Overview of Statute of Frauds Requirements

We come in this lesson to the Statute of Frauds, the requirement that certain contracts be evidenced by a signed writing. Now, the reference to the Statute of Frauds relates back to the original statute passed in 1677 by the English Parliament, an act entitled, An Act for Prevention of Many Fraudulent Practices Which Are Commonly Endeavored to be Upheld by Perjury and Subornation of Perjury. The Act came to be known more commonly as the Statute of Frauds, and it was influential enough that as English common law was planted in the United States, the Statute of Frauds came along with it almost as a matter of the common law, regardless of whether it was or was not enacted by a statute of a particular legislature. Today, there are many Statute of Frauds beyond the original one, but But when we refer to the common law statute of frauds, we think of seven categories of contracts that are covered by it. And that's what we're going to confine ourselves to in this course. Do remember, there can be many places where there is a statute of frauds that requires evidence of a signed writing. Here, we want to cover two main issues dealing with the common law statute of frauds. First, we want to determine whether the contracted issue is within the statute of frauds, meaning, is it one for which the statute would require a writing? But we are not done after that determination. because issue number two is, is the contract in question actually evidenced by a sufficient writing? And that requires us to study and to understand what sort of writing exactly would be sufficient, and we will cover that in this series of lessons. So let's deal with the first question. What contracts are within the statute of frauds. There is a mnemonic that many generations of law students have used to remember the items covered by the common law statute of frauds, and it is MY LEGS. That is simply an acronym that refers to the different categories of contracts covered by the statute of frauds. First, a contract in consideration of marriage is within the original statute of frauds. Now, be careful, that doesn't mean a contract to marry, like an engagement. A promise of engagement is not within the statute of frauds. But a promise to do something if the party on the other side will get married and think of wealthy landowners back in medieval and renaissance era Britain, then that is exactly the situation where this would apply. Second category, contracts that cannot be performed within one year. This one is occasionally tricky because it is a matter of logical proof. The majority approach on this is that if a contract conceivably could be performed within one year, even though it's very unlikely, then the contract is not within the statute of frauds. So the contract has to, by definition, be one that under no circumstance could be performed within a year. Number three, contracts for the transfer of an interest in land. This is one of the most durable parts of the statute of frauds in that it is generally widely agreed that every real estate contract, and notice it doesn't have to be a sale of land, it could be any interest in land, like a lease, for example, or an easement, that that would be covered by the statute of frauds. It must be evidenced by a writing or else it will not be enforceable. Number four, a contract by the executor of a will to pay a debt of the estate with personal money. Executors do pay debts of the estate, and those are not within the statute of frauds as such. But if the allegation is that the executor said, oh, don't worry about that, I'll cover that with my own personal money, we do require a writing because that's deemed to be so unlikely of a promise that an executor would make. Fifth are contracts for the sale of goods. This provision shows up in the Uniform Commercial Code in a section providing that contracts where the amount sold totals $500 or more, and that is the cutoff, that those must be evidenced by a writing. Section 2201 contains the statute of frauds requirements in the UCC. Finally, contracts in which a party becomes a surety, and that's a guarantor for another party's debt. If you are going to be held liable for the debt someone else has incurred, we will want that to be in writing because it seems like the kind of thing that might be made up if we couldn't evidence it with a writing. Now, out of those topics, the ones that are going to be most important for this course are contracts that cannot be performed within a year or contracts for the transfer. of an interest in land, and contracts for the sale of goods. The other issues do come up on occasion, but if you can remember those three, you'll be in fairly good shape for this course. Now, our second big issue is, once we have determined that a contract is within the statute of frauds, how do we satisfy it? What makes a writing sufficient? That brings us to Restatement 2nd of Contracts, Section 131, which lists the general requirements of a sufficient memorandum of writing. It says, unless additional requirements are prescribed by the particular statute, and remember there could always be other statutes, a contract within the statute of frauds is enforceable if it is evidenced by any writing signed by or on behalf of the party to be charged. Notice that the first requirement is that the writing be signed by the party who we are going to sue for breach of contract. If it is not signed by that party, then that is not going to be good enough. We have three more requirements. Subsection A says that the writing must reasonably identify the subject matter of the contract. We can't take a piece of paper that just has your signature on it and say, well, here it is, here's the subject matter. signed writing because it has to identify what the contract is about. We also have to have some degree of certainty in the description. Subsection B says that the writing must be sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party. So it is not enough that we know what the contract is about, we also have to know- who the parties are to this alleged contract. Finally, subsection C, often the most difficult part, the writing must state with reasonable certainty the essential terms of the unprofessional informed promises in the contract. If we're going to hold the other party to the writing, we need to know what those promises are, and if not in every respect, we at least need to know that with some reasonable respect. So those are our two main issues, and those give us the tools we need to think through a couple of sample problems from your book for how the statute of fraud operates. Let's look at some of these questions. Question A, does the statute apply? A $50,000 second mortgage payable in 10 years taken out on a family home. That is an example of a contract for an interest in real estate. It's a mortgage. although it is not the ownership of the real estate. It's a promise to the lender that gives the lender an interest in the real estate. The lender could foreclose if there's an event