The Statute of Frauds in Contract Law

The Statute of Frauds in Contract Law

When contract lawyers analyze the statute of frauds, they usually are focused on the specific statute in whatever jurisdiction applies to the particular case. The first question is whether or not the agreement in the case is within the statute of frauds (in other words, does the statute of frauds apply to the contract involved or not). If not, the statute of frauds is typically not an issue and the analysis is essentially over. The conclusion would be that the statute of frauds does not apply. If yes, however, the analysis shifts to a focus on whether the statute of frauds is satisfied. The applicable statute of frauds in the jurisdiction will set forth the law as to what the parties need in order for the contract to be enforceable (this is typically at least an agreement in writing). Once it’s known what is required, the last step is analyzing the evidence to determine whether or not the requirements have been satisfied. If the contract has everything it needs to have, the statute of frauds applies and is satisfied. If the contract is missing something, it is not necessarily unenforceable, however, an exception would need to apply such as an equitable remedy like promissory estoppel. Determining what the statute of frauds required and whether it’s been satisfied is best left to a business lawyer well versed in the law of contracts.

Purpose of the Statute of Frauds

Historically, courts did not trust witnesses and jurors were allowed to decide legal cases based on their own knowledge. The best way to decide if we have a contract that is enforceable is to have a signed written agreement. It is a legal formality satisfying an evidentiary function. If this is signed by the defendant, we have evidence that there was an agreement. Having the signature and a written agreement cautions the defendant to enough of an extent that from a legal standpoint they are seen to be aware that the agreement will be enforced by the courts.

Agreements Covered by Statute of Frauds

Legislatures enumerate categories in each jurisdiction’s statute of frauds. The categories themselves indicate that lawmakers thought those categories were areas important enough to fall within statute of frauds and trigger specific requirements (such as a written contract).
 

The Statute of Frauds under the U.C.C.

Just about every jurisdiction has enacted a special statute regarding the sale of goods and the statute of frauds. These statutes usually resemble model UCC section 2-201(1) which typically governs contracts for the sale of goods for the price of $500.00 or more. If the contract is dealing with the sale of goods and the price of those goods is $500.00 or more, the statute of frauds is usually triggered under the commercial contract laws. This is usually going to be satisfied if the parties have: A writing that is sufficient to indicate a contract for sale has been made; the quantity is specified; and the agreement is signed by the defendant. Sufficiency requirements are typically minimal. Even if the quantity is wrong, there are cases that still satisfy the statute of frauds but usually only to the extent of the mistaken quantity.

Merchants and the Statute of Frauds

It is always important to note that when dealing between merchants, there’s usually a different rule involved under the contracts law. In merchant transactions that trigger the the statute of frauds, many jurisdictions permit merchants to have an oral agreement followed by confirmation. In these types of cases, the parties typically need the confirmation to be sent between merchants for any applicable provisions of this kind to apply. Confirmation must usually be sent within reasonable amount of time set forth in the statute. It must satisfy whatever elements are required with respect to the sender. This typically requires: quantity and sufficiency to indicate a contract for sale of goods has already been made. An order itself does not show that a contract has been made. An order implies a future deal so it does not confirm an already made oral agreement. That being said, the statute usually requires the agreement to be signed by the sender and satisfy any other legal requirements. If the receiver turns out to be the defendant and the defendant hasn’t signed, the merchant statute of frauds provisions often binds the defendant anyways if they do not object within some time period set forth in the law. The merchant’s confirmation sent by a merchant to another merchant in confirmation of an agreement is typically enforceable against a sender and receiver if the receiver does not object promptly upon receipt.

About the Authors: Sawan PLLC is a family owned law firm practicing law in the areas of bankruptcydivorce, business law, estate planning and more. Our firm practices law in Ohio (Toledo, Columbus), Michigan and Florida. 

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chris Sawan

Chris Sawan holds a JD, MBA and is a CPA with a background that yields itself to some of the most complex legal challenges facing businesses, families, and individuals.

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Dennis E. Sawan is licensed to practice law in the States of Florida and Ohio. His experience as a transactional attorney makes him a tremendous ally to have for all types of transactions.

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