When a person enters into an important contract, it is common wisdom that they should get the agreement in writing. Getting a contract in writing generally makes good sense. A written document provides solid evidence that an agreement existed in the first place, and clearly lays out the expectations and obligations of each party to the agreement. Writing is also more reliable than human memory.
However, not every contract needs to be reduced to writing in order to be enforceable. Verbal contracts are entered into – and enforced by courts – all the time. Proving the existence of an agreement, as well as its exact terms, is more challenging when the agreement is verbal than when it is written. But if a party can prove sufficiently that a verbal agreement existed and that that party is entitled to legal relief under the agreement, the court will award such relief pursuant to most verbal contracts.
The Statute of Frauds, however, does require certain kinds of contracts to be in writing, and signed by the party against whom enforcement is sought. A contract which is subject to the Statute of Frauds, which is not in writing, is not enforceable in a court of law. The Statute of Frauds, as its name suggests, is intended to prevent fraud in certain types of agreements which are particularly vulnerable to fraud.
Types of contracts subject to the Statute of Frauds (SOF) include the following:
(1) Contracts for the sale or transfer of land. This includes the sale of both improved and unimproved land. This also includes interests in land, such as oil and mineral rights. This does not include the leasing or rental of real estate property.
(2) Contracts which are not to be performed within one year of entering into the contract. The SOF applies to contracts which cannot be performed within one year – it does not apply to contracts which are merely unlikely to be performed within one year, or which are not actually performed within one year.
For some examples of #2: Will lives below the poverty line, and enters into a verbal agreement to repay $100,000.00 of debt. This agreement is not subject to the SOF, because he could theoretically pay off the debt within one year, even if it is extremely unlikely. In another example, a carpenter enters into a verbal contract to build a home, and expects to finish the project in six months. The project actually takes 14 months. This agreement is not subject to the SOF, because the project could have been completed within one year. However, in another example, an engaged couple enter into an agreement with a performing artist for the artist to provide entertainment at their wedding on their anticipated wedding date. The wedding date is already scheduled two years from the date of the contract. This agreement is subject to the SOF and it therefore must be in writing, because it cannot be completed within one year of the date of the contract – as the wedding date will not yet have arrived by then.
(3) Promises to pay the debt of another. This is also known as indemnity, guaranty, and suretyship, depending upon the context. This also includes an agreement by the executor or administrator of a deceased person’s estate, to pay the debts of the estate.
(4) Promises entered into in anticipation of marriage. This is usually a premarital agreement, but includes other promises made in consideration of marriage.
For an example of #4: Tom and Jack are engaged. Tom promises to give to Jack a valuable painting upon their marriage. In this agreement, marriage is the consideration (exchange) for the painting. If the SOF is complied with, the painting rightfully belongs to Jack upon their marriage.
(5) Contracts for the sale of goods valued at $500.00 or more. Some states also add other kinds of sales, over specific dollar amounts, to this requirement, as well. Exceptions to the writing requirement under the SOF can be made where goods are unique or have been specially manufactured – for example, an exception to the SOF could be made where monogrammed goods are specially made for a customer, as the special design is evidence of a contract.
When a contract subject to the SOF comes before a court, the courts are lenient in terms of what constitutes a writing. Emails or texts count as writing. Also, the contract need not be a fully-fledged formal contract – so long as the “material terms” (those fundamental to the agreement, which make clear the obligations of each party) are written. The writing must simply demonstrate the rights and responsibilities of each party.
Although the above types of contracts must be in writing to be enforceable; it is a good idea to put any contract into writing. Doing so makes proving the existence of that contract easier later on, as well as keeping an accurate records of the terms agreed upon.
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Please note that the above is offered for educational purposes, and as a means of encouraging intellectual curiosity about the law. The information presented may not take into account every exception, variation, or complication which could apply to someone’s legal matters. Accordingly, nothing in this post or blog is ever intended as, nor should be construed by or relied upon by anyone, as legal advice. If you need legal advice, please consult an attorney who can give you assistance specific to your needs.