(1) Except as otherwise provided in this section a contract for the sale of
goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom
enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. (2)
Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of
subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable A principle of law that requires some contracts to be in writing in order to be enforceable What is the Statute of Frauds?The statute of frauds is a foundational principle of common law that requires – for them to be enforceable – some types of contracts to be written rather than merely oral agreements. It is a longstanding and well-established legal principle, originating in 17th century English law. The original legislative act passed by the English Parliament in 1677 – titled An Act for Prevention of Frauds and Perjuries – may still be effective law in some Canadian provinces. In England and the United States, while the statute of frauds has been a guiding legal principle in common law for centuries, many of its elements have since been codified through specific legislation in most jurisdictions. The statute of frauds exists primarily to serve two main purposes – evidentiary and cautionary. Requiring written contracts provides evidence in the case where a future dispute arises. Requiring parties to create written contractual agreements also, hopefully, induces the parties to only enter into such an agreement after due consideration and to avoid seriously obligating themselves without such appropriate consideration. Oral contracts are usually just as enforceable as written contracts, but the statute of frauds requires that certain types of contracts must be put into writing and signed by the appropriate parties. Summary
Types of Contracts GovernedThe statute of frauds governs six specific types of contracts. Contracts that fall outside the statute need not be in writing to be enforceable. However, if only an oral contract exists where the statute requires a written contract, that oral contract will be considered legally voidable. The following are the six types of contracts that the statute of frauds requires to be in writing:
Where the statute of frauds necessitates a written contract, it does not typically require the contract to be a formal document. Any type of written agreement that is reasonably clear and signed by the appropriate parties will usually suffice, as long as it meets the following conditions:
Exceptions to the Statute of FraudsThere are several legal exceptions to the statute of frauds, where only an oral agreement is found to exist, even though the statute would ordinarily require a written agreement to be enforceable. One exception is where the party seeking to enforce a contract can show that they have acted in reliance on an oral agreement and that at least partial performance of the contractual obligations has been completed. In such instances, the courts will usually rule that the oral agreement is enforceable, at least to the extent that the contract has been completed. For example, if one party orally agrees to manufacture 1,000 t-shirts for another party for a specified price, and has manufactured and delivered 500 of the shirts, then a court will order the other party to pay for the 500 shirts already received. However, since the oral agreement violates the statute of frauds, the court may rule that the balance of the contract is unenforceable. Another exception to the written requirement of the statute is in the area of real estate and known as an “easement by implication.” Suppose, for example, that Property Owner B can only access his property by driving over part of the driveway that is on Property Owner A’s land. If Property Owner B can show that it is the only reasonable way to access his property and that there has been pre-existing, ongoing usage of Owner A’s driveway for access for some time, then a court will hold that an easement by implication exists and that no written contract for the easement is necessary. Learn MoreCFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst. In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:
What 5 contracts are covered by the Statute of Frauds?The six categories of contracts that must be in writing include marriage, one-year, land, executor, goods, and suretyship contracts. A surety is a person who agrees to pay the debt of another.
Which of the following contracts is governed by the Statute of Frauds?What Is the Statute of Frauds? The statute of frauds (SOF) is a legal concept that requires certain types of contracts to be executed in writing. The statute covers contracts for the sale of land, agreements involving goods worth over $500, and contracts lasting one year or more.
What are the three exceptions to the Statute of Frauds?These exceptions are admission, performance, and promissory estoppel. Admission means that an oral contract can be enforced without meeting the requirements of a statute of frauds if the other party admits under oath that the oral contract was made.
What type of contract is not covered by the Statute of Frauds?The Statute of Frauds, codified in California Civil Code section 1624, requires certain contracts to be in writing (or that there be written evidence of the contract's terms). That is, an oral contract (one that is not in writing) may not be enforceable.
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