Defenses to enforceability - Statute of frauds

Learning Outcomes

After reading this article, you will be able to identify which contracts fall within the Statute of Frauds, explain the requirements for a sufficient writing and signature, and apply the main exceptions that allow enforcement of otherwise unenforceable agreements. You will be able to analyze MBE-style questions on enforceability defenses based on the Statute of Frauds.

MBE Syllabus

For MBE, you are required to understand when the Statute of Frauds prevents enforcement of a contract and how a party may raise this defense. You should be able to:

• Recognize which types of contracts are subject to the Statute of Frauds.
• Identify the requirements for a writing and signature.
• Apply the main exceptions to the Statute of Frauds (e.g., part performance, specially manufactured goods, judicial admission).
• Analyze the effect of noncompliance with the Statute of Frauds on contract enforceability.
• Determine when modifications must satisfy the Statute of Frauds.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following contracts must generally be in writing to be enforceable?
   1. A contract for the sale of $300 worth of goods.
   2. A contract to lease an apartment for 10 months.
   3. A contract to sell land.
   4. A contract to provide consulting services for 11 months.
2. Under the Statute of Frauds, which element is NOT required for a writing to be sufficient?
   1. Identification of the parties.
   2. The price term (for all contracts).
   3. The subject matter.
   4. The signature of the party to be charged.

3. Which of the following is an exception that may allow enforcement of an oral contract for the sale of goods over $500? a) The buyer has paid part of the price and accepted part of the goods. b) The contract is for the sale of land. c) The contract is for services lasting 18 months. d) The contract is between merchants for$400 worth of goods.

4. If a contract is within the Statute of Frauds and is not evidenced by a sufficient writing, what is the usual result?
   1. The contract is void.
   2. The contract is unenforceable by either party.
   3. The contract is enforceable if the parties intended to be bound.
   4. The contract is enforceable only by the party who did not sign.

Introduction

The Statute of Frauds is a key defense to contract enforceability on the MBE. It requires certain types of contracts to be in writing and signed by the party to be charged. If a contract falls within the Statute but does not meet these requirements, it is generally unenforceable unless an exception applies.

Key Term: Statute of Frauds
A legal rule requiring certain types of contracts to be in writing and signed by the party against whom enforcement is sought, or else they are unenforceable.

Contracts Within the Statute of Frauds

Not all agreements must be in writing. The Statute of Frauds applies only to specific categories of contracts. The main types tested on the MBE are:

• Contracts for the sale of land or interests in land (including leases over one year).
• Contracts that cannot, by their terms, be performed within one year from the date of making.
• Contracts to answer for the debt or duty of another (suretyship).
• Contracts made in consideration of marriage (other than mutual promises to marry).
• Contracts for the sale of goods for $500 or more (UCC Article 2).

Key Term: Suretyship
A promise to pay the debt or perform the obligation of another person if that person fails to do so.

Key Term: One-Year Rule
A contract that, by its terms, cannot possibly be performed within one year from the date it is made must be in writing to be enforceable.

Key Term: UCC Statute of Frauds
Under the UCC, a contract for the sale of goods for $500 or more must be in writing and signed by the party to be charged, with limited exceptions.

Worked Example 1.1

A homeowner orally agrees to sell her house to a buyer. The buyer pays a deposit and moves in, but the homeowner refuses to transfer title. Is the oral agreement enforceable?

Answer: The contract is for the sale of land, so it falls within the Statute of Frauds. However, the buyer has paid part of the price and taken possession, which may satisfy the part performance exception (see below), potentially making the contract enforceable despite the lack of a writing.

Writing and Signature Requirements

If a contract is within the Statute of Frauds, it must be evidenced by a writing signed by the party to be charged (the party against whom enforcement is sought). The writing must:

• Identify the parties.
• Show the essential terms of the agreement.
• Describe the subject matter.
• Be signed by the party to be charged.

The writing does not need to be a formal contract. It can be a letter, email, or even several documents that, taken together, show the agreement.

Key Term: Sufficient Writing
Any written memorandum, signed by the party to be charged, that reasonably identifies the subject matter and essential terms of the contract.

Worked Example 1.2

A merchant sends a signed email confirming an oral agreement to sell 1,000 widgets for $10,000. The buyer does not sign anything. Is the email sufficient to satisfy the Statute of Frauds?

