WHAT IS 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. Contracts that must be in writing include, but are not necessarily limited to:
- An agreement that by its terms cannot be performed within one year
- Promises to pay the debt of another
- Leases of real property for terms greater than one year
- Real estate agency or brokerage agreements
- A contract to purchase real property
- A contract to loan money or extend credit in an amount of $100,000.00 or greater
- An agreement that by its terms is not to be performed during the lifetime of the “promisor”
The types of contracts listed above are ones that involve a significant value or period of time regarding performance (greater than one year). Because of the significance involved in these types of contracts, the law requires them to be in writing before they can be enforced. Without the requirement that such contracts be in writing, it would be easy for a party to fraudulently claim that you, for instance, agreed to buy a house for a certain price. It would be unfair to require you, as a buyer, to purchase a home unless you specifically agreed to do so as evidenced by a written agreement. Under the Statute of Fraud, such a contract would have to be in writing and signed by both parties.
What Kind of Writing is Sufficient to Satisfy the Statute of Frauds?
The Statute does not require the “writing” or “writings” to be in a single document. The writing can be demonstrated by several separate writings that have some relation to one another. For example, signed and unsigned writings may be read together, provided that they clearly refer to the same subject matter or transaction. Oral testimony is admitted to show the connection between the documents and to establish the acquiescence, of the party to be charged, to the contents of the unsigned document. Beckwith v. Talbot, 95 U.S. 289, 24 L.Ed. 496.
At a minimum the “writing” must state with reasonable certainty: (a) the identity of both contracting parties; (b) the subject matter of the contract so that it can be identified either from the writing or if the writing is not clear by the aid of extrinsic evidence; (c) the essential terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made. (Rest.2d §131). However, the modern approach in California courts has been to enforce contracts where the parties intended to make a contract even if all the legal customs were not included. As a result, the scope of what constitutes a “writing” that satisfies the Statute of Frauds has become quite broad. For example, an email that recited all the terms of an agreement reached orally between the parties during a face-to-face meeting was found to satisfy the California Statute of Frauds. Lamie v. Mattel, Inc., 394 F.3d 1355, 1362 (Fed. Cir. 2005).
Ultimately, whether or not you intend to create an enforceable contact, it is always best to say so. For example, in real estate letters of intent it has become standard practice to include a disclaimer that neither party intends to be bound until a separate purchase and sale agreement is signed. It is best to always add such disclaimers to emails and other electronic messages that could otherwise be construed as a legal contract.
Put it in Writing!
Even assuming that an agreement is not required to be in writing to be enforceable under the Statute of Frauds, a good rule of thumb is that every contract you make should be reduced to some form of writing.
Getting Legal Help
If you need assistance drafting a contract, disclaimers, or determining the enforceability of a contract, it is smart to seek assistance from an experienced contract attorney. Our team of experienced contract attorneys and trial specialists are here to help. Brown & Charbonneau, LLP’s award-winning trial attorneys represents large and small companies as well as individuals in cases involving all forms of business disputes and general business and corporate matters. Contact us or call today at 714.505.3000 to schedule a consultation and learn more about how we can help you.
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