prevent the statute of frauds from being employed as a defense. Equitable estoppel holds that if a person has so altered his position that justice demands the enforcement of the contract, the court will enforce the contract even though it fails to comply with the statute.
See: quasi contract.
| Wikipedia: Statute of frauds |
The statute of frauds refers to the requirement that certain kinds of contracts be made in writing and signed.
Traditionally, the statute of frauds requires a writing signed by the defendant in the following circumstances:
- Contracts in consideration of marriage.
- Contracts which cannot be performed within one year.
- Contracts for the transfer of an interest in land.
- Contracts by the executor of a will to pay a debt of the estate with their own money.
- Contracts for the sale of goods above a certain value.
- Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation.
This can be remembered by the mnemonic "MY LEGS": Marriage, one year, land, executor, goods, surety.
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Terminology
The term statute of frauds comes from an English Act of Parliament (29 Chas. 2 c. 3) passed in 1677 (authored by Sir Leoline Jenkins and passed by the Cavalier Parliament), and more properly called An Act for Prevention of Frauds and Perjuries.[1] Many common law jurisdictions have made similar statutory provisions, while a number of civil law jurisdictions have equivalent legislation incorporated into their civil codes. The original English statute itself may still be in effect in a number of US states or Canadian provinces, depending on the constitutional or statutory reception of English law, and any subsequent legislative developments.
Law students often remember the circumstances for which a written contract is required by the mnemonic "MYLEGS" (marriage, year, land, executor, goods, surety); however, this traditional listing will vary according to the law of the jurisdiction concerned.
Raising the defense
A defendant in a "MYLEGS" case who wishes to use the Statute as a defense must raise the Statute in a timely manner. The burden of proving that a written contract exists only comes into play when a Statute of Frauds defense is raised by the defendant. A defendant who admits the existence of the contract in his pleadings, under oath in a deposition or affidavit, or at trial, may not use the defense.
A statute of frauds defense may also be effected by a showing of part performance, upon showing of one of two different conditions. If the parties have taken action in reliance on the agreement, as in the case Riley v. Capital Airlines, Inc. the court held that part performance does not take an executory portion of contract out of the Statute of Frauds. Each performance constitutes a contract that falls outside the Statute of Frauds and was enforceable to the extent it is executed. But the unexecuted portion of the contract falls within the Statute of Frauds and is unenforceable. As a result, only the executed portion of the contract can be recovered, and the doctrine of part performance does not remove the contract from the statute. On the other hand, the court in Schwedes v. Romain held that partial performance and grounds for estoppel can make the contract effective. In real estate sales, if a buyer takes possession by occupying the property, most courts will enforce the contract. Also, the Statute of Frauds will be suspended if the buyer has made permanent improvements to the property or rendered partial or full payment. In this situation a court may uphold the contract despite a violation of the statute of frauds because the parties' subsequent actions are evidence that a contract existed. Courts are wary of parties misusing the statute of frauds as a "get out of jail free card" in breach of contract actions.
Under common law, the Statute of Frauds also applies to contract modification - for example, suppose party A makes an oral agreement to lease a car from party B for 9 months. Immediately after taking possession party A decides that he really likes the car, and makes an oral offer to party B to extend the term of the lease by 6 months. Although neither agreement alone comes under the Statute of Frauds, the extension modifies the original contract to make it a 15-month lease, thereby bringing it under the Statute. In practice, this works in reverse as well - an agreement to reduce the lease from 15 months to 9 months would not require a writing. However, almost all jurisdictions have enacted statutes that require a writing in such situations. The Uniform Commercial Code abrogated this requirement for contract modification, discussed below.
Uniform Commercial Code
In the United States, contracts for the sale of goods where the price equals $500.00 or more (with the exception of professional merchants performing their normal business transactions, or any custom-made items designed for one specific buyer) fall under the statute of frauds under the Uniform Commercial Code (article 2, section 201) [1]. The most recent revision of UCC § 2-201 increases the triggering point for the UCC Statute of Frauds to $5,000, but as of 2006 no U.S. state has adopted revised Section 201.
The application of the statute of frauds to dealings between merchants has been modified by provisions of the Uniform Commercial Code, which is a statute that has been enacted at least in part by every state (Louisiana has enacted all of the UCC except for Article 2, as it prefers to maintain its civil law tradition governing the sale of goods). Uniform Commercial Code § 1-206 [2] sets out a "catch-all" statute of frauds for personal property not covered by any other specific law, stating that a contract for the sale of such property where the purchase price exceeds $500.00 is not enforceable unless memorialized by a signed writing. This section, however, is rarely invoked in litigation.
Interestingly, with respect to securities transactions, the Uniform Commercial Code (section 8-113) has abrogated the statute of frauds. The drafters of the most recent revision commented that "with the increasing use of electronic means of communication, the statute of frauds is unsuited to the realities of the securities business."
Exceptions
An agreement may be enforced even if it does not comply with the statute of frauds in the following situations:
- Merchant Confirmation Rule, under the UCC. If one merchant sends a writing sufficient to satisfy the statute of frauds to another merchant, the merchant has reason to know of the contents of the sent confirmation and the receiver does not object to the confirmation within 10 days, the confirmation is good to satisfy the statute as to both parties.
- Admission of the existence of a contract by the defendant under oath,
- Part Performance of the contract. The agreement is enforceable up to the amount already paid, delivered, etc.
- The goods were specially manufactured for the buyer and the seller either 1) began manufacturing them, or 2) entered into a third party contract for their manufacture, and the manufacturer cannot without undue burden sell the goods to another person in the seller's ordinary course of business-- for example, t-shirts with a baseball team logo or wall-to-wall carpeting for an odd-sized room.
- Promissory Estoppel can be applied when the charging party detrimentally relies on the otherwise unenforceable contract.
See also
References
- ^ 'Charles II, 1677: An Act for prevention of Frauds and Perjuryes.', Statutes of the Realm: volume 5: 1628-80 (1819), pp. 839-42. URL: http://www.british-history.ac.uk/report.asp?compid=47463. Date accessed: 6 March 2007.
External links
- UCC § 2-201: Statute of Frauds definition
- Official text of the Statute of Frauds 1677 as amended and in force today within the United Kingdom, from the UK Statute Law Database
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Mentioned in
- Implied Contract (business term)
- Surety
- Written Instrument
- Oral
- Use and Occupation (legal term)
- Oral Contract
- Performance (legal term)
- Fraud (in banking)
- Nuncupative Will
- Earnest
- acceptance
- Sales Contracts
- Apprentice (legal term)
- Dedication (legal term)
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