Question

what is the statue of frauds and what types of agreement does it cover? What is /are public policy reasons for the statue of frauds?

Answer 1

The statute of frauds refers to the requirement that certain kinds of contracts be memorialized in writing, signed by the party to be charged, with sufficient content to evidence the contract.

As applied in the United States, the concept generally requires the following types of contracts to be written in order to be legally binding. The mnemonic MYLEGS is sometimes used to help recall the scope of these agreements; the relevant letters are capitalized below.

1. Any promises made in connection with Marriage, including such gifts as an engagement ring.

2.Contracts that cannot be completed in less than one Year.

3. Contracts for the sale of Land. (Leases need not be covered, unless they're of a year or more in length.)

4. Promises to pay an estate’s debt from the personal funds of the Executor. (However, promises to pay such debt from the funds of the estate are not subject to the statute of frauds.)

5. Contracts for the sale of Goods above a certain dollar amount, typically $500.

6. A contract in which one person promises to pay the debt of another person is considered a “Surety,” and is subject to the statute of frauds.

Generally speaking, there are two main reasons for a statute of frauds. Both reasons are based on public policy---

1. First, because these statutes somewhat formalize the agreement, the parties will hopefully spend more time considering the agreement. The statutes purposely cover significant agreements that sometimes carry serious consequences. Careful advance consideration can prevent later litigation.

2. Secondly, the statutes were originally designed to prevent fraudulent conduct by one of the parties. Again, the statutes purposely cover those categories that can carry serious consequences for one of the parties. In these situations, there can be a potential for uneven bargaining power and an incentive for one party to argue the existence of a contract that the other party denies. The writing requirement can ensure that the parties meant to make the agreement - and that they understood the details of the agreement.