§ 6.01 Requirements of the Statute of Frauds

Certain agreements must satisfy the statute of frauds, which requires the agreement to:

1) be memorialized in a writing or record;

2) be signed by or on behalf of the party against whom enforcement is sought;

3) indicate that a contract has been made between the parties;

4) state with reasonable certainty the essential terms of the unperformed promises, in the case of non-goods contracts;

5) specify the term of quantity, in the case of contracts for the sale of goods . UCC § 2-201 specifically states that "a record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable . . . beyond the quantity of goods shown in the record."

§ 6.02 Contracts Within the Statute of Frauds

The following types of agreements fall within the statute of frauds:

1) Agreements that by its terms cannot be performed within a year from the making of the contract – The statute of frauds only applies if the contract specifically precludes performance within one year, not merely if performance would appear impossible to complete within one year of the making of the contract. (see § 6.04[3] for an exception to this writing requirement)

2) Promise to answer for the debt, default or miscarriage of another – A promise by a surety or guarantor to a creditor to pay the debt or perform the obligation of a principal debtor must be in writing where the creditor has reason to know of the surety/guarantor relationship. Many states likewise require a writing to memorialize a promise by an executor or other personal representatives to pay the obligations of the estate which they represent with their own funds. This requirement does not apply when the promise merely involves payment of another's debts with funds that belong to the debtor or which the promisor holds for the purpose of paying the debtor's obligations.

3) Agreements made upon consideration of marriage, other than mutual promises to marry, e.g., to provide a dowry or child support.

4) Agreements for the sale of land and for an interest in land (see § 6.04[2] for an exception)

5) Agreements for the lease of real property for longer than one year

6) Agreement by a purchaser of real property to pay an indebtedness secured by a mortgage or deed of trust upon the property, unless assumption of the indebtedness by the purchaser is specifically provided for in the conveyance of the property.

7) Contracts for the sale of goods for the price of $500 or more [UCC § 2-201]; under the proposed revision, the price threshold is raised to $5,000 (see § 6.04[1] for an exception)

8) Contracts for sale of other personal property – e.g, intellectual property, royalties – in the amount or value exceeding $5,000 [UCC § 1-206]

9) Leases of goods in the total amount of $1,000 or more [UCC § 2A-201]

10) Agreements which creates a security interest in personal property if it is not in possession of the secured party, and agreements for the assignment of contract rights [UCC § 9-203(1)(a)]

 

Other types of agreements upon which different states have imposed a writing requirement include:

1) agreements that by its terms cannot be performed during the lifetime of the promisor;

2) agreements by which a principal appoints an agent to execute a contract which is itself within a provision of the statute of frauds ("equal dignities" rule)

3) promises to pay debts, the enforcement of which was barred by the statute of limitations

4) promises to pay debts discharged in bankruptcy

5) agreements to pay a commission to a real estate agent

§ 6.03 Signature

[1] Generally

An agreement that falls within the statute of frauds must be signed by or on behalf of the party against whom enforcement is sought. An agreement may consist of several writings or records and only one need be signed if the circumstances clearly indicate that the various writings relate to the same transaction.

A signature may include any mark or symbol with which the signer intends to authenticate a writing. The signature may be written, printed, stamped, engraved, or otherwise marked on the writing. Signatures may include initials, imprinted signatures, letterhead, and firm logos.

[2] Electronic signatures

UETA, "E-Sign", and the UCC [proposed revised UCC § 2-211(1) ] recognize the validity of electronic signatures.

[3] Signed Confirmation Between Merchants

In a contract for the sale of goods between merchants, the contract may be enforced even against a merchant that did not sign the writing if:

1) within a reasonable time of the making of the oral contract, one merchant sends a signed writing to the other which would satisfy the statute of frauds as against the sender;

2) the other merchant receives the writing and has reason to know of the writing's contents; and

3) the non-signatory merchant fails to send a written notice of objection within 10 days of the date of receipt of the confirmation. [UCC § 2-201(2)]

[4] Signature by Party's Agent

Some jurisdictions require a signed writing to evidence an agent's authorization to sign a contract that is subject to the statute of frauds on behalf of a party. This is not the majority position however.

§ 6.04 Avoidance of the Writing Requirement

[1] Goods Contracts

Contracts for the sale of goods that fall within the statute of frauds may be enforced, at least partially, in the absence of a writing, in the following circumstances:

1) where payment has been made and accepted or the goods have been received and accepted – Such partial performance makes only the portion performed and accepted enforceable, not the oral contract in its entirety.

2) in a contract for specially manufactured goods where the seller cannot sell such goods to third parties in the normal course of his business, once the seller has made a substantial beginning in manufacturing or procurement of such goods, provided that the seller can establish that the goods were intended for the buyer.

3) where the party against whom enforcement is sought admits in a pleading, testimony or otherwise under oath that a contract was made but the contract is only enforceable up to the quantity of goods admitted. [UCC § 2-201(3)(c)]

[2] Contracts for the Sale of Real Estate

Despite failure to satisfy the statute of frauds, a contract for the sale of real property will be enforceable if the buyer has taken possession and has made permanent improvements upon it. The extent of the improvements made that will justify enforcement varies from jurisdiction to jurisdiction. [See Restatement § 129, comment a]

[3] Contracts That Cannot be Completed Within One Year

In a contract which cannot by its terms be completed within one year, lack of a writing will not preclude enforcement once full performance has been completed.

[4] Equitable Estoppel

Where the promisor makes a representation pertaining to the writing and the party seeking to enforce the contract relied to his detriment upon such representation – e.g., that the writing has been executed, that the statute of frauds will not be raised as a defense to the enforcement, or that the statute of frauds does not apply to the transaction in question – the promisor may be estopped from raising the lack of writing as a bar to enforcement.

[5] Promissory Estoppel

A non-goods contract that fails to satisfy the statute of frauds may nevertheless be enforceable if the promisor's promise foreseeably induces action or forbearance on the part of the promisee or a third person and enforcement is the only means of avoiding an injustice. [Restatement § 139] Mere reliance on the oral contract itself is generally not enough to justify estoppel; most cases require some additional statement or promise.

Some courts have refused to apply promissory estoppel to cases involving goods contracts because UCC § 2-201(3), which enumerates the circumstances under which the writing requirement may be avoided, does not include estoppel. However, section 1-103, which applies to all commercial transactions, indicates that principles of law and equity, including estoppel, are to supplement the specific provisions.