Statute of frauds
Encyclopedia
The statute of frauds refers to the requirement that certain kinds of contract
s be memorialized in a signed writing with sufficient content to evidence the contract.
Traditionally, the statute of frauds requires a signed writing in the following circumstances:
This can be remembered by the mnemonic "MY LEGS": Marriage, contracts for more than one year, land, executor (or estate), goods (over $500), surety; or Marriage, one year, land, executor (or estate), guarantor, sale.
of the Parliament of England
(29 Chas. 2 c. 3) passed in 1677 (authored by Sir Leoline Jenkins
and passed by the Cavalier Parliament
), the title
of which is An Act for Prevention of Frauds and Perjuries. Many common law
jurisdictions have made similar statutory provisions
, while a number of civil law
jurisdictions have equivalent legislation incorporated into their civil code
s. 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.
must raise the Statute 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 U.C.C. (Uniform Commercial Code
), however under common law
you may still use it. (Think about the movie "A Few Good Men" Col. Jessep: You want answers? Kaffee: I think I'm entitled to. Col. Jessep: *You want answers?* Kaffee: *I want the truth!* Col. Jessep: *You can't handle the truth!* and if he had said "you better believe we had a contract" under oath in court, the defendant could still use the Statute of Frauds defense under the common law
)
A statute of frauds defense may also be affected by a showing of part performance, upon showing 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 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 modification: 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 Uniform Commercial Code
abrogated this requirement for modification of contracts, as discussed below.
, 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 statute of frauds under the Uniform Commercial Code
(article 2, section 201). The most recent revision of UCC § 2-201 increases the triggering point for the UCC Statute of Frauds to $5,000, but as of 2006 no U.S. state has adopted revised Section 201.
The application of the statute of frauds to dealings between merchant
s 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). Uniform Commercial Code § 1-206 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 $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 (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."
Section 4 now 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 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 (commonly known as Lord Tenterden's Act) 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).
It was repealed (see here) on 1 August 1995 by the Requirements of Writing (Scotland) Act 1995, sections 14(2) and Schedule 5 (with ss. 9(3)(5)(7), 13, 14(3)).
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
s be memorialized in a signed writing with sufficient content to evidence the contract.
Traditionally, the statute of frauds requires a signed writing in the following circumstances:
- Contracts in considerationConsiderationConsideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...
of marriageMarriageMarriage is a social union or legal contract between people that creates kinship. It is an institution in which interpersonal relationships, usually intimate and sexual, are acknowledged in a variety of ways, depending on the culture or subculture in which it is found...
. This provision covers prenuptial agreements. - Contracts which 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 executorExecutorAn executor, in the broadest sense, is one who carries something out .-Overview:...
of a willWill (law)A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
to pay a debt of the estate with his own money. - Contracts for the sale of goods involving a purchase price of $500 or more (proposed Amended UCC § 2-201(1) requires a writing for contracts for the sale of goods of a price of $5000 or more).
- Contracts in which one party becomes a suretySuretyA surety or guarantee, in finance, is a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults...
(acts as guarantor) for another party's debt or other obligation.
This can be remembered by the mnemonic "MY LEGS": Marriage, contracts for more than one year, land, executor (or estate), goods (over $500), surety; or Marriage, one year, land, executor (or estate), guarantor, sale.
Terminology
The term statute of frauds comes from an ActAct of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
of the Parliament of England
Parliament of England
The Parliament of England was the legislature of the Kingdom of England. In 1066, William of Normandy introduced a feudal system, by which he sought the advice of a council of tenants-in-chief and ecclesiastics before making laws...
(29 Chas. 2 c. 3) passed in 1677 (authored by Sir Leoline Jenkins
Leoline Jenkins
Sir Leoline Jenkins was a Welsh academic, jurist and politician. He was a clerical lawyer serving in the Admiralty courts, and diplomat involved in the negotiation of international treaties .-Biography:...
and passed by the Cavalier Parliament
Cavalier Parliament
The Cavalier Parliament of England lasted from 8 May 1661 until 24 January 1679. It was the longest English Parliament, enduring for nearly 18 years of the quarter century reign of Charles II of England...
