goldsmith
Maritime Contracts: Do I Have to Put it in Writing?
Fred Goldsmith practices admiralty & maritime, insurance coverage, personal injury and commercial litigation in PA, WV, and OH with Goldsmith & Ogrodowski, LLC (www.golawllc.com). He can be reached at fbg@golawllc.com How the Statute of Frauds Works
The Statute of Frauds
Most states have a "statute of frauds" that renders certain types of contracts unenforceable unless they are in writing. Law students often learn to remember the types of contracts that state statutes of frauds invalidate by the mnemonic, "My Legs." � Marriage If the "consideration" for the contract is marriage, then it is governed by, or "within," the statute of frauds. For instance, if John promises Sue that if she marries him he'll buy her a Porsche, the "contract" is not enforceable unless it is written. � Year A contract that cannot be performed within one year must be in writing. Thus, a five year employment contract, for example, is generally "within" the statute of frauds and thus unenforceable unless in writing. � Land A contract to buy or sell land or other real estate is generally (there are some exceptions) subject to the statute of frauds. � Executor If an executor of an estate agrees to pay off the debts of the decedent with the executor's own funds, such a contract must be in writing, otherwise the executor can defend against the claimed contract by invoking the statute of frauds. � Goods Most states' versions of the statute of frauds, which is actually a provision in the Uniform Commercial Code that most states have adopted, require that contracts to buy or sell goods for a price of $500 or more must be in writing to be enforceable. � Suretyship A promise or contract whereby one person agrees to assume responsibility for the debts of another must be in writing, otherwise the would-be surety can invoke the statute of frauds to escape the putative obligation.
Reason for Statute of Frauds
The statute of frauds is not self-activating. Rather, it usually comes up when party A wants party B to live up to an agreement A says B entered into. If the agreement is one covered by the statute of frauds in the state in question, if B wants to get out of the contract, or if B claims the contract never existed, B can invoke the statute of frauds as a defense. Thus, lawyers refer to these types of agreements as "voidable." They aren't automatically unenforceable, but they can be made unenforceable if the party who is being asked to perform the agreement wishes to escape the agreement or claimed agreement. There are exceptions to the invalidating effect of the statute of frauds. One is called "partial performance." When there is "partial performance" of an obligation, the party who accepts the benefit of the other party's partial performance of the agreement will usually be prevented from asserting the statute of frauds as a defense to the contract's validity and existence. Another exception to the statute of frauds is called "promissory estoppel." Promissory estoppel can be invoked in many states to avoid the contract-voiding effect of the statute of frauds where significant unfairness would occur if one party were allowed to escape from the contract and that party knew or reasonably should have known from the beginning that the unfairness would result.
What Terms Are Required for a Valid Contract if Statute of Frauds Applies?
The rationale for the statute of frauds is thought to be to prevent people from being victimized by the fraudulent acts of others.
20 MN
If the subject matter of the agreement is one to which the statute of frauds applies, then the contract generally must set forth in writing and with reasonable certainty: (a) the identity of the parties to the agreement; (b) the subject matter of the agreement; and (c) the essential terms and conditions of the agreement, including which party is promising to do what for whom. The Uniform Commercial Code's provision concerning the sale of goods, which many states have adopted, provides that a contract will be legally sufficient if it (a) is in writing; (b) is signed by the party to be charged (the one who is seeking to escape the deal); and (c) recites the quantity term. Even if a contract has not been reduced to writing and is one of those "within" the statute of frauds (remember "My Legs"), it is generally enforceable when the party
June 2008