The term Statute of Frauds refers to a law that requires certain types of contracts be made in writing, and signed by the parties to the agreement. Such statutes, which vary by state, serve to protect the parties from fraudulent acts in respect to the contract. The contract need not be written in formal language, and it is not even necessary that both parties sign the agreement. Contracts written in accordance to the Statute of Frauds must be signed by the party against whom the contract will be enforced. To explore this concept, consider the following Statute of Frauds definition.
Origin
1677 An Act for Prevention of Frauds and Perjuries (enacted by the Parliament of England)
The concept of a Statute of Frauds in the U.S. finds its origins in an English law enacted by Charles II in 1677. This Act for Prevention of Frauds and Perjuryes sought to prevent the fraudulent practices that had burgeoned as the English Civil War came to an end. Whether these tactics were used as a type of round-about looting, or engaged in as a way to settle grudges, the common people were being taken advantage of.
The people petitioned the common law courts of the day in such numbers that the system became clogged with suits. Under this heavy burden, cases were pushed through with incapable witnesses, and professional witnesses who were paid to offer an opinion in favor of the higher bidder. Perjury and corruption became the order of the day.
Most agreements and contracts of the 17th century were verbal agreements, a simple exchange of coin, goods, or services, in which each party was to receive something of value. The 1677 Act required that certain types of contracts or transactions be put in writing, and signed by each party’s own hand. This served to provide proof to the court of the original agreement. As the founding fathers shaped the government of the new American people, they relied on the 1677 Act in shaping the requirements of business transactions, and the legal system’s role in disputes over such deals.
While the law recognizes agreements made verbally, such contracts are often vague, and it is often impossible to prove in a court of law what the original terms were. If one party breaches an oral contract, the injured party may file a civil lawsuit, but it often becomes an issue of he said, she said, forcing the judge to determine which party is more believable.
By contrast, written contracts provide a tangible record of the specifics of the agreement. Some contracts involve high-value transactions, which have a high likelihood of ending in litigation if made only verbally. The Statute of Frauds requires some types of agreements or transactions to be made in writing, with signatures of the parties on the writing. In the event such an agreement leads to litigation, the court has a firm understanding of each party’s responsibility in fulfilling the terms of the contract.
For example:
Samantha visits a local floral supply house, where she purchases 30 bundles of carnations on 30-days credit. The cashier writes down the purchase details, including the amount Samantha is being charged for the flowers. Samantha signs the supplier’s receipt book under the total, and takes the flowers back to her shop.
Two months later, Samantha claims that the carnations were not of good quality, and she refuses to pay the total amount. If the supplier takes Samantha to court to recoup its losses, Samantha’s signature in the notebook will be sufficient proof that Samantha agreed to the purchase price. No signature is required by the supplier. This simple notation, containing the buyer’s signature, serves as a legal contract in the eyes of the law.
On Saturday, April 25, 1964, Dick McIntosh was offered a job as assistant sales manager at his employer’s Murphy Motors location in Hawaii, with a one-year commitment, which made moving worthwhile. The agreement was made over the phone, and McIntosh was on a plane to Hawaii the next day. He had moved some of his things with him, sold others, and moved into an apartment near his new job.
McIntosh began working at Murphy Motors on Monday, April 27, 1964. On July 16, 1964, McIntosh was let go from his job at Murphy Motors, after which he filed a civil lawsuit against his employer, claiming the contract was for a year, not three months. The defendant, Murphy Motors, asked the court for a directed verdict, as even if the defendant admitted there was a verbal contract, the case fell under the Statute of Frauds, in that the contract could not be fulfilled in one year.
The trial court ruled that, because of the plaintiff’s actual start date, and not counting the Saturday or Sunday, the case did not fall under the Statute of Frauds, and could be decided. The jury found in the plaintiff’s favor, and awarded him damages.
When the defendant appealed the verdict, the appellate court also applied the principle of fundamental fairness, in that the plaintiff had reasonably relied on the defendant’s offer of a job with a one-year contract when he disposed of his personal property and moved across the ocean to Hawaii. The defendant knew the plaintiff would have to make such a drastic move, and that was likely the reason the one-year contract had been offered. When the plaintiff was discharged from his position, he found himself in a strange place without employment. It would be unfair, then, to not enforce such a contract.