Contracts: Statute of Frauds

Origins of the Statute of Frauds

1677 England passed the law “An Act for the Prevention of Frauds and Abuses.”

Certain types of contracts must be in writing and signed by the party against whom enforcement is sought to be enforceable.

Today, almost every state has a Statute of Frauds.

The Statute of Frauds

To be enforceable, the following types of contracts must be in writing and signed:

§ Contracts involving interest in land.

§ Contracts involving “One Year Rule.”

§ Collateral or Secondary Contracts.

§ Promise made in consideration of marriage.

§ Contracts for the sale of goods priced at $500 or more.

Contracts Involving Interests in Land

Land includes all physical objects that are permanently attached to the soil: buildings, fences, trees, and the soil itself.

All contracts for the transfer of other interest in land: mortgages and leases.

Case 14.1: Michel v. Bush (2001).

The One-Year Rule

A contract that cannot, by its own terms, be performed within one year from the date it was formed must be in writing to be enforceable.

One-year period begins to run the day after the contract is made.

§ Test:  Whether performance is possible (although unlikely) within one year.

Collateral Promises

Primary v. Secondary Obligations.

“Main Purpose Rule” Exception .

Estate Debts.

Promises Made in Consideration of Marriage

Prenuptial agreements must be in writing and signed to be enforceable.

Contracts must be supported by some consideration to be enforceable.

Prenuptial agreements may not be enforceable if the agreement is not voluntary.

Contracts for the Sale of Goods

UCC requires a writing or memorandum for the sale of goods priced at $500 or more. Exceptions:

§ Partial Performance.

§ Admissions.

§ Promissory Estoppel.

§ Special Exceptions under the UCC.

Sufficiency of the Writing

Under the Statue of Frauds.

§ Must name, identify subject matter, consideration, other essential terms, and must be signed by the the party against whom enforcement is sought.

Under the UCC.

§ Need only name the quantity term and be signed by the party to be charged.

Case 14.3: Interstate Litho Corp. v. Brown (2001)

Parol Evidence Rule

Oral representations or promises made prior to the contract’s formation or at the time the contract was created, may not be admitted in court.

Integrated Contracts.

Exceptions to the Parol Evidence Rule

ü   Contracts subsequently modified.

ü   Voidable or Void contracts.

ü   Contracts containing ambiguous terms.

ü   Prior dealing, course of performance, or usage of trade.

ü   Exceptions to the Parol Evidence Rule

ü   Contracts subject to orally agreed-on conditions.

ü   Contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties. 

Case 14.4: Cousins Sub Systems v. McKinney (1999).