14.3 The Statute of Frauds

14.3 The Statute of Frauds

The Statute of Frauds does not make oral contracts void; it makes certain contracts unenforceable against a party who has not signed a sufficient writing. Work through three questions: Is the contract within the statute? If so, is there a sufficient writing signed by the party to be charged? If not, does an exception apply?

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The Statute of Frauds (SoF)

The Statute of Frauds requires that certain enumerated contracts be evidenced by a writing signed by the party to be charged (the defendant against whom enforcement is sought) in order to be legally enforceable.

A. The Six Covered Categories (MY LEGS)

                      ┌────────────────────────────────────────┐
                      │     STATUTE OF FRAUDS: "MY LEGS"       │
                      └───────────────────┬────────────────────┘
                                          │
     ┌──────────┬──────────┬──────────────┴──────┬──────────┬──────────┐
     ▼          ▼          ▼                     ▼          ▼          ▼
┌─────────┐┌─────────┐┌─────────┐           ┌─────────┐┌─────────┐┌─────────┐
│Marriage ││  Year   ││  Land   │           │Executor ││  Goods   ││Surety   │
│ (Prenup)││(> 1 yr) ││(Realty) │           │ (Estate)││ ($500+) ││(Guaran.)│
└─────────┘└─────────┘└─────────┘           └─────────┘└─────────┘└─────────┘

1. Marriage: Contracts made upon consideration of marriage (e.g., prenuptial or antenuptial agreements, promises to convey property in exchange for marrying someone). A simple mutual promise to marry is not within the Statute.
2. Year (One-Year Provision): Contracts that cannot possibly be fully performed within one year from the exact date the contract is formed.
   • The Impossibility Standard: If performance within one year is theoretically possible under the terms of the agreement—no matter how improbable or unlikely—the contract is NOT within the Statute of Frauds.
   • Lifetime Contracts: An oral contract to employ someone "for life" or "until retirement" is NOT within the Statute, because the employee could die within one year, fully performing the contract.
   • Fixed-Term Contracts Exceeding One Year: An agreement to employ someone for "14 months" or for "one year beginning next month" IS within the Statute because full performance cannot occur within 365 days of contract formation.
3. Land Interests: Contracts creating or transferring an interest in real property, including contracts for the sale of land, mortgages, easements, and leases exceeding one year.
   • Exception — Part Performance Doctrine: In equity, many courts enforce an oral contract for the transfer of land if the buyer satisfies at least two of the following three elements (other courts ask whether the buyer's acts unequivocally refer to a contract, or whether the buyer reasonably relied so that injustice can be avoided only by specific enforcement, Restatement § 129):
     1. Takes physical possession of the property;
     2. Makes payment (full or partial) of the purchase price; and/or
     3. Makes valuable improvements to the property.
4. Executor: Contracts where an executor or administrator promises to answer for the debts of a decedent out of the executor's personal funds (not out of the estate's assets).
5. Goods for $500 or More (UCC § 2-201): Any contract for the sale of goods where the aggregate price is $500 or more.
6. Suretyship: A promise to answer for the debt, default, or miscarriage of another person (a collateral guaranty).
   • The Main Purpose Rule (Leading Object Exception): If the promisor's primary economic motivation or leading object in guaranteeing the third party's debt is to serve the promisor's own pecuniary or business advantage, the promise is NOT within the Statute of Frauds, and an oral promise is fully enforceable.

B. Writing Requirements: Common Law vs. UCC § 2-201

C. UCC Article 2 Statute of Frauds Exceptions (SWAP)

An oral contract for the sale of goods for $500 or more that lacks a signed writing by the defendant is nevertheless enforceable in four specific circumstances (SWAP):

1. S — Specially Manufactured Goods (§ 2-201(3)(a)):
   • Goods are specially manufactured for the particular buyer;
   • Goods are not suitable for sale to others in the ordinary course of the seller's business; AND
   • Seller has made a substantial beginning on their manufacture or commitments for their procurement before notice of repudiation is received.
2. W — Written Merchant's Confirmatory Memo (§ 2-201(2)):
   • Both parties are merchants;
   • One party sends a written confirmation of an oral agreement within a reasonable time;
   • The writing is sufficient against the sender (signed by sender, states quantity);
   • The recipient has reason to know its contents; AND
   • The recipient fails to object in writing within 10 days of receipt.
   • Effect: The writing satisfies the Statute of Frauds against the non-signing recipient!
3. A — Judicial Admissions (§ 2-201(3)(b)):
   • The party against whom enforcement is sought admits in a pleading, testimony, or in court that a contract for sale was made.
   • Limit: Enforceable only up to the specific quantity admitted.
4. P — Part Performance (§ 2-201(3)(c)):
   • Enforceable with respect to goods for which payment has been made and accepted, or which have been received and accepted.
   • Limit: In divisible goods, an oral contract is enforced only for the quantity actually received/paid for, not the unperformed balance.

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Applying the Statute of Frauds

The Memorandum at Common Law

• Contents: The writing must be signed by the party to be charged, reasonably identify the subject matter, show that a contract was made, and state the essential terms of the unperformed promises with reasonable certainty (Restatement § 131).
• Signature: Any mark or symbol intended to authenticate the writing counts, including a printed letterhead or a typed name in an e-mail. Under the federal E-SIGN Act and the Uniform Electronic Transactions Act, a record or signature may not be denied legal effect solely because it is electronic.
• Several writings: Separate writings may be read together if they clearly relate to the same transaction, even if only one is signed (Restatement § 132).
• Timing and purpose: The writing need not be made at the time of contracting or delivered to the other party; even a signed letter repudiating the deal can satisfy the statute if it states the contract's terms.

Details of the Covered Categories

• One-year provision: The year runs from the date the contract is made, not the date performance begins. When one party has fully performed, most courts enforce the other party's promise despite the one-year provision (Restatement § 130(2)).
• Land: Contracts to sell land, easements, mortgages, and (in most states) leases longer than one year are covered. Contracts to build a house on land, or to pay a broker a commission, generally are not covered by the land provision, although many states have separate statutes requiring brokerage agreements to be in writing.
• Suretyship: Only collateral promises made to a creditor to pay if the debtor does not are covered. A promise made to the debtor to pay the debt, or a promise to become primarily liable in place of the debtor, is outside the provision.
• Goods: The UCC provision applies to sales of goods for a price of $500 or more; leases of goods under Article 2A require a writing when total payments are $1,000 or more.
• Modifications: A modification of a contract within the statute must itself be in writing if the contract as modified is within the statute (§ 2-209(3); Restatement § 149).
• Agents: In many states, an agent who signs a land contract for a principal must have written authority (the "equal dignity" rule).

Consequences of Noncompliance

• Unenforceable, not void: The defense must be raised, or it is waived, and a party may still enforce the contract against a party who did sign.
• Restitution: A party who performed services or paid money under an unenforceable oral contract may recover the reasonable value of the benefit conferred.
• Estoppel: Some courts enforce an oral promise when the promisee reasonably and substantially relied and injustice can be avoided only by enforcement (Restatement § 139), and many courts estop a party who falsely promised to sign a writing or misrepresented that one was unnecessary.