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Business Law/Breach, Remedies, and Defenses/Statute of Frauds

Breach, Remedies, and Defenses

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Statute of Frauds

The statute of frauds is a requirement that certain types of contracts must be in writing to be valid: ones for the sale of an interest in land; ones for goods sold for $500 or greater, under the Uniform Commercial Code; ones in consideration of marriage; ones that cannot be performed within a year of making the agreement; ones for a type of insurance called suretyship; and ones where an estate executor personally pays estate debts.

A contract that cannot be performed within one year must be in writing. This rule does not mean that the contract must be completed within one year. Rather, the rule requires that it can be completed within a single year.

For example, John agrees to pay Michael $100 for Michael to clean John's house four times. This contract would not have to be in writing because Michael could complete all four cleaning assignments within a year. If, on the other hand, John agreed to rent Michael's scooter for 14 months, the agreement would have to be in writing because it could not be performed within a year of making the agreement.

The statute of frauds is a requirement that certain types of contracts must be in writing in order to be valid. It also has several exceptions, such as equitable estoppel, the principle that prevents a party from denying a certain fact or legal conclusion. This is a way that courts protect people and businesses from parties that do not act fairly. Under equitable estoppel, a court will not award a judgment to a party that has gone back on its word.

For example, Bella goes to a tailor to have some alterations made on her wedding dress. The tailor accidentally tears the inside of the dress. He offers to fix it, but Bella says not to worry about it—nobody will see the inside of the dress. In this situation, Bella cannot then sue the tailor for damaging her dress. Because she has already forgiven the error, a court will not allow her to collect damages from the tailor.

Statute of Frauds Contracts

In accordance with the statute of frauds, several types of contracts must be in writing to be enforceable. These include goods sold for more than $500 under the Uniform Commercial Code as well as a type of specialized insurance called suretyship.
Under the statute of frauds, certain kinds of contracts need to be in writing:
  • Any interest in land.
  • Those that cannot be performed within one year.
  • Those to pay the debt of another. These are known as collateral promises—for example, if a family member agrees to pay back the debt of another person.
  • Those made by an executor of an estate. An executor is the person who is in charge of someone's assets after they pass away.
  • Those made in consideration of marriage. This refers to the promise to give money or property in exchange for marriage.
  • Those for the sale of goods of $500 or more.
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