Statute of frauds
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The statute of frauds refers to a statute (i.e., statutory law), or a provision in a statute, in many common law jurisdictions that requires certain kinds of contracts to be done in writing and to be signed by the party against whom enforcement is sought. In a number of civil law jurisdictions, there are similar requirements in their civil codes.
The term statute of frauds comes from an English statutory law (29 Car. II c. 3) passed in 1677 and more properly called the Statute of Frauds and Perjuries.
The writing that the Statute requires is a precondition to maintaining a suit for breach of contract (or other obligation). However, the Statute is used as a defense, which defense is waived if the person against whom enforcement is sought fails to raise in a timely manner. Thus, the burden of showing evidence that such a writing 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 defeated by a showing of part performance. If the parties have taken action in reliance on the agreement, a court may uphold the contract despite a violation of the statute of frauds because the parties' subsequent actions verify 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.
Traditionally, the statute of frauds requires a writing signed by the party against whom enforcement is sought in the following circumstances:
- Contracts in consideration of marriage.
- Contracts which cannot be performed within one year.
- Contracts for the sale of an interest in land.
- Contracts by the executor of a will to pay a debt of the estate with his own money.
- Under the Uniform Commercial Code (article 2, section 201), contracts for the sale of goods where the price exceeds $500.00 (with the exception of professional merchants performing their normal business transactions, or any custom-made items designed for one specific buyer) [link].
- Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation.
Uniform Commercial Code
In the United States, 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 by every state (except Louisiana). Uniform Commercial Code § 1-206 [link] 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 $5,000.00 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."
The Statute of Frauds also applies to modified contracts - for example, suppose party A makes an oral agreement to lease a house from party B for 9 months. Immediately after taking possession party A decides that he really likes the place, 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.
See also
External links
- UCC § 2-201: [Statute of Frauds Definition]
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