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Exceptions to Statute of Frauds

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  • 0:53 Statute of Frauds Requirements
  • 2:37 Exceptions to Statute…
  • 3:03 Admission
  • 4:19 Performance
  • 7:05 Promissory Estoppel
  • 8:49 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

A statute of frauds is a state law that covers certain types of oral contracts. This means that certain requirements must be met before these contracts can be enforced. However, there are some exceptions to a statute of frauds. This lesson explores the typical statute of frauds and some common exceptions.

Statute of Frauds

A statute of frauds is a state law that applies to particular categories of oral contracts. Different states have different statutes of frauds, but there are usually six main categories affected:

  1. Promises that involve marriage as consideration
  2. Contracts that can't be performed within one year
  3. Contracts that involve the sale or transfer of land
  4. Contracts that involve promises by executors to pay estate debts
  5. Contracts that involve a promise to act as a guarantor or surety
  6. Contracts that involve the sale of goods worth more than $500

Statute of Fraud Requirements

A statute of frauds typically means that contracts in these categories are unenforceable unless they meet these two requirements:

  1. There must be a written memorandum of the contract. A memorandum of the oral contract can be any writing that proves the agreement.
  2. The written memorandum must be signed by the party that disputes the contract.

In order to satisfy a statute of frauds, a person must have written evidence that proves that an oral contract was made. The written memorandum can be just about anything. It can be an order form, an invoice, a receipt, or even a cocktail napkin with written notes. The written memorandum must prove any material terms of the oral contract. Material terms will include items like the parties involved and the agreed-upon price.

Note that it's not necessary for both people to sign the memorandum. Only the person that disputes the contract needs to have signed the memorandum. If any party in the agreement doesn't sign the written memorandum, the oral contract can't be enforced against him or her.

For example, let's say that you and I make an oral contract. You're going to paint my house next week, and I'm going to pay you $1,000. You then book another painting job and refuse to paint my house. If I want to enforce our oral contract against you, I need to have a written memorandum, signed by you, that proves our contract.

Exceptions

There are several common exceptions to a statute of frauds. Sometimes, even though a contract falls within a statute of frauds, it can be enforced without meeting the two requirements. These exceptions are admission, performance, and promissory estoppel. Let's take a closer look at each of these exceptions.

Admission

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. This is known as the admissions exception.

Let's say that you and I made an oral contract. You're going to paint my house next week, and I'm going to pay you $1,000. You break our contract, and I sue you in order to enforce the contract. What's your defense going to be? Of course, you'll argue that our contract is unenforceable because it wasn't written down and you didn't sign it. However, you confess under oath that we did, in fact, have an oral contract.

Our oral contract is enforceable. This contract doesn't need to meet the requirements of a statute of frauds. The main purpose of a statute of frauds is to prove the existence of an oral contract. I no longer have to prove that we had an oral contract because you agree that we did. You can't now claim that you're relieved of your contract obligations. Admission is an automatic exception to all of the provisions of a statute of frauds.

Performance

Another exception to the statute of frauds is performance. Performance can be full performance or partial performance. Performance is most often allowed as an exception in contracts involving real estate or in contracts for the sale of goods.

Full performance means that one party to the oral contract completed all of his or her duties under the contract. When one side completes the contract, the courts will infer that an oral contract really existed. This dismisses any defense that the oral contract didn't meet the requirements of a statute of frauds.

For example, let's say that you show up next week and you completely paint my house. I can't then raise a defense that I don't owe you the $1,000. The fact that you painted my house is evidence enough that our contract existed.

Partial performance can also prove the existence of an oral contract. This means that one party to the oral contract partially completed his or her duties under the contract.

Let's say that I told you which colors I'd like. You went out and bought all of the paint in the colors I requested. When you show up to start painting, I cancel our oral contract. You've partially performed your end of our contract. Since I've accepted your partial performance, I can't now assert that a statute of frauds invalidates our oral contract.

You've performed part of the contract, and now I'll have to match that performance by paying for that particular part of the contract. Let's say you paid $200 for the paint, and since it was custom mixed, the paint store won't take it back. I'll have to reimburse you that $200. However, neither of us has to complete the rest of the contract.

Now let's say that I provided the paint, but you showed up and started scraping the old paint off of my house. You worked for five hours, and you usually charge $20 an hour. If I show up and cancel our contract, I am unjustly enriched. This means that I got a service without giving anything in exchange. I'll have to pay you for the services you provided me. This is known as quantum meruit. Quantum meruit allows you to recover the reasonable value of your services, even though our oral contract is otherwise unenforceable. Quantum meruit is most often allowed as an exception to the statute of frauds in contracts involving services.

Promissory Estoppel

Promissory estoppel is another exception to a statute of frauds. Promissory estoppel is most often allowed as an exception to a statute of frauds in contracts involving the sale or transfer of land, contracts that can't be completed within one year, and contracts that involve a promise to act as a guarantor or surety.

Promissory estoppel is a legal doctrine that will apply if all three of these criteria are met:

  1. The party relied on the oral contract, which resulted in harm to that party.
  2. The other party to the oral contract could have reasonably foreseen that the first party would rely on the oral contract.
  3. The only way to avoid committing an injustice is to enforce the contract.

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