ch 20 statute of frauds and parol evidence

8/17/2019 Ch 20 Statute of Frauds and Parol Evidence

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Elizabeth Necka, Emilie Baugh, and Julie Sztukowski

Edited by Nikki Meltabarger

I. Statute of Frauds

Oral contracts are typically binding, though it is sometimes difficult to proe their

e!istence if they are challenged in court" #oweer, some types of agreements are only alid and

enforceable when they are in writing " $hese contracts are coered by the Statute of Frauds"

%f a type of contract &often abbreiated '( is listed in the Statute of )rauds, it is only

enforceable if it is written"

A. Real Estate

Real estate contracts are the

first provision in the Statute of

Frauds. *ny contract pertaining to an

e!change of land or real estate

property must be in writing" $hese

include the following+ " Mortgages,

-" Long term leases, which pertain to

a period of one year or greater, ."

Easements, which pertain to the

permanent right to use another party/s property" $he only e!ception to this

element of the Statute of )rauds is

substantial performance on the grounds of the contract" Substantial performance can be payment

on the property, buyer possession of the property, or buyer improement on the property" Most

states re0uire two or three of the conditions to be met before the courts will enforce an oral

contract"

Chapter 20 Statute of Frauds Page 1

Chapter 20: Statute of Frauds and

Parol Evidence Rule

6

There are six main types of contracts

that are covered by the Statute of

Frauds.

1. Real estate Ks2. Long term Ks. Someone else!s debt". #ebt of deceased$. #o%ry&. '$(() in goods


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1onsider the following scenario under the Statute of )rauds+

Mike and Jim hae been best friends for as long as they can remember" Een though

their friendship became long distance after college22Mike lies in 3ashington and Jim lies in

%llinois22they hae maintained contact" One day, Mike decides he wants to moe to 1alifornia to

soak up the sun and coincidentally Jim/s 4ob forces him to relocate to 3ashington" Since theyare best friends, the two make an oral contract" Mike tells Jim, 56ou can hae my place"7

• Jim is buying the house from Mike"

o Their oral contract is unenforceable. Because this is a real estate contract, it is

coered by the Statute of )rauds"

• Jim is renting the house from Mike, but Jim is only going to lie there for si! months"

o Their oral contract is enforceable. *lthough this is a real estate contract, the duration

of Jim/s lease makes this an e!ception to the Statute of )rauds" 8eal estate contracts

must only be in writing if they are long-term leases" 9ong2term leases pertain to a period of time greater than one year"

• Mike tells Jim that he can use a priate road on his property indefinitely"

o Their oral contract is unenforceable. $his is a real estate contract coered by the

Statute of )rauds" $he contract is an easement, or an agreement between two parties

stating that one party gies another party the permanent right to use some of the first

party/s property"

• Jim bought the house from Mike, moed in, painted some rooms, and made renoations"

3hen Mike gets too sun2burnt and wants to go back to 3ashington, he tries to kick Jimout, claiming their contract is oidable"o Their oral contract is enforceable" 3hile real estate contracts must be in writing

according to the Statute of )rauds, courts will typically enforce an oral deal if there is

already substantial performance on the grounds of the contract"

B. Long-term contracts

The second provision of the Statute of Frauds pertains to long-term contracts which

cannot be completed within one year of their creation. $his also pertains to contracts for a

serice or employment which is ongoing for oer a year or an unspecified amount of time that

could likely be oer a year"

1onsider this e!ample under the Statute of )rauds+

Samantha and Eleanor work as secretaries in an office and they hate paperwork" On

une !, "##$, t%e& decide to ma'e an oral contract.



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• Eleanor has a 0uick brain for numbers and agrees to balance Samantha/s checkbook and pay

her bills for her from now until :ecember ., -;;, when Samantha plans to hae paid off

her credit2cards"o Their oral contract is unenforceable. " Samantha will be employing Eleanor as a

babysitter"o Their oral contract is enforceable. Because this employment period will be

completed three months from when the contract is made, it does not fall into the

domain of the Statute of )rauds and does not need to be in writing"

• Samantha and Eleanor decide to open their own $aco Bell franchise" Samantha/s husband,

1hris, who works for $aco Bell, tells them they can be part of the $aco Bell franchise for the

ne!t fie years" #oweer, 1hris did not clear this with his boss, gets in trouble, and tries to

conince the women not to open the store"o Their oral contract is unenforceable" )ranchise agreements are long2term business

contracts and, therefore, need to be in writing"

