THE STATUTE OF FRAUDS AND ITS IMPACT ON CONTRACTS

THE STATUTE OF FRAUDS AND ITS IMPACT ON CONTRACTS

THE STATUTE OF FRAUDS AND ITS IMPACT ON CONTRACTS

Potential clients, family and friends frequently ask what is required to make a contract legally binding. Many times, a contract simply requires an offer, acceptance of the offer and consideration.  Consideration is something of value that is promised or contracted for that induces or motivates the parties to enter into a contract.  While it is usually smart to document the terms of a contract to avoid future disagreements, verbal contracts are legally binding. However, as with most legal principles, there are exceptions where contracts must be in writing, such as the Statute of Frauds.  The Statute of Frauds states that certain types of contracts must be in writing, signed by the parties and contain the essential terms of the agreement.  While each state has its own laws, generally five types of contracts fall under the Statute of Frauds: (1) Contracts for the sale of land; (2) Contracts for the sale of goods for more than $500; (3) Contracts where one party promises something of value to the other party based on the specific condition that they become married; (4) Contracts that cannot be performed within one-year from the time the contract was made; and (5)  Contracts where one person or entity assumes an obligation or responsibility of another person. There are additional arguments and legal principles that could be made to enforce the terms of an unwritten agreement that falls into one of the five previous categories; however, to make the contract binding, these types of agreements must be in writing.  Enforcing a contract can become complicated quickly.  If any of our readers have a question regarding their rights based on a contract or agreement, they should always feel free to reach out to our firm for a free consultation to better understand what options may be available.