of default. Subsection B, a one-year employment contract signed on June 1st, which will go into effect on July 1st. You might initially think to yourself, ooh, that's right on the edge of one year. It is exactly one year. Do we apply the statute or not? Courts have deviated one way or another if it is exactly a one-day issue, but this one is not even close. The contract is within the statute of frauds. Why is that? If a contract is signed on June the 1st and the one years of employment begins a month later on July 1st, then by definition this contract must take over a year to perform. It's really a 13-month contract where there's no work the first month and performance will then finish 12 months after that. The employment part doesn't begin until a month after the signature, but we do have a contract once it is signed, so that is within the statute of frauds. Next, a promise by the mother of a daughter who was killed in an auto accident to pay a claim herself if the claimant agrees not to bring a claim against the daughter's estate. That one is a little tricky, and you may wonder if this is really a surety contract, again, one of a guarantor, because the mother is saying, saying that she will pay a debt if the claimant doesn't bring a claim against the daughter's estate. Now, the daughter, remember, from a legal financial perspective, has obligations that continue on through her estate, but the contract is ultimately not within the statute of frauds because the mother has made the promise independently. Next, a contract to purchase a one-ounce gold coin, assuming that the gold coin is worth at least $1,000. least $500, which seems quite likely, then this would be a contract for the sale of goods, because a gold coin is tangible and movable, and we are within the UCC statute of frauds. Question? E, a contract to pay the total cost of a student's law school tuition. Here, once again, the promise is direct. It is between the law school and the person who is agreeing to pay. In that sense, it is an obligation to which the promisor is a direct contracting party. It is not a promise to pay a debt already incurred by the student. So that actually takes it out of the suretyship requirement, not within the statute of frauds. So parents out there, if you make a promise to pay someone else something for the benefit of your children, That is a promise that you have made, and you will be the one liable. It is not in the nature of suretyship. F, a parent's promise to guarantee payment of a loan taken out by a minor to purchase a car. That one is a clear suretyship promise because it guarantees someone else's debt. The initial debtor is the minor, and the parent is saying, I will cover that if the minor cannot, and that is a classic suretyship arrangement. Question G. A prenuptial agreement providing for the distribution of property among the spouses in the event of a divorce. Now, this may be a large dollar agreement in terms of what is being dealt with by the contract, and the distribution of property likely will include some goods, but this isn't a sale, so based on that, we're not under UCC Article 2. Also, it's not in consideration of marriage. No one is trying to induce marriage, even though there is a marriage involved here. So this agreement, although it suggests a couple of statute of frauds, categories would not be within the statute of frauds. Question H, a promise by a bride's family to pay a dowry to the husband upon the couple's marriage in a country, and there are some of these, where dowries are still common. That is a contract in consideration of marriage, so if the couple gets married, then the bride's family will be obligated to pay the dowry. That is within the statute of frauds. Part I, a contract to allow the buyer to remove 50,000 cubic feet of clay from a piece of real estate in exchange for $20,000. This one is interesting because you may recall from the Toosley-Bixler case that whether the clay qualifies as goods depends on who removes it. If the buyer is going to come on the property and remove it, that does not qualify as a sale of goods. However, if it's not a sale of goods, then it's a mineral interest, which is a property interest in real estate. Therefore, this one, actually, whether it's a sale of goods or not, is within the statute of frauds. Subsection. J, a contract for an around-the-world cruise that will cost $10,000. This one is for services, a cruise. You're not purchasing goods. And an around-the-world cruise can make it in less than a year. There's no reason that is not possible, even if it happens to take longer than a year. So we there are outside the statute of frauds. K, another services contract, a contract to landscape a home at a total price of $12,000. Again, that's a contract for services, and services are not in the UCC. And there is nothing else here to put this within the statute of frauds. No writing is required. Finally a whimsical one, Part L, a contract for a round trip excursion to the star system Alpha Centauri. which is 4.367 light years away. The excursion does appear to take more than a year. Technology might change the outcome on this if we have some sort of Star Trek-ish hyperdrive or some dematerialization technology. But for the moment, it is in all circumstances physically impossible to complete this contract in less than a year. So we probably are within the statute of frauds. I have to say you likely won't see that one come up in real life. One other point I want to raise out of the review questions in your book is section 139 of the restatement second of contracts, which I would urge you to read. It's called Enforcement by Virtue of Action in Reliance. And if you read this section, you'll see it's very similar to the promissory estoppel provision in Section 90, and that's because it is a promissory estoppel provision. This one relates to promissory estoppel being a substitute for lack of compliance with the statute of frauds. as estoppel, when you have detrimental reliance that's reasonable on a promise that the other side made, if it's not enforceable for lack of consideration, we can be in Section 90. If it's not enforceable because there is no statute of frauds satisfaction, but we do have reliance that's justified, then Section 139 could get us over the statute of frauds. And so I ask you, what do you think the consideration doctrine and the statute of frauds have in common that would give rise to these exceptions? The answer for that tends to be that both fact patterns bring up situations where we're concerned of a party getting out of its promise because of a technicality when the evidence is quite clear that there was a promise. Thank you. Now, the evidence might not be of a writing, but there's some other acts or actions where it appears that the promise was made. And so the promissory estoppel is sort of an escape hatch for unjust results. That gets us to the end of our introductory lesson on the statute of frauds. In the next lesson, we will explore the adequacy of writings in the Elizabeth Arden case.

