The term “statute of frauds” often gets mentioned during disputes involving oral contracts. The statute of frauds outlines that some contracts must be “memorized” in a signed document that outlines the agreement. Nonetheless, a written agreement isn’t always required for contracts to be enforceable. In the US, different states recognize various exceptions to the statute of frauds. These include:
Admission Under Oath
A contract will be enforceable if it gets administered under oath (in a court proceeding or deposition).
Part Performance
An oral contract may be enforceable if either of the parties has partly performed it. This exception to the statute of frauds typically applies to oral agreements to transfer or sell a property.
Promissory Estoppel
The principle of promissory estoppel comes into play in cases where one party in a contract believes that the exchange of promises with the other party is a legally binding and enforceable contract. Thus, they’re in a position to suffer losses if the other party fails to execute the contract.
Generally, the justification for the exceptions to the statute of frauds is that each case provides additional proof of the existence of an enforceable contract. This negates the need for a written agreement proving that the contract exists.
What Does MY LEGS Stand for In the Statute of Frauds?
The statutes of frauds vary from state to state, but they generally cover six categories of contracts with the mnemonic MY LEGS (Marriage, Year, Land, Executor, Guarantor, and Sales).
Marriage
Under US law, marriage-related contracts, including prenuptial agreements, must be in writing to be enforceable.
Year
Contracts whose execution requires over one year are only enforceable if they’re backed by a written agreement.
Land
Transactions relating to land or real estate, including mortgage agreements must be in writing to be legally binding. This may also include rental and sublease contracts.
Executors’ Agreements
Executors often get appointed under the terms of a will to ensure that the assets get divided as required and the estate’s debts paid. Promises to pay the debts must be backed by a written contract since they’re exempted from the statute of frauds.
Guaranty
If someone promises to back someone else’s obligation, there must be a signed agreement.
Sale
The sale of goods worth over $500 must come with a contract. Nonetheless, that doesn’t mean you must sign a contract when you purchase items like phones. In this case, the sale receipt can act as a contract.
What are The Elements of The Statute of Frauds?
The elements of the statute of frauds include:
- The agreement is only enforceable if both parties sign it.
- The quantity and condition of goods indicated in the written agreement must match what’s shown in writing.
- A written rejection of the agreement must be provided within a specified period.
- A mistake committed by one party when making the contract, which affects the agreed outcomes, yields the contract invalid.
What Type of Contract May Not Be Enforceable Under the Statute of Frauds?
Some contracts can’t get enforced under the statute of frauds. These include:
Contracts Between Merchants
Verbal contracts between merchants are enforceable if one party delivers the agreed goods and the other party either makes a delivery or sends a written notice confirming the requirements of the agreement.
Contracts Involving Specialty Goods
If a company verbally agrees to manufacture specialty goods, the agreement is enforceable once the production of the goods starts.
Contracts Involving Complete/Partial Performance
If goods get delivered and the necessary payments are made, the parties can’t claim that the verbal agreement was enforceable and demand a return of the goods or money. That can also be true when partial payments are made for the goods.
When to Contact an Attorney
It’s best to find an attorney near you early on before you sign a contract or make a verbal agreement. They can help you navigate any issues related to the statute of frauds.
