The statute of frauds refers to the requirement that certain kinds of contracts be memorialized in a writing, signed by the party to be charged, with sufficient content to evidence the contract.
Contents
- Terminology
- Raising the defense
- Exceptions
- Ireland
- Canada
- Uniform Commercial Code
- Other statutes
- England and Wales
- Scotland
- References
Traditionally, the statute of frauds requires a signed writing in the following circumstances:
This can be remembered by using the mnemonic "MY LEGS": Marriage, contracts for more than one Year, Land, Executor (or Estate), Goods ($500.00 or more), Surety.
Terminology
The term statute of frauds comes from an Act of the Parliament of England (29 Chas. 2 c. 3) passed in 1677 (authored by Lord Nottingham assisted by Sir Matthew Hale, Sir Francis North and 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 codes. 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.
Raising the defense
A defendant in a statute of frauds case who wishes to use the Statute as a defense must raise it in a timely manner. The burden of proving that a written contract exists comes into play only 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 Uniform Commercial Code (UCC), but may still use it under common law.
A Statute of Frauds defense may also be affected by a showing of part performance by proving the existence 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 a 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. However, 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 most 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 modifications: 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, it 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 UCC abrogated that requirement for modification of contracts, as discussed below.
Exceptions
An agreement may be enforced even if it does not comply with the statute of frauds in the following situations:
Ireland
The Statute of Frauds was passed in 1695 in Ireland. The statute is one of the few pre-Independence laws that survived the Statute Law Revision (Pre-1922) Act 2005 and the Statute Law Revision Act 2007, and remains largely in force today.
Some effects of the law have been softened by equity, for example the requirement that all contracts for sale of land be evidenced in writing can be circumvented by reliance on the doctrine of part performance.
Canada
The Statute of Frauds recites that it was enacted for the “. . . prevention of many fraudulent practices which are commonly endeavored to be upheld by perjury . . .”. The mischief arising from claimants asserting oral agreements was to be avoided by requiring that certain contracts be evidenced by “some memorandum or note thereof . . . in writing and signed by the party to be charged therewith . . .”. Contracts respecting land “created by livery and seisen only or by parole” would not be enforced absent such a writing.
It quickly became apparent to the common law judges that the Statute might itself become an instrument of fraud (or at least injustice) if it was strictly enforced with respect to contracts that were wholly or partly performed: Hill v. Nova Scotia (Attorney General), [1997] 1 S.C.R. 69
The courts developed the concept of “part performance” as an exception. If a contract concerning land was partly performed, that could displace the need for a note or memorandum in writing signed by the party to be charged.
It was one thing to create an exception that displaced the need for a memorandum in writing, but something else to completely nullify the Statute’s operation. The thrust of the Statute was that contracts concerning land could not be proved by parol evidence alone. Thus, part performance might be an exception, but it could not, in effect, mean that the underlying contract could be proven by parol evidence. In developing the “part performance” exception, a balancing of the competing considerations was required. An important factor in the case law became that the part performance must be “unequivocally” related to the alleged contract.
Uniform Commercial Code
In the United States, 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 Uniform Commercial Code. The most recent UCC revision increases the triggering point for the UCC Statute of Frauds to $5,000, but as of 2006 no U.S. state has adopted it.
The application of the statute of frauds to dealings between merchants 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). There is a "catch-all" provision in the UCC 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 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."
Other statutes
Every state has a statute that requires certain types of contracts (in addition to contracts governed by the UCC) be in writing and signed by the party to be charged. The most common are contracts that involve the sale or transfer of land, and contracts that cannot be completed within one year.
The statute of frauds in various states come in two types:
- those that follow the English Statute and provide that "no action shall be brought" on the contract or the contract "shall not be enforced"
- Those that are declared "void"
England and Wales
The Statute of Frauds (1677) was largely repealed in England and Wales by the Law Reform (Enforcement of Contracts) Act 1954 (2 & 3 Eliz 2 c 34). The only provision of it that is still extant is that part of Section 4 which 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 (19 & 20 Vict 97) 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 (9 Geo 4 c 14) (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).
The provision in section 4 that related to contracts for the sale of land was repealed by Schedule 7 to the Law of Property Act 1925 (15 Geo 5 c 20), however the requirement that contracts for the sale of land be evidenced in writing was maintained by section 40 of that Act, subsequently replaced by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (c 34).
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 online 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)).