), the title
Long title
The long title is the formal title appearing at the head of a statute or other legislative instrument...
of which is An Act for Prevention of Frauds and Perjuries. Many common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
jurisdictions have made similar statutory provisions
Statutory law
Statutory law or statute law is written law set down by a legislature or by a legislator .Statutes may originate with national, state legislatures or local municipalities...
, while a number of civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
jurisdictions have equivalent legislation incorporated into their civil code
Civil code
A civil code is a systematic collection of laws designed to comprehensively deal with the core areas of private law. A jurisdiction that has a civil code generally also has a code of civil procedure...
s. 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
Reception statute
A reception statute is a statutory law adopted as a former British colony becomes independent, by which the new nation adopts pre-independence English law, to the extent not explicitly rejected by the legislative body or constitution of the new nation...
of English law
English law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
, and any subsequent legislative developments.
Raising the defense
A defendant in a statute of frauds case who wishes to use the Statute as a defenseDefense (legal)
In civil proceedings and criminal prosecutions under the common law, a defendant may raise a defense in an attempt to avoid criminal or civil liability...
must raise the Statute 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
Deposition (law)
In the law of the United States, a deposition is the out-of-court oral testimony of a witness that is reduced to writing for later use in court or for discovery purposes. It is commonly used in litigation in the United States and Canada and is almost always conducted outside of court by the...
or affidavit, or at trial, may not use the defense under the U.C.C. (Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
), however under common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
you may still use it. (Think about the movie "A Few Good Men" Col. Jessep: You want answers? Kaffee: I think I'm entitled to. Col. Jessep: *You want answers?* Kaffee: *I want the truth!* Col. Jessep: *You can't handle the truth!* and if he had said "you better believe we had a contract" under oath in court, the defendant could still use the Statute of Frauds defense under the common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
)
A statute of frauds defense may also be affected by a showing of part performance, upon showing 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 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
Estoppel
Estoppel in its broadest sense is a legal term referring to a series of legal and equitable doctrines that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative...
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
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
, the Statute of Frauds also applies to contract modification: 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 Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
abrogated this requirement for modification of contracts, as discussed below.
Uniform Commercial Code
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, 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 statute of frauds under the Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
(article 2, section 201). The most recent revision of UCC § 2-201 increases the triggering point for the UCC Statute of Frauds to $5,000, but as of 2006 no U.S. state has adopted revised Section 201.
The application of the statute of frauds to dealings between merchant
Merchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s 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
Louisiana
Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...
has enacted all of the UCC except for Article 2, as it prefers to maintain its civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
tradition governing the sale of goods). Uniform Commercial Code § 1-206 sets out a "catch-all" statute of frauds for personal property
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
not covered by any other specific law, 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
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
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."
England and Wales
The Statute of Frauds (1677) was largely repealed in England and Wales by the Law Reform (Enforcement of Contracts) Act 1954.Section 4 now 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 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 (commonly known as Lord Tenterden's Act) 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).
Scotland
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 by the Requirements of Writing (Scotland) Act 1995, sections 14(2) and Schedule 5 (with ss. 9(3)(5)(7), 13, 14(3)).
Exceptions
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 UCCUniform Commercial CodeThe Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
. If one merchantMerchantA merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail 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. - Admission of the existence of a contract by the defendant under oath,
- Part Performance of the contract. The agreement is enforceable up to the amount already paid, delivered, etc.
- 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 baseball team logo or wall-to-wall carpeting for an odd-sized room.
- Promissory Estoppel can be applied when the charging party detrimentally relies on the otherwise unenforceable contract.
External links
- UCC § 2-201: Statute of Frauds definition