The term “Statute of Frauds” refers to a statute that requires certain categories of contracts to be in writing or, at minimum, memorialized in some type of writing and signed by the party against whom that contract is being enforced. An oral contract that falls within the Statute of Frauds is not enforceable. The objective of the Statute of Frauds is to prevent fraud and perjuries in certain categories of transactions.
Commonly, the following categories of contracts fall under the statute of frauds:
- Contracts whereby a party assumes someone else’s debt;
- Contracts made in consideration of marriage (e.g., Prenuptial Agreements);
- Contracts that by their express terms cannot be performed within one year (e.g., A agreeing to supply widgets to B for the term of 2 years);
- Contracts for sale of real property; and
- Contracts for sale of goods above a certain price.
An oral contract that falls within the Statue of Frauds may still be enforced by a court if it falls within one of the exceptions to the Statute, such as Promissory Estoppel. See Alaska Democratic Party v. Rice, 934 P.2d 1313 (Alaska 1997).
Restatement Second of Contracts § 130. Contract Not To Be Performed WithinAYear
(1) Where any promise in a contract cannot be fully performed within a year from the time the contract is made, all promises in the contract are within the Statute of Frauds until one party to the contract completes his performance.
(2) When one party to a contract has completed his performance, the one-year provision of the Statute does not prevent enforcement of the promises of other parties.
Possibility of performance within one year.The English Statute of Frauds applied to an action “upon any agreement that is not to be performed within the space of one year from the making thereof.” The design was said to be not to trust to the memory of witnesses for a longer time than one year, but the statutory language was not appropriate to carry out that purpose. The result has been a tendency to construction narrowing the application of the statute. Under the prevailing interpretation, the enforceability of a contract under the one-year provision does not turn on the actual course of subsequent events,nor on the expectations of the parties as to the probabilities. Contracts of uncertain duration are simply excluded; the provision covers only those contracts whose performance cannot possibly be completed within a year.
D & N Boening, Inc. v. Kirsch Beverages, Inc., 63 N.Y. 2d 449 (1984):
The ancient Statute of Frauds is derived from the original English “Act for Prevention of Frauds and Perjuries” enacted in 1677, which provided in part that “no action shall be brought * * * upon any agreement that is not to be performed within the space of one year from the making thereof * * * unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith” (29 Charles II, C. 3, 8 Stat at Large 405; see 6 Holdsworth, History of English Law , pp 379-397). The entire Statute was intended to prevent fraud in the proving of certain legal transactions particularly susceptible to deception, mistake and perjury and, with regard specifically to the requirement for a signed writing for a contract not to be performed within one year, “the design of the statute was, not to trust to the memory of witnesses for a longer time than one year”. (Smith v Westfall, 1 Lord Raymond 316, 317 ; see Calamari and Perillo, Contracts [2d ed], § 19-1; Fuller and Eisenberg, Basic Contract Law [4th ed], at p B-2.)
27 Experts, The Business Man’s Encyclopedia, Contracts (1905).
This statute, enacted in England in 1677 and re-enacted in part or in whole with various modifications in all the United States, states that all contracts must be in writing when, having any of the following conditions: (1) For the sale of any interest in lands; (2) leases of land, except in certain cases, for one year or more; (3) if not by their own terms to be performed within one year; (4) if made upon consideration of marriage, except mutual promises to marry; (5) to answer for the debt, default or miscarriage of another; (6) for the sale of goods, chattels or things in action for the sum of $50 or more (amount differs in different states), unless the purchaser receives a part of the thing or pays part of the purchase price, or the sale be by auction.
Besides lawful contracts, or those made in good faith by competent parties which the law will enforce, there are various other contracts not lawful and hence not to be enforced. Unlawful contracts are those in violation of the law where made and are void everywhere. Illegal contracts are those contrary to the acts of government. A contract to obstruct a lawful business would come in this class. Fraudulent contracts are those operating as an injury to or a fraud on a third person. Transfer of property before making an assignment to creditors comes under this head. Im -moral contracts embrace those opposed to the moral welfare of a community, as a contract to commit adultery, or desecrate the Sabbath, etc. The law will not rescind nor enforce an executory contract of this nature.