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Statute of Frauds
Samuel Goldwyn, Polish-born movie producer (1882-1974) and co-founder of MGM studios, is reported to have said that "a verbal contract [he meant "oral contract"] isn't worth the paper it's written on." His practical insight is only partially mirrored in the rules of contract law. Many agreements are enforceable as contracts even if not evidenced by any writing or electronic record, although proof of the existence of an oral agreement may be more difficult than proof of the existence of an agreement that is evidenced by a writing or electronic record. However, some agreements, identified in statutes adopted by each of the fifty states, are not enforceable as contracts unless evidenced by a sufficient writing or electronic record that is signed by the party against whom enforcement of the contract is sought. Note that such agreements need not be entirely in writing. Rather, there must only be a writing sufficient to indicate that a contract has been made. The following is typical statutory language: "The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent: . . . [list of contracts]" (emphasis added). Recall from Commentary.Electronic communication, that an electronic record will satisfy the requirement of a writing and an electronic signature will satisfy the requirement of a subscription (i.e. signature) by the party to be charged or the party's agent.
Each state has adopted more than one statute identifying agreements that must be evidenced by a writing, but, in common legal parlance, judges, lawyers, and legal scholars typically refer to the group of such statutes in any one state and even to all such statutes throughout the United States simply as the Statute of Frauds (singular), a name derived from "An Act for Prevention of Frauds and Perjuries" enacted by Parliament in 1677. Technically it would be more accurate to refer to the group of such statutes as the statutes of frauds (plural), but you would likely draw a quizzical look if you used that phrase in legal circles (not to mention the looks you would draw in other circles). In California, for example, the following statutes are among those that condition enforceability of an agreement upon a sufficient signed writing (for which an electronic record and signature may now also suffice): Cal. Civ. Code 1624 (a variety of kinds of contracts); Cal. Uniform Commercial Code 1206 (sale of personal property for more than $5,000, other than personal property governed by Articles 2, 8 and 9 of the Commercial Code, e.g., sale of a copyright) (note that Revised Article 1 of the Uniform Commercial Code deletes this Statute of Frauds provision; as of 2003, however, California has not adopted Revised Article 1); Cal. Civ. Code 2922 (mortgage on real property); Cal. Uniform Commercial Code 9203 (certain security interests on personal property), Cal. Fam. Code 1611 (premarital agreements) (requires the entire agreement to be in writing). Briefly skim those statutes simply for a feel of the kinds of agreements covered. Any kind of agreement not identified in a Statute of Frauds is enforceable (if provable) even without a record.
Parliament repealed most of its Statute of Frauds in 1954, and rules of contract law for international contracts do not include a writing requirement. Persistence of the Statute of Frauds in the United States in view of these approaches elsewhere raises questions about both the purposes and efficacy of the Statute of Frauds. Supporters point to both an evidentiary and a cautionary purpose to the requirement of a writing. Official Comment 1 to U.C.C. 2-201 describes the evidentiary purpose to the Article 2 Statute of Frauds: "All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction." U.C.C. 2-201(2) and (3), which offer escape from the writing requirement, also reflect the evidentiary function; in each case, those subsections identify alternative behavior that affords an evidentiary basis for believing that a contract was formed. The Statute also may perform a cautionary function. The formality inherent in the signing of a writing may bring home to the person signing the significance of a promise made and the consequences of a promise breached. Detractors suggest that the Statute, intended to prevent fraudulent testimony asserting the formation of an oral contract, more often promotes fraud by permitting one party an easy escape from oral contracts actually made. Moreover, many contracts with an economic or other impact upon the parties equal to or greater than those identified by the Statute of Frauds are enforceable notwithstanding the absence of any signed writing. As a consequence, judges will typically read the Statute of Frauds narrowly or exceptions to it broadly (thus restricting its application) or may find even the most informal or cryptic writing sufficient to satisfy the statutory requirement.
It would be time consuming and not particularly fruitful to study the details of each of the various statutes of frauds. Therefore, we study instead only one example, U.C.C. 2-201 (adopted in California with trivial amendment as Cal. Uniform Commercial Code 2201) governing contracts for the sale of goods for the price of $500 or more ($5,000 or more in amended U.C.C. 2-201). Study of this one example should suffice to familiarize you with the issues presented when a party claims application of a Statute of Frauds. Problem.Dispute.Purchase of juke box and Problem.Dispute.Sale of used Jaguar present opportunities to apply U.C.C. 2-201. In resolving the issues presented by those problems, bear in mind the extent to which your resolution serves the purposes of the Statute of Frauds.
Supplementary reading: Farnsworth, 6.1-6.12; White and Summers 2.1-2.8.