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15: Statute of Frauds, Part 1 - YouTube
Channel: Center for Innovation in Legal Education
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This unit introduces the Statute of Frauds.
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It's a common misconception among
non-lawyers
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that an agreement needs to be in writing
in order to be legally enforceable.
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In fact, putting to one side practical
questions of proof,
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most oral agreements are every bit as
enforceable
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as a written contract. However,
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for several specific kinds of contracts,
the law
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requires the agreement to be
memorialized in some kind of a writing,
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though not necessarily a formal written
contract, before it can be enforced.
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The law involved here is not common law
case decisions,
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but rather statutory law. And although the
statutes can differ in their details
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all states have enacted some kind of
statute for the prevention of frauds,
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which is typically shortened to the
phrase "statute of frauds."
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Section 110 of the second restatement of
contracts summarizes five kinds of
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contracts that most states' general
statute of frauds include:
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A) Contracts by executors of estates to
perform an obligation of the deceased.
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B) Contracts to be responsible for the
debt of another.
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So, for example, when a parent guarantees
repayment of a loan made to a child
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C) Contracts made upon consideration of
marriage.
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D) Contracts for the sale or lease longer
than a month
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of an interest in land. And, E)
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Contracts that cannot be performed
within one year
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from the making of the contract. That is,
it must be
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impossible, not just unlikely, that the
contract can be completed within one
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year.
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This last category is perhaps the
trickiest in the five,
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so let me give you an example to show
why. An agreement for lifetime employment.
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Is that within the statute? No, because
if the employee died within a year
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that would complete the lifetime term in
the contract. And, as it is not impossible
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for anyone to die within the next twelve
months,
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it is possible to complete the contract
within a year.
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But, a contract for employment with a
fifty year term
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is within the statute because in that
case death does not complete the
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contract
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it only terminates it. In addition, the
Uniform
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Commercial Code includes its own
statute of frauds.
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The most recent version of UCC Section 2-201
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requires that contracts for the sale of
goods of five thousand dollars or more
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comply with the statute. But, some
jurisdictions continue to use the older
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version of Section 2-201
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which had a lower threshold of only five
hundred dollars.
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If an agreement falls within one of
these categories,
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the agreement is said to be "within the
statute"
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that is it is a kind of contract covered
by the statute.
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If an agreement is within the statute
then to be enforceable,
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it has to meet one of two requirements:
Either there must be some kind of writing,
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again not necessarily a formal written
contract, that shows there was a real
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transaction.
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And that writing must be signed by the
party to be charged, that is whichever
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party is the defendant,
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or there must be an exception that
applies to the transaction.
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If there is a writing that meets the
requirements, the statute is said to be
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"satisfied,"
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or if there's an exception, it is said to
take the transaction
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out the statute. Note the mildly
confusing terminology.
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If an agreement is within the statute,
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that means it's one of the kinds of
agreements covered by the statute.
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And that also means that there must be
some kind of writing to satisfy the
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statute.
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Conversely, if an agreement is outside
the statute,
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that means you don't have to worry about
any writing. Lastly,
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if an agreement is within the statute,
but
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an exception to the statute applies, that
exception takes the agreement
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out of the statute. Again meaning you
don't have to worry about any kind
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writing. So let's assume we have an
agreement that is
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within the statute. Now there must be
some kind of writing that satisfies the
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statute.
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How do we tell whether writing satisfies
the statute?
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The answer depends on which statute of
frauds applies:
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a state general statute or the UCC
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Section 131 of the Restatement Second
summarizes what most state general statutes
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require:
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a writing signed by the party
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to be charged... that reasonably identifies
the subject matter...
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is sufficient to indicate a contract has
been made...
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and states with reasonable certainty the
essential terms.
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The UCC statute of frauds section 2-201
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on its face seems similar. It requires: a
writing signed by the party to be
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charged...
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that is sufficient to indicate a contract
for sale has been made.
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Most commentators however agree that the UCC statute of frauds
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is a little more forgiving than the
state's general statute of frauds.
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For example the UCC does not require
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that all essential terms be included in
the writing, or that the included germs
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be correct.
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as Comment 1 to the section states: all
that is required
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is that the writing afford a basis for
believing that the
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offered oral evidence rests on a real
transaction.
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