And that's what we're going to confine ourselves to in this course. Do remember, there can be many places where there is a statute of frauds that requires evidence of a signed writing. Here, we want to cover two main issues dealing with the common law statute of frauds.

First, we want to determine whether the contracted issue is within the statute of frauds, meaning, is it one for which the statute would require a writing? But we are not done after that determination. because issue number two is, is the contract in question actually evidenced by a sufficient writing? And that requires us to study and to understand what sort of writing exactly would be sufficient, and we will cover that in this series of lessons.

So let's deal with the first question. What contracts are within the statute of frauds. There is a mnemonic that many generations of law students have used to remember the items covered by the common law statute of frauds, and it is MY LEGS. That is simply an acronym that refers to the different categories of contracts covered by the statute of frauds.

First, a contract in consideration of marriage is within the original statute of frauds. Now, be careful, that doesn't mean a contract to marry, like an engagement. A promise of engagement is not within the statute of frauds.

But a promise to do something if the party on the other side will get married and think of wealthy landowners back in medieval and renaissance era Britain, then that is exactly the situation where this would apply. Second category, contracts that cannot be performed within one year. This one is occasionally tricky because it is a matter of logical proof.

The majority approach on this is that if a contract conceivably could be performed within one year, even though it's very unlikely, then the contract is not within the statute of frauds. So the contract has to, by definition, be one that under no circumstance could be performed within a year. Number three, contracts for the transfer of an interest in land. This is one of the most durable parts of the statute of frauds in that it is generally widely agreed that every real estate contract, and notice it doesn't have to be a sale of land, it could be any interest in land, like a lease, for example, or an easement, that that would be covered by the statute of frauds.