• Samantha starts a business and because she knows Eleanor is a good worker, employs her as

her Office Superisor" 3hen she decides she cannot afford an Office Superisor in

:ecember of -;;, she tries to get rid of Eleanor by claiming their contract was oidable"o Their oral contract is unenforceable. Because this contract pertained to employment

of oer a year &if no ending date of employment is set, it is assumed that employment

will last oer a year(, the Statute of )rauds re0uires it to be in writing" #oweer,

Eleanor must pay Samantha for the work she has already done"

*n e!ample of a long2term oral contract can be seen in the Doherty v. Doherty case below"



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*

+T


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(. Someone else)s debt

The third type of contract which must be in writing is a promise to pay someone else’s

debt. $here is one e!ception to this rule+ %f a party promises to pay off another party/s debt in

order to receie a benefit, such as an organization trying to get a ta! break, this 0ualifies as a

main purpose e*ception and the oral contract is enforceable under contract law"


8achel is 1atherine/s mother" %n college, 1atherine declared herself as independent and

emancipated from her parents, but still maintained close ties with them" 1atherine is now in her

.;s and carries a large amount of debt from her student loans that she/s haing difficulty paying"

8achel olunteers to help her out"

• 8achel realizes that if she helps 1atherine pay, her other two daughters will ask for her

financial assistance as well" She decides to help 1atherine find other ways of paying off her

debt"o Their oral contract is unenforceable. 8achel does not hae to pay off 1atherine/s

debt because their contract was not in writing and the Statute of )rauds pertains to

these types of promises"

• 8achel knows that if 1atherine/s debts are paid off, she will finally moe to #ollywood to

pursue her acting career" %f she is successful, 8achel might get famous riding 1atherine/s

coattails as her mother" She plans to use this new2found fame to publicize the noel she has

been writing" She considers 1atherine/s debt a small price to pay for all of the benefits she

will receie by being a famous author, the mother of a famous daughter" One month,howeer, she forgets to pay the debt and 1atherine becomes angry with her mother"

)rustrated, 8achel decides not to pay at all"o Their oral contract is enforceable. 8achel is legally and contractually bound to pay

1atherine/s debt" $his is due to the main purpose e*ception to the Statute of )rauds"

* promise to pay someone else/s debt for selfish reasons is legally binding, whether it

was an oral or written contract"

+. +ebts of deceased

The fourth type of contract under the Statute of Frauds’ domain pertains to paying the

debts of the deceased. %f an administrator of an estate is going to pay the debts of the deceased

personally, a written document is re0uired"




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Janet and Simon are brother and sister in their elderly years" Simon has tremendous debt,

so Janet fre0uently helps him out, 4ust like she used to do when they were kids" Janet says to

Simon, 5% promise %/ll help you pay off your debts" % don/t want to see you stressing out because

of all these financial issues, so %/ll 4ust pay out of my pocket"7 $he ne!t month, Simon has a

heart attack in his sleep and dies, leaing Janet as the administrator of his estate" Now, credit

companies are coming after her for her own personal money to pay off Simon/s debt"

• Their oral contract is unenforceable. Simon and Janet did not hae a alid contract

under the Statute of )rauds, which re0uires that promises by an administrator of the estate

who will be personally paying for the deceased/s debts be made on paper" $herefore,

Janet cannot personally be held accountable for her brother/s debts"

E. +or&

Dowry is the fifth division of the Statute of Frauds. *ny property that will change handsas part of an agreement to get married is considered dowry and an oral contract is not

enforceable"


Mark is madly in loe with Eileen and cannot wait for their wedding day" Eileen/s

parents are so e!cited to gie away their only daughter to the man of her dreams that they forget

to make a written contract pertaining to her dowry22a house in the countryside and a goat" 3hen

Eileen and Mark get diorced two years later, Mark wants his lawyer to fight for custody of the

countryside house and their goat, Jacob" Mark beliees these things to be his property, gien to

him as a dowry gift from Eileen/s parents when they got married"

• Their oral contract is unenforceable" *ccording to the Statute of )rauds, all property that

changes hands as part of a marriage agreement must be in writing"

F. oods

The final element of the Statute of Frauds pertains to goods worth $!! or more.

