Statute of Frauds Contracts: Definition & Purpose

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  • 0:05 Statute of Frauds
  • 1:22 Contracts Covered by a…
  • 2:38 Purpose of a Statute of Frauds
  • 3:45 Effect of a Statute of Frauds
  • 5:38 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley has a JD degree and is an attorney. She has taught and written various law courses.

A statute of frauds is a state law that applies to certain oral contracts. Generally speaking, a statute of frauds requires that certain contracts be in writing and signed by the parties. This lesson explains what these statutes are, what these statutes require and why we have these statutes.

Statute of Frauds

The statute of frauds originated in 17th century England. Generally speaking, a statute of frauds requires that certain contracts be in writing and signed by the parties. For the most part, a binding contract can be oral or written. There are, however, state laws that deem certain types of oral contracts unenforceable unless there's a writing that evidences the agreement.

It's important to note that the writing doesn't need to be a formal, written contract. The writing simply serves to prove the agreement between the parties. Any writing will meet the requirements of the statute, as long as it's sufficient to show a contract between the parties.

Also, it's not necessary for both parties to sign the writing. The agreement needs to be signed by the party against whom the agreement is enforced.

Every state has some type of statute of frauds, but different jurisdictions have different statutes. These statutes, though, have the same purpose. A statute of frauds always serves to act as an assurance for the parties and protection against fraudulent behavior.

Contracts Covered by a Statute of Frauds

A statute of frauds only applies to particular contracts. There are six categories covered by this type of statute.

Statutes of frauds cover contracts involving the sale of an interest in land, contracts that can't be performed within one year, contracts in which someone assumes responsibility for someone else's debt, promises that involve marriage as consideration, contracts for the sale of goods worth more than $500 and certain promises by executors or administrators.

Some states have also added certain life insurance contracts, contracts to make a will and contracts to pay a real estate agent's commission.

For example, let's say that I agree to sell you my TV. I'll deliver the TV to you six months from today. This contract may not need to be in writing, because six months isn't more than a year away. But we need to know how much you've agreed to pay for the TV. If it's over $500, then the contract needs to be in writing.

Purpose of a Statute of Frauds

Generally speaking, there are two main reasons for a statute of frauds. Both reasons are based on public policy.

First, because these statutes somewhat formalize the agreement, the parties will hopefully spend more time considering the agreement. The statutes purposely cover significant agreements that sometimes carry serious consequences. Careful advance consideration can prevent later litigation.

Secondly, the statutes were originally designed to prevent fraudulent conduct by one of the parties. Again, the statutes purposely cover those categories that can carry serious consequences for one of the parties. In these situations, there can be a potential for uneven bargaining power and an incentive for one party to argue the existence of a contract that the other party denies. The writing requirement can ensure that the parties meant to make the agreement - and that they understood the details of the agreement.

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