When considering entering into a contract, the Statute of Frauds is an important protector of your interests. The Statute of Frauds protects parties who enter important contracts that can have significant effects on them if not well thought though. The statute of frauds requires specific types of contracts to be in writing or evidenced by a written memorandum, rather than an oral agreement.
There are five types of contracts that fall within this category:
- Contracts involving land.
- Contracts that cannot by their terms bee performed within 1 year.
- Collateral, or secondary contracts, such as promises to answer for the debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate personally.
- Promises made in consideration of marriage.
- Contracts for sales of goods exceeding $5,000 or more.
Is the Statute of Frauds a good thing?
It definitely protects people from entering into contracts they might not otherwise have fully thought through. If one must put something into writing and sign it, they must have thought about it more seriously than having simply held a conversation over it.
The Statute of Frauds protects parties from being held to agreements that might put them at an undue hardship.
- Landowners might lose their land, and ultimately shelter.
- For the guarantor of a collateral promise, he/she might be overburdened financially by the transaction of accumulating another’s debt.
- For a party of considerable wealth to enter into marriage without fully considering a prenuptial contract, he/she could lose a significant amount of their estate in the event of a divorce.
- For parties purchasing $5,000 or more of goods, only one who could afford such an investment would be likely to sign a contract for those goods.
- The one-year rule, also protects those who enter into it. So many circumstances can change within a year that it is vital for parties that will fulfill a contract outside of that timeframe to be bound to that agreement.
To put oneself in a position that is detrimental to their financial situation or lifestyle (shelter), one must thoroughly consider such a decision. Hopefully for the majority of people, a written contract will have ensured this.
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