1ontracts for goods of ?@;; or more must be in writing, according to the


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%n addition, it is allowable for some oral contracts for goods to be partially fulfilled" %f an

oral contract is for si!ty units of a good which are priced ?; each, the total cost of the goods is

?A;;" $hough this is unenforceable under the Statute of )rauds because the total is oer ?@;;, if

?-;; of the transaction is e!changed, twenty goods of the si!ty dictated in the contract, must also

be e!changed, or ice ersa" $his is because the contract is being partially performed " #oweer,

if the contract was for one large good which cost ?A;; indiidually and there was a payment of

?-;;, it is not possible to only e!change part of the good" $herefore, the good must be

e!changed and the party making the payment must make the payment in full" $his type of full

performance is enforceable in court, een if there is no written contract" See the e!amples below

for a better understanding of the application of full and partial performance"

1onsider the following under the Statute of )rauds+

Susanne has sold lilacs from her garden to 8yan, the local florist, for oer ten years and

they hae a healthy relationship" So, when 8yan orders ;; lilacs from Susanne, she starts

feeding her lilac plants plenty of fertilizer, preparing for 8yan/s order"

• Susanne decides to gie 8yan a deal22the low price of ? per lilac, an order total of ?;;"

9ater that week, 8yan calls apologetically to tell Susanne that he does not need the lilacs

anymore and cancels his order" Susanne claims he is breaching the terms of their contract"o Their oral contract is enforceable" Because the price of the goods is less than ?@;;,

the Statute of )rauds does not coer this goods contract and an oral contract is enough

to make a binding contract"

• Susanne charges 8yan ?- per lilac, an order total of ?=;;" 9ater that week, 8yan calls to

cancel his order" Susanne claims he is breaching the terms of their contract"o Their oral contract is unenforceable. $he Statute of )rauds dictates that contracts

pertaining to goods which total more than ?@;; must be in writing" 8yan does not

hae to pay for the lilacs"

• Susanne charges 8yan ?- per lilac, an order total of ?=;;, which he will pay when he

receies the order in full" 9ater that week, Susanne drops off ?;; worth of lilacs" $he ne!t

week, right before Susanne is about to drop off the second batch of lilacs, 8yan calls to tell

her not to bring them oer22he actually cannot afford to pay for any of the lilacs"o Their oral contract is enforceable for up to $"!!. Because the order total is ?=;;, the

Statute of )rauds re0uires a written contract for the goods" #oweer, because only?;; of the contract was actually e!changed, this falls under the partial performance

e!ception" )our hundred dollars is less than the minimum of ?@;;, so that much of

the contract was legally binding and 8yan must pay for ?;; worth of lilacs"

• 8yan and Susanne decide that a more efficient e!change for both of them would be for

Susanne to 4ust sell her lilac bush to 8yan for ?=;;" #e gies her ?-;; and tells her he

cannot afford to pay any more money"



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o Their contract is enforceable for the full amount. $hough this is an order oer ?@;;

and should hae a written contract under the Statute of )rauds, partial payment on a

contract for one item, no matter the total, enforces the contract for the entire purchase"

• 8yan re0uests that Susanne dip the lilacs in a pink dye for his special order" $he order total is

?=;;" Susanne begins working on the order"o Their oral contract is enforceable" *n e!ception to the Statute of )rauds rule about

goods is that the contract is alid if it pertains to goods which cannot be resold

because they were manufactured specifically for the buyer" %f the special item cannot

be readily resold and the seller has already begun work on the order, the good is

coered by this e!ception to the Statute of )rauds"

• 8yan brings Susanne to court because he/s not getting his order as he correctly ordered it" %n

court, under oath, Susanne admits to their oral contract"o Their oral contract is enforceable" 1ourt admissions are an e!ception to any rules

about goods that fall under the Statute of )rauds" %f the party in 0uestion admits in

court that there was an oral contract, then the contract is alid"

• Susanne tells 8yan his order total will be ?=;;" She goes home that night after the oral

contract is made and writes a confirmation note for her own records" She photocopies it and

sends it in the mail to 8yan" 8yan receies it and forgets about it, but then sends a letter

ob4ecting to the order and the contract two weeks later"o Their oral contract is enforceable" Because both parties inoled are merchants,

under the Statute of )rauds, a written confirmation sent by one party makes an oral

contact alid, no matter the total cost" %f 8yan had ob4ected within ten days, the

contract would hae been oid"



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#ere is an easy way to remember the Statute of )rauds+

$hough this is not an incredibly optimistic way to remember which types of contracts fall

under the Statute of )rauds, it would be a pretty pessimistic day if an oral contract was not

enforceableC :o not forget the ery important e!ceptions to each of the rules, as well"


Five hundred marriages %ill die from real

estate debt in the next one year if they don!t

sign a contract.