Answer: Yes, for the seller. The UCC requires a writing signed by the party to be charged. If the buyer seeks to enforce the contract against the seller, the seller's signed email is sufficient. If the seller seeks to enforce against the buyer, the buyer's signature is required unless an exception applies.

Exceptions to the Statute of Frauds

Even if a contract is within the Statute of Frauds and lacks a sufficient writing, it may still be enforceable if an exception applies. Key exceptions include:

Part Performance (Land Contracts)

If a buyer seeking specific performance of an oral land contract has taken possession and made valuable improvements, or has taken possession and paid part or all of the price, courts may enforce the contract despite the lack of a writing.

Full Performance (Service Contracts)

If one party fully performs a service contract that cannot be performed within one year, the contract is enforceable even if it was not in writing.

Specially Manufactured Goods (UCC)

If goods are specially manufactured for the buyer and are not suitable for sale to others, and the seller has made a substantial start or commitments for their procurement, the contract is enforceable even without a writing.

Judicial Admission

If the party to be charged admits in court that a contract was made, the contract is enforceable to the extent of the admission.

Payment or Delivery (UCC)

If goods have been paid for and accepted, or received and accepted, the contract is enforceable to that extent.

Key Term: Part Performance Exception
An exception allowing enforcement of an oral contract for land if the buyer has taken possession and made improvements or paid part of the price.

Key Term: Judicial Admission
A statement in court or legal proceedings by the party to be charged admitting the existence of the contract, making the contract enforceable to the extent admitted.

Key Term: Specially Manufactured Goods Exception
Under the UCC, an oral contract for goods made specially for the buyer is enforceable if the seller has made a substantial start and the goods are not suitable for sale to others.

Worked Example 1.3

A buyer orally orders 1,000 custom-printed T-shirts from a manufacturer for $6,000. The manufacturer begins production, but the buyer cancels before any shirts are delivered. Is the oral contract enforceable?

Answer: Yes. The goods are specially manufactured, and the seller has made a substantial start. The specially manufactured goods exception applies, so the contract is enforceable even without a writing.

Exam Warning

The Statute of Frauds is a defense to enforcement, not to contract formation. If a contract is within the Statute and lacks a sufficient writing, it is unenforceable by either party unless an exception applies. However, if both parties fully perform, the defense is waived.

Effect of Noncompliance

If a contract within the Statute of Frauds is not evidenced by a sufficient writing and no exception applies, the contract is unenforceable by either party. However, a party who has conferred a benefit may be able to recover the value of services or goods provided under a theory of restitution (quantum meruit).

Key Term: Unenforceable Contract
A contract that cannot be enforced in court due to failure to comply with the Statute of Frauds or other legal requirements, even though it may otherwise be valid.

Modifications and the Statute of Frauds

If a contract as modified falls within the Statute of Frauds, the modification must also be in writing and signed by the party to be charged. If the contract as modified is not within the Statute, no writing is required, even if the original contract was in writing.

Revision Tip

Always check whether the contract as modified, not just the original contract, falls within the Statute of Frauds. If so, the modification must be in writing.

Summary

The Statute of Frauds requires certain contracts to be in writing and signed by the party to be charged. If a contract is within the Statute and lacks a sufficient writing, it is generally unenforceable unless an exception applies. Key exceptions include part performance, specially manufactured goods, and judicial admission. Always analyze whether the contract, as modified, falls within the Statute.

Key Point Checklist

This article has covered the following key knowledge points:

• The Statute of Frauds requires certain contracts to be in writing and signed to be enforceable.
• Main categories: land contracts, contracts not performable within one year, suretyship, marriage consideration, and goods over $500.
• A sufficient writing must identify the parties, subject matter, essential terms, and be signed by the party to be charged.
• Key exceptions: part performance (land), full performance (services), specially manufactured goods, judicial admission, payment or delivery (UCC).
• If a contract as modified falls within the Statute, the modification must also be in writing.
• If no writing and no exception, the contract is unenforceable, but restitution may be available.

Key Terms and Concepts

• Statute of Frauds
• Suretyship
• One-Year Rule
• UCC Statute of Frauds
• Sufficient Writing
• Part Performance Exception
• Judicial Admission
• Specially Manufactured Goods Exception
• Unenforceable Contract