Learn All About The Statute of Frauds Origins

The Statute of Frauds as it exists in the most jurisdictions within the United States is based on a 1677 act passed by the English Parliament. The act was known as “An Act for the Prevention of Frauds and Perjuries.”

Part of the reason the Act was passed by Parliament was that at the time the parties to a contract were unable to testify in a court dispute involving a contract to which they were a party. As a result, all testimony in contract disputes at the time was provided by expert witnesses. These witnesses were hired by each side in the dispute. It was possible to hear expert testimony that presented directly conflicting information.

A belief arose that the experts in these contractual disputes were under no obligation to tell the truth, and were instead willing to perjure themselves in order to provide testimony beneficial to the party that had hired them and was paying for their services. The reliance on expert witnesses also diminished because of an increased recognition that it was impossible to testify accurately as to the intentions of another individual.

In response to these concerns, the Act sought to require contracts to be written down and signatures affixed to these contracts in certain circumstances. The most crucial element is that the requirement that the contracts be written provided evidence that was not dependent on testimony. Instead the existence of written testimony meant that there would be objective evidence, not subject to the requirement of expert testimony.

It also lead to the parties in the contract eventually being able to testify in contract disputes on their own part. As a result, it became essential to have objective evidence available that could not be disputed by a party seeking to enhance their own status.

Fast Overview of Statute of Frauds

The Statute of Frauds is based on an Act of the British Parliament from 1677 called “An Act for the Prevention of Frauds and Perjuries.” The Statute places a requirement on several different contracts.

Contracts that Fall Under Statute of Frauds

Contracts falling under the Status of Frauds include those for sale of goods worth more than $500, for an exchange of real estate, cannot be completed within one year, contain collateral promises, or when an executor pays a debt for an estate.

These contracts must contain two distinct elements. The contract must be written down and there must be some mark indicating acceptance.

Important Fact Regarding Contracts Involving Land

Under the Statute of Frauds, a land contract cannot be enforceable unless it is written down. It also must contain all the other regular requirements for an enforceable contract.

A property contract that calls for the property under discussion to be leased for three months would not be subject to the Statute of Fraud because it does not involve the exchange of the title to the property and is of short enough duration so as to not violate the one year rule. If the lease is for a period greater than twelve months, however, then the contract must be in writing.

Important Facts About Marriage Promises

Marriage contracts form one of the major areas of the Statute of Frauds. The Statute of Frauds requires that any marriage contract be in writing. The marriage contracts most often dealt with by the Statute of Frauds are prenuptial and postnuptial agreements.

The marriage contracts share all the regular requirements of any other contract. The elements of a contract most relevant to a marriage contract is that it must be genuinely assented to by the individual, and the contract cannot bear unconscionable provisions.

Although there was a historic tendency for marriage contracts to be arraigned by the family of the individuals getting married, this has become less common. Instead, the most common marriage contracts currently are for the division of the assets of the married partners. These agreements are known as prenuptial agreements if they are created before the marriage, and postnuptial agreements if they are entered into by the parties while they are married.

Although these marriage contracts are most often at issue in the event the partners become divorced, a marriage contract reached as the result of a nuptial agreement may also be created to provide for the care of beneficiaries in the event of the death of one of the partners to the marriage contract.

Pre-marriage contracts are recognized in all of the United States, as well as in the District of Columbia. The Uniform Prenuptial Agreements Act of 1983 served to unify the implementation and execution of prenuptial marriage contracts within the United States.

Importance of the One Year Rule

Under the Statute of Frauds contracts that cannot be completed within a year must be written down. The one year rule does not mean that a contract needs to be completed within the year. It only requires that it can be completed within a single year.

For instance, if Paul promises Erin that Paul will pay her $500 a year until her bakery goes out of business, the one year rule means that their contract does not have to be written down. Despite a promise that could last several years, it is possible that the bakery could close that week. Therefore, it would be possible to completely execute the contract within a single year. In contrast, the Statute of Frauds would require the contract to be written down in the event that Mike rented a bike from Ed for 13 months.

There are several circumstances where it may appear that the one year rule has been violated when it has in fact not come into effect. A contract that calls for a bathroom to be renovated would not be required to be written down under the Statute of Frauds because it could reasonably be completed within a year. Even if the renovation takes two years, the Statute of Frauds has not been violated.

