What Is the Statute of Frauds?

What Is the Statute of Frauds?

Let me explain the statute of frauds directly to you: it's a legal doctrine that demands certain types of contracts be in written form to be valid. You should know that the most common ones covered include the sale of land, agreements for goods worth $500 or more, and contracts that last one year or longer.

The main purpose here is to prevent fraud or other harms, which we often break down into evidentiary and cautionary roles. The evidentiary side ensures there's documentation proving a binding agreement exists. The cautionary aspect makes both parties more serious and deliberate in their dealings.

In the U.S., statutes of frauds started as common law concepts, meaning unwritten law, but many states have turned them into formal statutes. If you're in a breach of contract case where this applies, the defendant can use it as a defense, and you'll have to prove as the plaintiff that a valid contract was in place.

Key Takeaways

Here's what you need to remember: the statute of frauds is a common law idea requiring written contracts for certain agreements to bind them. It covers land sales and most goods purchases of $500 or more. There are key exceptions, like oral contracts where work has started. It varies by state in the U.S., and many elements are in the Restatement (Second) of the Law of Contracts.

History of the Statute of Frauds

You might be interested in its origins: the statute of frauds comes from the 1677 Act for Prevention of Frauds and Perjuryes passed by the English Parliament. This law required written contracts for high-value transactions to avoid misunderstandings and fraud from oral deals.

Back then, the English courts lacked written evidence, leading to clogged dockets and settlements via paid professional witnesses, with perjury becoming common. When shaping the U.S. government, the founders drew from this act to handle business transactions and disputes. They saw that written, signed contracts reduce ambiguity, cut down on litigation, and simplify resolutions when suits arise.

Contracts Covered by the Statute of Frauds

In the U.S., the statute generally requires written contracts for these to be binding: any promises tied to marriage, like engagement rings; contracts not completable in under a year; land sales, though leases under a year might not apply; promises by an executor to pay estate debts from personal funds, but not from estate funds; goods sales over $500; guarantees to pay another's debt; and sales of personal property over $5,000 in value or remedy.

Requirements of the Statute of Frauds

Not every written document qualifies under the statute. For instance, both parties must sign it, or it's not enforceable. If the quantity in the agreement differs from what's written, that can be an issue. You have to object in writing within a set time. Correspondence must be properly sent; mistakes in addressing or transmission make it invalid. Also, a contract is void if one party's mistake at formation materially affects the exchange.

Keep in mind that emails and invoices can sometimes meet these requirements for an enforceable contract.

Exceptions to the Statute of Frauds

There are cases where oral agreements without writing can still be enforced. This often happens when work has begun or money has been spent based on the oral deal. For example, if you order specially made items like monogrammed shirts over the phone and then cancel, you might still owe partial payment.

The same goes for modifications to possessions started on oral agreements and then canceled. Say a painter buys materials and starts work based on your request, then you back out claiming no agreement; the painter likely wins due to promissory estoppel, which is about fundamental fairness to fix injustices. Partial performance, where one side has already done their part, can also confirm a contract existed.

Examples of the Statute of Frauds

States enforce these provisions, and the Uniform Commercial Code (UCC) is a prime example, regulating financial contracts and adopted fully in every state except partially in Louisiana. Changes to UCC articles affecting the statute might not immediately update in all states' laws, and places like Louisiana have unique variations.

Explain Like I'm Five

Simply put, the statute of frauds means some deals need a written, signed contract to count. It covers big money or long-term stuff. Writing it down clarifies terms for disputes and makes everyone take it seriously. It started in English law but adapted elsewhere.

The Bottom Line

To wrap this up, the statute of frauds declares certain verbal contracts non-binding without written proof, protecting against fraud as it did in 17th-century England. Rules differ by location, like in U.S. states, and there are cases where writings become void or orals enforceable, such as after payment or work starts.