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Business Law
Principles
and Practices 8e
Arnold J. Goldman William D. Sigismond
Chapter 11: Memorialize Contracts in Writing– Statute of Frauds
The Status of Oral and Written Contracts
Oral contracts are just as enforceable as written contracts, if they contain all the elements necessary to make a contract legally binding, and if the terms of the oral contract can be proven in a court of law.
Written contracts need no witnesses.
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Contracts Required to Be In Writing
Statute of frauds: law requiring that certain types of contracts be in writing.
The statute of frauds applies only to executory contracts, that is, contracts that have not been fully performed.
Only pertains to six specific types of contracts.
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Contracts Required to Be In Writing
A contract to personally pay the debt of another person.
A contract by an executor or administrator to personally pay the debts of a deceased person.
A contract involving the sale of an interest in real property.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Contracts Required to Be In Writing
A contract made in consideration of marriage.
A contract that by its terms cannot be performed within one year from the date the agreement was formed.
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Contracts Required to Be In Writing
A contract for the sale of goods or merchandise for the price of $5,000 or more.
In addition to these contracts, some states require other types of contracts to be in writing.
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A Contract to Personally Pay the Debt of Another Person
Because guarantor promises to pay for the debtor in the even of default, these contracts must be in writing to be enforceable.
If debtor refuses to pay a debt, the creditor can proceed against guarantor.
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A Contract by an Executor to Pay the Debt of a Deceased Person
An executor or administrator is one who handles the property (or estate) of a deceased person.
The executor is not personally responsible for the debts of the deceased, but can elect to become so—this must be in writing.
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A Contract Involving the Sale of an Interest in Real Property
Real property: land, rights to land, and anything permanently attached to the land.
Oral contracts are not enforceable.
Contracts for temporary transfers must also be in writing.
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A Contract Made in Consideration of Marriage
Prenuptial agreement: agreement by a couple planning to marry regarding the rights and obligations of each person.
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Contracts That Cannot be Performed
A contract must be in writing if its terms cannot be carried out exactly within one year of the date of the agreement.
The key for determining whether an oral contract is enforceable under the one-year rule is the possibility of performance.
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The Sufficiency of the Written Record
Memorandum: informal written evidence of an agreement required by the statute of frauds.
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The Sufficiency of the Written Record
An oral agreement is enforceable even if it is within the statute of frauds as long as there is some writing that refers to the agreement and its terms.
Some courts have held that a tape or video recording may even satisfy the writing requirement.
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What Must be Included on the Memorandum
The names of the parties.
The subject matter of the agreement.
The consideration.
All material terms with reasonable certainty.
The signature of the party against whom enforcement is sought.
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E-Signatures
The handwritten signature alone as a way to sign documents has not been necessary for some time.
Typed or printed signatures are also allowed.
Electronic signature, or e-signature was invented to accommodate electronic commerce.
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Parol Evidence Rule
Parol evidence rule: rule stating that terms of a written contract cannot be changed by prior oral or written agreements.
Can be introduced when it does not change the terms of the contract.
Only applies prior to or at the time of signing.
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