The one year rule goes into effect once the contract is created. It is immaterial when the work was begun. The one year period begins the day the contract is formed. For instance, Rosemary enters into a contract to be the President of XYZ Company for one year beginning May 3, 2010. She and the company agree to the contract on April 6, 2010. Unless this agreement is written down, the Statute of Frauds invalidates the contract as soon as April 6, 2011 arrives. The one year rule began counting on April 6, 2010, not on May 3, 2010.

Exceptions to Applicability of Statute of Frauds Revealed

There are several exceptions to contracts that would otherwise be subject to the terms of the Statute of Frauds. These exceptions can either serve to compel action on the part of one of the parties to the contract or to prevent an action from occurring.

Partial performance can also invalidate a defense predicated upon the Statute of Frauds. Partial performance only affects contracts for goods or for real estate. Partial performance in real estate contracts involves when one of the parties has provided partial payment under the contract’s terms, taken possession of the land, and made permanent changes to the real estate. Partial performance may result in the enforcing of an oral real estate contracts if the courts cannot easily or fairly return the parties to the conditions they were in before the commencement of the contract.

Admission is always a reason that contracts can be exempted from the restrictions placed on them by the Statute of Frauds. If one of the parties admits that they are bound by the contract, either by action or by statement, they cannot then claim that the Statute of Frauds relieves them of their obligations. Admission is an exception to all the provisions of the Statute of Frauds.

Promissory estoppel is another common reason that the Statute of Frauds can cease to apply to a contract. It can arise in contracts for the sale of real estate, contracts that cannot be completed within a year, and contracts for the satisfaction of another party’s debt.

Promissory estoppel can result in the enforcement of contracts that the Statute of Frauds would otherwise not allow if one of the parties made a justifiable reliance on the other party’s promises. Promissory estoppel applies if the reliance resulted in harm to the party that was relying upon it, the party that made the promise could have reasonably foreseen that reliance, and the only way to avoid committing an injustice is to enforce the contract.

There is an exception granted to contracts in which one party assures the debts of another. If the main reason that the assuring party enters into the agreement is selfish, or that is is to ensure that the indebted party also pays a debt owed to the assuring party, then the contract may not be required to be written down.

The final two reasons that contracts may be enforced even if they do not adhere to the Statute of Frauds are limited to contracts for the sale of goods. If a contract commissions the sale of personalized items from one party to another, the contract may be enforceable even if the value is below $500. The reason contracts for personalized good can be enforced is because the courts generally find that it would place an unjust burden on the party that customized the goods to find a purchaser for the customized goods in the event the original purchaser attempts to renege on the contract.

If the contract is between two parties, a memorandum can serve to invalidate a defense by a party claiming that the Statute of Frauds makes the contract voidable or unenforceable. A memorandum can take a variety of forms, but in essence is a note exchanged by two parties that lays out the subjects discussed in a meeting. These memorandums do not have to take a particular format to invalidate a defense reliant upon the Statute of Frauds to escape liability.

Learn All About Adhesion Contracts and Unconscionability

Despite some controversy over how strictly adhesion contracts should be enforced by the courts, the existence of these contracts serves a crucial societal function. They serve to increase the efficacy of normal commercial interactions. Standard form contracts commonly cover rental car agreements, the tickets which are given out by parking garages or the end user license agreements included in software.

The societal benefit is that these common interactions do not need to be negotiated on an individual basis. Instead, the existence of standard forms can be used quickly and simply by the involved parties. Although the normal requirements of contra proferentem, or “against the proffering party”, act against those using such contracts. This inclination of the courts to issue a judgment against the party issuing the contract is similar to its preference when interpreting contracts under the plain meaning rule to invalidate attempts at alternate interpretations.

Contracts that Fall Under Statute of Fraud

The following are contracts which fall under the Statute of Frauds:

Involving Land

Cannot be Completed within One Year

Collateral Promises

Marriage Promises

Sale of Goods

Uniform Commercial Code

Executor of a Will Pays Debt of an Estate.

The Statute of Frauds also requires a contract be written in the event the executor of an estate pays any of the estate's debts out of the executor's own money. This is twofold: to ensure that the executor's claims for reimbursement are substantiated by documentation and to encourage the executor to use the estate's resources before their own. Contact a fraud lawyer to review your case.

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