CHAPTERCHAPTER McGraw-Hill/Irwin©2008 The McGraw-Hill Companies, All Rights Reserved Statute of Frauds SIXSIX

6-2 Objectives Chapter Objectives: Use vocabulary regarding the Statute of Frauds and its application properly Discuss the five types of agreements that must be in writing to comply with the statute Determine whether the statute applies to a given set of facts Analyze the extent of partial performance to determine whether it will take the oral agreement out from under the requirements of the statute

6-3 Statute of Frauds Five categories of contracts that fall under the Statute of Frauds: 1.The transfer of real property interests

6-4 Statute of Frauds Five categories of contracts that fall under the Statute of Frauds: 2.Contracts that are not performable within one year

6-5 Statute of Frauds Five categories of contracts that fall under the Statute of Frauds: 3.Contracts in consideration of marriage

6-6 Statute of Frauds Five categories of contracts that fall under the Statute of Frauds: 4.Sureties and guarantees (answering the debt of another)

6-7 Statute of Frauds Five categories of contracts that fall under the Statute of Frauds: 5.Uniform Commercial Code provisions regarding the sale of goods valued over $500.00

6-8 The Statute of Frauds is the courts’ attempt to deny enforcement of dubious claims However, strict enforcement of the Statute of Frauds could deny recovery for real claims and cause injustice as against an innocent party Statute of Frauds

6-9 Parties can generally choose terms and conditions they wish under the freedom of contract theory, the nature of contract law and its desire for certainty takes the lead in certain types of contracts Written form is more certain and concrete than verbal form. Certain types of contracts require that there be proof in writing in order to be enforced through the court Writing Requirement

6-10 An oral contract concerning these enumerated types of contracts will not be enforced in a court of law. Writing Requirement

6-11 Note of Caution: Paralegals must do their research! –Each state has its own statutory provisions enumerating requirements for each type of contract that falls under the Statute of Frauds Writing Requirement

6-12 Note of Caution: Paralegals must do their research! –It must be determined whether the contract falls within the Statute of Frauds and, if the writing satisfies the requirements of the Statute of Frauds Writing Requirement

6-13 “Writing to Satisfy the Statute of Frauds” A document or compilation of documents containing the essential terms of the agreement Writing Requirement

6-14 Writing Requirement The writing must be signed by the party to be charged. This means that the writing(s) must be signed or otherwise authenticated by the person against whom enforcement is sought

6-15 Types of Contracts Transfer of Real Property Interests –The actual sale of a piece of real estate - in order to purchase a house or parcel of land, the contract must be in writing –“interests in real property” that qualify for inclusion under the Statute of Frauds are mortgages, leases for more than one year, transfers of shares in real estate cooperatives, easements, liens on property as security, and the like

6-16 Contracts That Are Not Performable within One Year –Statute of Frauds requires contracts to be in writing where the performance under the contract could not take place in under one year –the amount of time that lapses between performance and the acceptance of the contract determines whether the contract falls under the Statute of Frauds, not how long the actual performance takes Types of Contracts

6-17 The tricky element to this “performance within one year” requirement is that the drafter or reviewer must bear in mind not what actually does happen in the circumstance, but what could happen Types of Contracts

6-18 Contracts in Consideration of Marriage −Prenuptial and Antenuptial Agreements –The Statute of Frauds does not apply to the mutual promise to actually marry the other person, but it does apply to all other arrangements and/or conditions attached to that agreement Types of Contracts

6-19 Sureties and Guarantees (Answering the Debt of Another) −Surety A party who assumes primary liability for the payment of another’s debt −Guarantor A party who assumes secondary liability for the payment of another’s debt. The guarantor is liable to the creditor only if the original debtor does not make payment Types of Contracts

6-20 The Sale of Goods Valued over $ (Uniform Commercial Code) –The UCC requires that a contract for the sale of goods for a price over $ is required to be in some written form – Price is stressed because there has been a change away from value as that is a more indefinite term Types of Contracts

6-21 Price The monetary cost assigned to a transaction by the parties Value The worth of the goods or services in the transaction as determined by an objective outside standard Types of Contracts

6-22 Partial Performance Doctrine The court’s determination that a party’s actions taken in reliance on the oral agreement “substitutes” for the writing and takes the transaction out of the scope of the Statute of Frauds and, thus, can be enforced Partial Performance

6-23 Summary Contract law’s desire for certainty has placed a writing requirement on certain types of contracts to ensure against fraud. These include: 1.The transfer of real property interests 2.Contracts that are not performable within one year 3.Contracts in consideration of marriage 4.Sureties and guarantees (answering the debt of another) 5.Uniform Commercial Code provisions regarding the sale of goods over $500.00

6-24 Summary Even if the Statute of Frauds does apply and the writing requirement is not met, the court may still give the aggrieved party who is not at fault a remedy to prevent injustice if that party has partially performed on the agreement