United States contract law (Part 2 of 2)

Formality.

Ordinarily, contracts do not have to be in writing to be enforceable. However, certain types of contracts do have to be reduced to writing to be enforceable, to prevent frauds and perjuries, hence the name statute of frauds, which also makes it not a misnomer (fraud need not be present to implicate the statute of frauds).

Typically, the following types of contracts implicate the statute of frauds:

Land, including leases over a year and easements.

Suretyships (promises to answer for the debts, defaults, or miscarriages of another).

Consideration of marriage (not to actually get married but to give a dowry, for example).

Goods over a certain amount of money (usually $500, as in the UCC).

Contracts that cannot be performed within one year.

For example, a two-year employment contract naturally cannot be performed within one year.

In many states’ lifetime contracts are not considered to fall within the Statute of Frauds reasoning that life can end at any time, certainly within one year from the time of execution. In other states, notably Illinois, contracts requiring performance for a lifetime are covered by the Statute.

The statute of frauds requires the signature of the party against whom enforcement is sought (the party to be sued for failure to perform). For example, Bob contracts with the Smith Company for two years of employment. The employer would need to sign the writing.

Moreover, the writing for purposes of satisfying the statute of frauds does not need to be the actual contract. It might be a letter, memorializing and formalizing an oral arrangement already made over the phone. Therefore, the signed writing does not need to contain all of the terms that the parties agreed to. At common law, only the essential terms were required in the signed writing. Under the UCC, the only term that must be present in the writing is the quantity. The writing also does not need to be one document, but if there are multiple documents, they must all obviously refer to the same transaction, and they all must be signed. The signature itself does not need to be a full name. Any mark made with the intent to authenticate the writing is satisfactory, such as initials or even such as an X by an illiterate party.

A contract that may otherwise be unenforceable under the statute of frauds may become enforceable under the doctrine of part performance. If the party seeking enforcement of the contract has partially or fulfilled its duties under the contract without objection from the other party, the performing party may be able to use its performance to hold the other party to the terms of the contract.

No writing is required when:

Goods have been received and accepted.

Payment has been made and accepted.

Goods are specially manufactured (there is no market for them); or,

under the UCC, the party against whom enforcement is being sought admits a certain quantity of goods.

The last exception applies up to the quantity admitted, which may include the entire contract. This reversed the rule at common law that permitted a defendant to testify that he indeed contracted with the plaintiff but refuses to perform because it is not in writing.