Contracts may be formed either orally or written. The statute of frauds is a body of rules that state which types of contracts must be formed in writing or they are not valid.
The body of law that governs the statute of frauds is called the Uniform Commercial Code or the “UCC”. If a contract falls under the statute of frauds it will not be valid or enforceable in a court of law. The purpose of the statute of frauds is to prevent fraudulent acts.
The statute of frauds laws may vary from state to state, but most resemble the UCC standards. There are various types of contracts that fall within the statute and require a writing. Generally, any other contract that falls outside the scope of the statute are enforceable without a written contract. The following are the most common types of contracts that requires a written agreement for:
These types of contracts must be properly formed and completed in order for the agreement to be lawfully enforceable.
Again, the laws will vary from state to state. Typically, however, the writing should have the following information included:
It is important to note that if both parties do not sign the agreement then the non-signing party is not liable for their performance of the contract.
However, if the contract is for the sale of goods, the only signature required in that the writing is from the party accepting the goods, in addition to a term regarding quantity of the goods. This applies of the person selling the goods did not put an area for them to sign or made it clear that they do not need to sign the contract.
There are two exceptions to the statute of frauds because there are some situations where applying the statute may create an unjust situation. In these situations, a party to a contract that would typically be unenforceable under the statute of frauds may be able to enforce it on the basis of partial performance or promissory estoppel.
Although these exceptions exists, a contract will remain enforceable despite the statute of frauds if all parties have agreed to the contract. If the parties agree to the contract, but only later argues about the statute of frauds in order to get out of it, then it is possible for a court to find it in your favor.
However, the court rarely accepts oral contracts for things like selling a home or transitions with a large amount of money. If the transaction involves a large sum, far above the requirement of $500, then it is likely the court will order the parties to form a contract in writing.
A statute of frauds does not of itself render a contract completely void. The statute does makes certain contract voidable by one of the parties. Note the differences below:
You should note that even when a written contract is not required, it is a good idea to have one anyway. It may be difficult to prove that an oral agreement existed, and there may remain questions regarding the terms of the agreement.
A contract does not need to be drafted by an attorney in order to be valid or enforceable. However, a local business attorney will be able to make sure the contract you draft or enter into is legally binding and in the manner of your understanding.
A business attorney with extensive experience with contracts will also help explain the consequences and responsibilities of entering into the contract. In any case, it is always helpful to have an attorney review a contract before entering into any major agreements.
Last Modified: 08-08-2018 09:33 AM PDTLaw Library Disclaimer
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