Statute of frauds
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The statute of frauds refers to a requirement in many common law jurisdictions that certain kinds of transactions, typically contractual obligations, be evidenced by a writing signed by the party against whom enforcement is sought, or by the party's authorized agent. The term comes from an English statutory law (29 Car. II c. 3) passed in 1677. It is 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.
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 land
- Contracts by the executor of a will to pay a debt of the estate with his own money
- Under the Uniform Commercial Code, contracts for the sale of goods where the price exceeds $500.00
- Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation.
Law students often remember these circumstances by the mnemonic "MYLEGS" (marriage, year, land, executor, goods, surety).
Uniform Commercial Code section 1-206 also 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.