Term Paper on "Statute of Fraud"

Term Paper 14 pages (4500 words) Sources: 1+

[EXCERPT] . . . .

Statute of Frauds is a catch-all phrase that sums up the idea that some contracts must be in writing in order to be enforceable. Although the technical requirements of the Statute of Frauds vary by jurisdiction, the basic premise of the Statute of Frauds is that certain contracts are unenforceable unless they are in writing. Among those contracts are: those for the sale of goods worth more than $500; promises by an executor to answer for the debt of a decedent; suretyship contracts; promises made in consideration of marriage; contracts for the sale of land; and certain landlord-tenant contracts.

Section 2-201 of the Uniform Commercial Code (UCC) details the general requirements of the Statute of Frauds in relation to the sale of goods. In general, the Statute of Frauds provides that contracts for the sale of goods for a price of $500 or more are unenforceable unless a writing exists that indicates that a contract has been made. The writing must be signed by the party against whom enforcement is sought or his agent (First Year, A-111). In regards to a sale of goods, a writing is insufficient if it does not specify the quantity of goods to be sold.

The Statute of Frauds does not require the parties to execute a formal contract. A confirmatory memorandum that has been signed by the party against whom enforcement is sought is sufficient to satisfy the Statute of Frauds. "Courts applying the Statute of Frauds have not required the writing to be formal or even that it have been seen by both parties" (Talley). In fact, for contracts covered by the Statute of Frauds, the obligations do not have to be mutual. Furthermore, the writing does not have to be made at the time of the contract. As the Statute of Frauds continues to evolve, modern courts have determined that tapes, video recordings, and electronic communications can satisfy the writing requirement of the Statute of Frauds.

History

In 17th century England, there was virtually no regulation of the "rich mixture of financial interchange, property ownership, and agreements for every conceivable transaction" (Rain). Most bargains were based on oral agreements, not necessarily because people were more trustworthy, but because most people could not write. However, fraud was a serious problem. The oral agreements were difficult to enforce. Furthermore, there was no real established law or regulations governing the construction of contracts. Actions based upon oral promises were frequently unsuccessful due to perjury and fraud. As the number of lawsuits increased, so did the incidents of perjury and fraud. It became increasingly apparent that oral evidence was unreliable.

Charles II, the King of England, sought a solution. Sir Leoline Jenkins, a well-respected attorney, privy councilor, and secretary of state came up with a solution. Jenkins drafted the English Act for the Prevention of Frauds and Perjuries, which was enacted in 1677. The English Act for the Prevention of Frauds and Perjuries provided that certain types of contracts were too important to be enforced unless they were in writing. The contracts covered included: contracts for the sale of land; contracts that could not be performed within one year; surety contracts; marriage contracts; contracts involving the sale of goods over a certain amount; and an executor's promise to administer a decedent's estate.

The idea that certain contracts are too important to rely on oral promises has endured in Anglo-American jurisprudence. Although England repealed the Statute of Frauds in 1954, is still alive and well in American jurisprudence. Most states have adopted a version of the Statute of Frauds. Furthermore, due largely to the efforts of Karl Llewellyn, the Statute of Frauds has been codified in the Uniform Commercial Code. While versions of the Statute of Frauds vary from state to state, there has been very little change in what categories of contracts must be in writing. Some of the additions have included wills and real estate contracts.

Examples

Although each state has its own version of the Statute of Frauds, they are all based on the English Act for the Prevention of Fraud and Perjury. The scenarios where the Statute of Frauds applies are wide-ranging and it is not always easy to determine whether or not a particular situation falls under the Statute of Frauds. It can also be difficult to determine whether or not a particular document satisfies the writing requirement of the Statute of Frauds.

For example, the modern Statute of Frauds requires that a contract for a sale of goods worth more than $500 be in writing in order to be enforceable. A common scenario where the Statute of Frauds might apply is in the sale of automobiles. A customer who enters into an oral agreement with a car salesman for the purchase of a vehicle worth more than $500 will be left without recourse if the salesman sells the car to another buyer unless their agreement has been reduced to writing.

What type of writing would work to ensure that the customer and the salesman have entered into a contract? Obviously, a detailed contract for the sale of the automobile would satisfy the writing requirement. In addition, the salesman would be able to enforce the sales contract if he obtained something in writing from the customer that indicated the customer's intent to purchase the vehicle. An example of the type of writing that would satisfy that requirement is if the customer left a deposit check and indicated in the memo line that the check was a deposit on a specific vehicle. However, in many jurisdictions, the customer's deposit check might not be sufficient to give the customer a right of action against the car salesman. The writing has to be "signed" by the person against whom enforcement is sought. Therefore, to preserve his rights, the customer would need to get something from the dealership promising him the vehicle in question. In some jurisdictions, the fact that the car salesman accepted the check with a notation in the memo line that it was for a specific vehicle and did not object to the form of the check would be sufficient to give the customer a right of action against the salesman.

Another example of a situation where the Statute of Frauds applies is in suretyship contracts. A suretyship contract is where a party offers to assume responsibility for the debts of another. A scenario where that might be applicable is where the surety tells the lender that if the lender will lend money to a borrower, the surety will repay the lender if the borrower fails to repay the loan. Unless the lender gets the agreement in writing, he will be unable to collect the money from the surety. This scenario is actually fairly common, as anyone who has ever seen daytime court television shows can attest. A person (the surety) asks someone in their family (the lender) to lend money to a boyfriend or girlfriend (the borrower). The couple breaks up and the boyfriend or girlfriend refuses to repay the money due to the family member. The family member seeks repayment from the surety, who no longer feels obligated to cover the borrower's expenses, given that they are no longer a couple. The lender may have written proof that he made a loan to the borrower, such as a check written by the lender to the borrower, indicating in the memo line that it was a loan, which has been endorsed by the borrower. While such a writing would be sufficient to establish liability on the part of the borrower, it would not be sufficient to establish any liability on the part of the surety.

Another type of contract covered by the Statute of Frauds is a contract for the conveyance of land. At first glance, it may seem unlikely that parties would enter into an oral agreement to convey real property. However, it is actually very common for parents to promise a son or daughter that, if that child takes care of the parents in their old age, the child will receive the family home upon the parents' deaths. If that agreement is not in writing, then whatever other written provisions the parents have made regarding disposition of the family home will govern its disposition. Even if the parents have not made any type of written disposition of the family home, that child will be unable to enforce the oral agreement. Instead, intestacy laws will govern the disposition of the real property in question.

Although most states no longer recognize any right to enforce most promises made in anticipation of marriage, the Statute of Frauds is still applicable in most of the states that do recognize such promises. In a state that recognized marriage or the promise of marriage as consideration for a contract, parties may make a conditional promise of marriage. For example, if Texas recognizes a promise made in anticipation of marriage and a man who lives in Dallas promises a woman that lives in Houston that if she… READ MORE

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