It must be evidenced by a writing or else it will not be enforceable. Number four, a contract by the executor of a will to pay a debt of the estate with personal money. Executors do pay debts of the estate, and those are not within the statute of frauds as such. But if the allegation is that the executor said, oh, don't worry about that, I'll cover that with my own personal money, we do require a writing because that's deemed to be so unlikely of a promise that an executor would make. Fifth are contracts for the sale of goods.

This provision shows up in the Uniform Commercial Code in a section providing that contracts where the amount sold totals $500 or more, and that is the cutoff, that those must be evidenced by a writing. Section 2201 contains the statute of frauds requirements in the UCC. Finally, contracts in which a party becomes a surety, and that's a guarantor for another party's debt.

If you are going to be held liable for the debt someone else has incurred, we will want that to be in writing because it seems like the kind of thing that might be made up if we couldn't evidence it with a writing. Now, out of those topics, the ones that are going to be most important for this course are contracts that cannot be performed within a year or contracts for the transfer. of an interest in land, and contracts for the sale of goods.

The other issues do come up on occasion, but if you can remember those three, you'll be in fairly good shape for this course. Now, our second big issue is, once we have determined that a contract is within the statute of frauds, how do we satisfy it? What makes a writing sufficient? That brings us to Restatement 2nd of Contracts, Section 131, which lists the general requirements of a sufficient memorandum of writing. It says, unless additional requirements are prescribed by the particular statute, and remember there could always be other statutes, a contract within the statute of frauds is enforceable if it is evidenced by any writing signed by or on behalf of the party to be charged.

Notice that the first requirement is that the writing be signed by the party who we are going to sue for breach of contract. If it is not signed by that party, then that is not going to be good enough. We have three more requirements. Subsection A says that the writing must reasonably identify the subject matter of the contract.

We can't take a piece of paper that just has your signature on it and say, well, here it is, here's the subject matter. signed writing because it has to identify what the contract is about. We also have to have some degree of certainty in the description. Subsection B says that the writing must be sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party.

So it is not enough that we know what the contract is about, we also have to know- who the parties are to this alleged contract. Finally, subsection C, often the most difficult part, the writing must state with reasonable certainty the essential terms of the unprofessional informed promises in the contract. If we're going to hold the other party to the writing, we need to know what those promises are, and if not in every respect, we at least need to know that with some reasonable respect. So those are our two main issues, and those give us the tools we need to think through a couple of sample problems from your book for how the statute of fraud operates. Let's look at some of these questions.

Question A, does the statute apply? A $50,000 second mortgage payable in 10 years taken out on a family home. That is an example of a contract for an interest in real estate. It's a mortgage.

although it is not the ownership of the real estate. It's a promise to the lender that gives the lender an interest in the real estate. The lender could foreclose if there's an event of default. Subsection B, a one-year employment contract signed on June 1st, which will go into effect on July 1st. You might initially think to yourself, ooh, that's right on the edge of one year.

It is exactly one year. Do we apply the statute or not? Courts have deviated one way or another if it is exactly a one-day issue, but this one is not even close. The contract is within the statute of frauds. Why is that?

If a contract is signed on June the 1st and the one years of employment begins a month later on July 1st, then by definition this contract must take over a year to perform. It's really a 13-month contract where there's no work the first month and performance will then finish 12 months after that. The employment part doesn't begin until a month after the signature, but we do have a contract once it is signed, so that is within the statute of frauds.

Next, a promise by the mother of a daughter who was killed in an auto accident to pay a claim herself if the claimant agrees not to bring a claim against the daughter's estate. That one is a little tricky, and you may wonder if this is really a surety contract, again, one of a guarantor, because the mother is saying, saying that she will pay a debt if the claimant doesn't bring a claim against the daughter's estate. Now, the daughter, remember, from a legal financial perspective, has obligations that continue on through her estate, but the contract is ultimately not within the statute of frauds because the mother has made the promise independently.

Next, a contract to purchase a one-ounce gold coin, assuming that the gold coin is worth at least $1,000. least $500, which seems quite likely, then this would be a contract for the sale of goods, because a gold coin is tangible and movable, and we are within the UCC statute of frauds. Question? E, a contract to pay the total cost of a student's law school tuition.