Five hundred - the goods rule about '$(( or more

Marriages- #o%ry

Die, -ersonal payment for the deceased

Real estate- Real estate contracts

Debt , -ay someone else!s debts

One Year - ontracts that %ill ta/e longer than a year


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$echnically, 1harlie Brown would not een need a written contract to make his contract

with 9ucy enforceable" $heir agreement does not fall under the Statute of )rauds and, therefore,

an oral contract is acceptable"

. %o must sign t%e contract under t%e Statute of Frauds/

1ontracts do not necessarily hae to be signed by both parties, though it is prudent for

that to happen" $he Statute of )rauds only re0uires written contacts to hae the signature of the

part& to be c%arged, or the person who claimed that there was no deal" 3ithout this signature,

it is likely that the contract will be considered unenforceable" Some real estate documents

&deeds, mortgages, and easements( re0uire the signature of the party selling or giing up the real

estate rights"

II. 0arol E1idence Rule

$hough oral contracts are generally binding, these few e!ceptions dictated by the Statuteof )rauds can be hard to keep straight" )or this reason, as a rule of thumb, written contracts are

generally more reliable and safe than oral ones" 3ritten contracts are more likely than oral

contracts to stand up in court in the case of a disagreement between parties" #oweer, een

written contracts can be problematic" Sometimes the contract itself is not enough to proe its

alidity in court"

$he 0arol E1idence Rule states that parties cannot normally proide additional eidence

of an agreement that either supplements or contradicts the current written contract" $his rule

protects the integrity of the written contract22its terms cannot easily be breached or weakened by

new agreements" New eidence complicates the court hearing and the contract/s original terms"$here are four e!ceptions to the Darol Eidence 8ule four situations where new eidence can be

introduced to make a case on a contract"

$he first e!ception is when a contract is short, or partiall&-integrated, and much shorter

than normal" Such a contract may contain only one or two lines because the terms of the contract

are fairly standard and well understood" #oweer, additional information may need to be added


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to the contract for clarity/s sake and to make it more specific" $his rule is not applicable if the

additional information directly contradicts the terms of the original contract" 1onsider the

following+ Julie owes Emilie ?;;" $he two orally agree that Julie will sell Emilie te!tbooks for

?.;; and the ?;; preiously mentioned will be credited against the ?.;; price" $hey sign a

written agreement, but it does not mention the ?;; of debt, redefined as a credit" $hus, the

written agreement is partially2integrated making the oral agreement from the ?;; credit

admissible eidence to enhance the written agreement"



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Een if a contract is not partially2integrated, it may still be ague or unclear" %f additional

clauses are added to the contract to e!plain unclear proisions, these are also e!ceptions to the

Darol Eidence 8ule" )or e!ample, James got distracted when he was typing up his real2estate

contract for his tenant"


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$he third situation in which eidence is allowed in the court is when there is a clerical

error, mistake, or a case of fraud" )or e!ample, a lease for an apartment may ask for ?; per

month instead of ?;; per month" $he new eidence would correct the issue"



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$he fourth e!ception is when an agreement is made after the written contract" $he

agreement will be alid eidence as long as it can be proen that the agreement was made after

the original written contract" $his allows for situations where both parties are in faor of the new

terms of agreement oer the old ones" $hey should not be forced to follow the original written

contract, but should instead be allowed to introduce eidence of their new agreement" )or

e!ample, 'elly bought a wide2screen teleision from 3al2Mart" $he written contract made on

May -nd stated that the parties agreed the teleision would be deliered to 'elly at 3al2Mart/s

e!pense on May @th" On May ;th, 'elly contacted 3al2Mart stating she would rather pick up

the teleision from the store" 3al2Mart would be in faor of this as it would no longer incur

deliery charges" %n order to be admissible, it must be proen that these new terms were made

and agreed upon after the original written contract date of May -nd"



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$he first three types of eidence are typically found on the original document as clauses

handwritten in the margins or in the footnotes, and initialed or signed by both parties"



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*s can be seen in the #occa v. ittsburgh Steelers Sports% &nc. case below, once a contract



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ch 20 statute of frauds and parol evidence

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