Statute of frauds

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The statute of frauds refers to the requirement that certain kinds of contracts be memorialized in a writing, signed by the party to be charged, with sufficient content to evidence the contract.

Traditionally, the statute of frauds requires a signed writing in the following circumstances:

  • Contracts in consideration of marriage. This provision covers prenuptial agreements.
  • Contracts that cannot be performed within one year. However, contracts of indefinite duration do not fall under the statute of frauds regardless of how long the performance actually takes.
  • Contracts for the transfer of an interest in land. This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement.
  • Contracts by the executor of a will to pay a debt of the estate with his own money.
  • Contracts for the sale of goods totaling $500 or more ($50 in Alberta, Canada).
  • Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation.

This can be remembered by using the mnemonic "MY LEGS": Marriage, contracts for more than one Year, Land, Executor (or Estate), Goods ($500 or more), Surety.

Terminology[edit]

The term statute of frauds comes from an Act of the Parliament of England (29 Chas. 2 c. 3) passed in 1677 (authored by Lord Nottingham assisted by Sir Matthew Hale, Sir Francis North and Sir Leoline Jenkins.[1] and passed by the Cavalier Parliament), the title of which is An Act for Prevention of Frauds and Perjuries.[2] Many common law jurisdictions have made similar statutory provisions, while a number of civil law jurisdictions have equivalent legislation incorporated into their civil codes. The original English statute itself may still be in effect in a number of US states or Canadian provinces, depending on the constitutional or reception statute of English law, and any subsequent legislative developments.

Raising the defense[edit]

A defendant in a statute of frauds case who wishes to use the Statute as a defense must raise it in a timely manner. The burden of proving that a written contract 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 under the Uniform Commercial Code (UCC), however under common law they may still use it.

A Statute of Frauds defense may also be affected by a showing of part performance, by proving the existence of one of two different conditions. If the parties have taken action in reliance on the agreement, as in the case Riley v. Capital Airlines, Inc. the court held that part performance does not take an executory portion of a contract out of the Statute of Frauds. Each performance constitutes a contract that falls outside the Statute of Frauds and was enforceable to the extent it is executed. But the unexecuted portion of the contract falls within the Statute of Frauds and is unenforceable. As a result, only the executed portion of the contract can be recovered, and the doctrine of part performance does not remove the contract from the Statute. On the other hand, the court in Schwedes v. Romain held that partial performance and grounds for estoppel can make the contract effective.

In an action for specific performance, an agreement to convey land must satisfy the Statute of Frauds. The Statute is satisfied if the contract to convey is evidenced by a writing or writings containing the essential terms of a purchase and sale agreement and signed by the party against whom the contract is to be enforced. If there is no written agreement, a court of equity can specifically enforce an oral agreement to convey only if the part performance doctrine is satisfied. In a majority of jurisdictions, part performance is proven when the purchaser pays the purchase price, has possession of the land, and makes improvements on the land, all with the permission of the seller. No jurisdiction is satisfied by payment of the purchase price alone.

Under common law, the Statute of Frauds also applies to contract modifications: for example, suppose party A makes an oral agreement to lease a car from party B for 9 months. Immediately after taking possession party A decides that he really likes the car, 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 theory, 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. The UCC abrogated this requirement for modification of contracts, as discussed below.

Exceptions[edit]

An agreement may be enforced even if it does not comply with the statute of frauds in the following situations:

  • Merchant confirmation rule, under the UCC. If one merchant sends a writing sufficient to satisfy the statute of frauds to another merchant and the receiving merchant has reason to know of the contents of the sent confirmation and does not object to the confirmation within 10 days, the confirmation is good to satisfy the statute as to both parties.[3]
  • Admission of the existence of a contract by the defendant under oath,[4]
  • Part performance of the contract. The agreement is enforceable up to the amount already paid, delivered, etc.[5]
  • The goods were specially manufactured for the buyer and the seller either 1) began manufacturing them, or 2) entered into a third party contract for their manufacture, and the manufacturer cannot without undue burden sell the goods to another person in the seller's ordinary course of business: for example, T-shirts with a Little League baseball team logo or wall-to-wall carpeting for an odd-sized room.[6]
  • Promissory estoppel can be applied in many but not all jurisdictions when the charging party detrimentally relies on the otherwise unenforceable contract.[7] In England and Wales, the circumstances where promissory estoppel may be used to overcome the statute are limited,[8] and some jurisdictions deny this possibility altogether.

