Monday, July 15, 2013

Statute of Frauds: Exceptions

The following question was asked by a reader of the blog:

I'm getting statute of frauds questions correct, but I have a tough time understanding when a contract that would normally apply to the statute of frauds doesn't apply. Can you post about this?

Response:

The most commonly tested fact patterns in this respect deal with the sale of goods and the sale of land. Most Statute of Frauds questions on the MBE will involve these types of contracts. In regards to the sale of land (common law), the statute will not apply if there is performance that unequivocally indicates that a contract has been performed. The rationale here is that if we have this evidence available, then there is no need for a writing, and the need for a writing is the entire basis behind the Statute of Frauds. Two of the following are required to remove a contract for the sale of land from the Statute of Frauds: payment from one party to the other (either full or partial payment), possession by the buyer of the property that was the subject of the contract, or valuable improvements on the property by the buyer.

In regards to the sale of goods for over $500 (UCC), the Statute of Frauds will not apply if one merchant sends to another merchant a confirmation regarding their oral agreement, and the recipient does not object within 10 days of receipt (the “confirmatory memo rule”). In addition, the statute is inapplicable if the goods were specifically made for the buyer and not suitable for sale in the ordinary course of business. The statute will also not apply if the party claiming the defense admits in his pleading or court testimony that a contract was formed, or if the contract is in fact performed (fully or partially) by the party claiming the defense. The rationale behind these exceptions is identical to the rationale in regards to the sale of land. With adequate evidence of the contract at hand, we need not require that the original contract be in writing to enforce it, even if the contract is one that would normally require a writing (such as a contract for the sale of goods over $500).


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