Statute of Fraud
Statute of frauds is a legal consideration for a number of types of legal contracts. It stipulates that the terms of an agreement must be written down and signed by the parties that will be bound by it. There are many deals that will only be legally recognized this way.
Originally introduced to the US as part of English common law in 1677, it is a condition that must be met in the case of certain agreements to make sure that they become legally binding. This is intended to prevent fraud and to improve the enforceability of an accord between two or more parties.
Read on to find out more about when and how statutes of frauds might become a necessity for legal documents that you are preparing. This article explains how they must be used and the key requirements that govern them.
When are Statute of Frauds Used?
It is always best to operate under written contracts rather than verbal agreements to make your agreements enforceable, yet it is not always a legal requirement. However, there are six types of contract where the statute of frauds must be used by law, these include:
- Agreements in the consideration of marriage (e.g. prenuptial agreements).
- Contracts for the sale of items over $500.00 in value (e.g. a Vehicle Bill of Sale for a car worth $700).
- Deals where land is to be sold or a transfer of interest in the land will occur (e.g. mortgages and land sale contracts)
- Contracts created by the executor of a will to cover any estate costs with their own finances.
- Arrangements that cannot be fulfilled within 1 year (e.g. an employment contract for a full-time employee)
- Any deal where one party acts as a guarantor by providing surety for another party’s debts. (e.g. a Loan Agreement, where a family member provides collateral)
Statute of Frauds Requirements
In order for a contract or agreement to be valid under the statute of frauds rules, it must meet specific requirements. If you wish to get the correct legal protection using these conventions your contract must do the following:
- It must be written down.
- The parties must be identified
- It must be comprehensible and easy to understand.
- The nature of the agreement must be clearly described.
- The terms of the exchange must be outlined as must any rules regarding what constitutes a breach of the terms.
- The agreement must be signed by all the parties it binds.
It is always recommended to check the statute of frauds laws that cover agreements in your state before proceeding with a contract. This will help clarify any doubts and side-step any potential misunderstandings that could affect the validity of your agreement.