United States[edit]

Uniform Commercial Code[edit]

In the United States, contracts for the sale of goods where the price equals $500 or more (with the exception of professional merchants performing their normal business transactions, or any custom-made items designed for one specific buyer) fall under the Uniform Commercial Code.[9] The most recent UCC revision increases the triggering point for the UCC Statute of Frauds to $5,000, but as of 2006 no U.S. state has adopted it.

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 at least in part by every state (Louisiana has enacted all of the UCC except for Article 2, as it prefers to maintain its civil law tradition governing the sale of goods). There is a "catch-all" provision in the UCC for personal property not covered by any other specific law,[10] stating that a contract for the sale of such property where the purchase price exceeds $500 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 has abrogated the statute of frauds.[11] 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."

Other statutes[edit]

Every state has a statute that requires certain types of contracts (in addition to contracts governed by the UCC) be in writing and signed by the party to be charged, the most common are contracts that involve the sale or transfer of land, and contracts that cannot be completed within one year.[12]

The statute of frauds in various state come in two types:

  1. those that follow the English Statute and provide that "no action shall be brought" on the contact or the contract "shall not be enforced"
  2. Those that are declared "void"[13]

United Kingdom[edit]

England and Wales[edit]

The Statute of Frauds[14] (1677) was largely repealed in England and Wales by the Law Reform (Enforcement of Contracts) Act 1954 (2 & 3 Eliz 2 c 34). The only provision of it that is still extant is that part of Section 4 which provides that contracts of guarantee (surety for another's debt) are unenforceable unless evidenced in writing. This requirement is subject to section 3 of the Mercantile Law Amendment Act 1856 (19 & 20 Vict 97) which provides that the consideration for the guarantee need not appear in writing or by necessary inference from a written document.

Section 6 of the Statute of Frauds Amendment Act 1828[15] (9 Geo 4 c 14) (commonly known as Lord Tenterden's Act[16]) was enacted to prevent section 4 of the 1677 Act being circumvented by bringing an action for the tort of deceit (the tort in Freeman v. Palsey[17]).

The provision in section 4 that related to contracts for the sale of land was repealed by Schedule 7 to the Law of Property Act 1925 (15 Geo 5 c 20), however the requirement that contracts for the sale of land be evidenced in writing was maintained by section 40 of that Act, subsequently replaced by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (c 34).

Scotland[edit]

Section 6 of the Mercantile Law Amendment Act Scotland 1856 was derived from those parts of section 4 of the Statute of Frauds (1677) which relate to contracts of guarantee and from section 6 of the Statute of Frauds Amendment Act 1828.

It was repealed (see here) on 1 August 1995[18] by the Requirements of Writing (Scotland) Act 1995, sections 14(2) and Schedule 5 (with ss. 9(3)(5)(7), 13, 14(3)).

See also[edit]

References[edit]

  1. ^ Cosgigan Jr., George P. (1913). "The Date and Authorship of Statute of Frauds". Harvard Law Review 26: 329 at 334–42. 
  2. ^ 'Charles II, 1677: An Act for prevention of Frauds and Perjuryes.', Statutes of the Realm: volume 5: 1628-80 (1819), pp. 839-42."Report". Retrieved 6 March 2007. 
  3. ^ U.C.C. 2-201(2)
  4. ^ U.C.C. 2-201(3)(b)
  5. ^ U.C.C. 2-201(3)(c)
  6. ^ U.C.C. 2-201(3)(a)
  7. ^ Summers, Lionel Morgan (1931). "The Doctrine of Estoppel Applied to the Statute of Frauds". University of Pennsylvania Law Review and American Law Register 79 (4): 440–464. Retrieved May 12, 2013. 
  8. ^ Actionstrength Ltd (t/a Vital Resources) v. International Glass Engineering In.Gl.En. SpA & Ors [2003] UKHL 17, [2003] 2 AC 541 (3 April 2003)
  9. ^ UCC § 2-201
  10. ^ UCC § 1-206
  11. ^ UCC § 8-319
  12. ^ Legal Information Institute
  13. ^ 3 Williston, Contracts §§526, 527 (3d ed. Jager 1960)
  14. ^ This short title was given by the Short Titles Act 1896. It is written here as printed in "The Public General Acts, 1896", HMSO, 1896.
  15. ^ This short title was given by the Short Titles Act 1896
  16. ^ Clerk and Lindsell on Torts, 16th Edition, 1989, Sweet and Maxwell, paragraph 18-41, at page 1036
  17. ^ (1789) 3TR 51
  18. ^ The Requirements of Writing (Scotland) Act 1995, section 15(2)

External links[edit]