Here, once again, the promise is direct. It is between the law school and the person who is agreeing to pay. In that sense, it is an obligation to which the promisor is a direct contracting party. It is not a promise to pay a debt already incurred by the student.

So that actually takes it out of the suretyship requirement, not within the statute of frauds. So parents out there, if you make a promise to pay someone else something for the benefit of your children, That is a promise that you have made, and you will be the one liable. It is not in the nature of suretyship.

F, a parent's promise to guarantee payment of a loan taken out by a minor to purchase a car. That one is a clear suretyship promise because it guarantees someone else's debt. The initial debtor is the minor, and the parent is saying, I will cover that if the minor cannot, and that is a classic suretyship arrangement. Question G. A prenuptial agreement providing for the distribution of property among the spouses in the event of a divorce.

Now, this may be a large dollar agreement in terms of what is being dealt with by the contract, and the distribution of property likely will include some goods, but this isn't a sale, so based on that, we're not under UCC Article 2. Also, it's not in consideration of marriage. No one is trying to induce marriage, even though there is a marriage involved here. So this agreement, although it suggests a couple of statute of frauds, categories would not be within the statute of frauds.

Question H, a promise by a bride's family to pay a dowry to the husband upon the couple's marriage in a country, and there are some of these, where dowries are still common. That is a contract in consideration of marriage, so if the couple gets married, then the bride's family will be obligated to pay the dowry. That is within the statute of frauds. Part I, a contract to allow the buyer to remove 50,000 cubic feet of clay from a piece of real estate in exchange for $20,000.

This one is interesting because you may recall from the Toosley-Bixler case that whether the clay qualifies as goods depends on who removes it. If the buyer is going to come on the property and remove it, that does not qualify as a sale of goods. However, if it's not a sale of goods, then it's a mineral interest, which is a property interest in real estate. Therefore, this one, actually, whether it's a sale of goods or not, is within the statute of frauds. Subsection.

J, a contract for an around-the-world cruise that will cost $10,000. This one is for services, a cruise. You're not purchasing goods. And an around-the-world cruise can make it in less than a year. There's no reason that is not possible, even if it happens to take longer than a year.

So we there are outside the statute of frauds. K, another services contract, a contract to landscape a home at a total price of $12,000. Again, that's a contract for services, and services are not in the UCC.

And there is nothing else here to put this within the statute of frauds. No writing is required. Finally a whimsical one, Part L, a contract for a round trip excursion to the star system Alpha Centauri. which is 4.367 light years away. The excursion does appear to take more than a year.

Technology might change the outcome on this if we have some sort of Star Trek-ish hyperdrive or some dematerialization technology. But for the moment, it is in all circumstances physically impossible to complete this contract in less than a year. So we probably are within the statute of frauds. I have to say you likely won't see that one come up in real life.

One other point I want to raise out of the review questions in your book is section 139 of the restatement second of contracts, which I would urge you to read. It's called Enforcement by Virtue of Action in Reliance. And if you read this section, you'll see it's very similar to the promissory estoppel provision in Section 90, and that's because it is a promissory estoppel provision. This one relates to promissory estoppel being a substitute for lack of compliance with the statute of frauds.

as estoppel, when you have detrimental reliance that's reasonable on a promise that the other side made, if it's not enforceable for lack of consideration, we can be in Section 90. If it's not enforceable because there is no statute of frauds satisfaction, but we do have reliance that's justified, then Section 139 could get us over the statute of frauds. And so I ask you, what do you think the consideration doctrine and the statute of frauds have in common that would give rise to these exceptions? The answer for that tends to be that both fact patterns bring up situations where we're concerned of a party getting out of its promise because of a technicality when the evidence is quite clear that there was a promise.

Thank you. Now, the evidence might not be of a writing, but there's some other acts or actions where it appears that the promise was made. And so the promissory estoppel is sort of an escape hatch for unjust results.

That gets us to the end of our introductory lesson on the statute of frauds. In the next lesson, we will explore the adequacy of writings in the Elizabeth Arden case.

Transcript for:Overview of Statute of Frauds Requirements

Transcript for:
Overview of Statute of Frauds Requirements