The writing requirement
By Dr. John Murray, Jr. -- Purchasing, 2/10/2000 2:00:00 AM
Because of the way trials were conducted in seventeenth century England, there was a lot of lying going on. If A owed B a thousand pounds, but A was broke and could not pay, B might allege that A's brother, C, orally promised to pay if A failed to pay--i.e. C had allegedly become a "surety" for A. If a jury believed that story, C would be stuck paying the thousand pounds. If X died and he had a lot of creditors anxious to be paid, one or more of the creditors might allege that the executor of X's estate orally promised to pay X's debts out of his own pocket. If a jury believed this story, the executor would have to pay. If Marilyn promised to marry Charles but later broke the engagement, Charles might allege that Marilyn had orally promised to pay a certain amount to Charles in consideration of the marriage and the jury might believe Charles.
Ames may have had an overwhelming desire to buy land owned by Barnes who was not willing to sell. Ames could allege an oral promise by Barnes to sell Ames the land and, if believed, that promise could be enforced. Sims might allege that he had an oral contract to work for Miller for five years and, if believed, the contract would be enforceable. A merchant could allege an oral contract for the sale of goods at a price of more than ten pounds sterling. If the jury believed him, he could enforce that oral contract.
Because many of these lawsuits suggested the strong possibility of fraud and perjury, Parliament passed a law in 1677 called a Statute Against Fraud and Perjury which later became known, simply, as the Statute of Frauds. It required such contracts to be evidenced by a writing, i.e. without a writing, the following contracts would be unenforceable: (1) contracts to answer for the debt of another (suretyship contracts); (2) promises by an executor to pay the decedent's debts out of his own pocket; (3) contracts in consideration of marriage; (4) contracts for the sale of land; (5) contracts not performable within one year from the time they were made, and (6) contracts for the sale of goods with a price of ten pounds sterling and up. United States law is based upon English law and each of our states included their own "Statute of Frauds" which typically contained the same kinds of contracts that were required to be evidenced by a writing under the original English statute. We have even added some others. For example, many of our state statutes require a contract with a real estate broker to be in writing.
There is criticism of the statute of frauds in modern times. Why are these types of contracts included and not others? For example, a contract to construct a commercial building for millions of dollars need not be in writing because it is a contract for services rather than goods (the bricks, mortar and lumber are incidental to the services in constructing the building). Any contract for services of any kind need not be evidenced by a writing. In 1954, England repealed the statute of frauds except for contracts for the sale of land and contracts to answer for the debt of another (the suretyship contract). We have not followed suit, however. We still require all contracts on the original list (and sometimes more) to be evidenced by a writing. The writing, however, need not exist at the time the contract is made i.e. an oral contract followed by a written confirmation will satisfy the statute of frauds. Buyers and sellers of goods often make contracts by telephone or in person and only later send confirming purchase orders and acknowledgments. Moreover, no particular form of writing is required. A contract can be evidenced by a writing on the back of a napkin. It can be in a letter, even a letter dealing with other matters. It can be in the minutes of a meeting of the company or in many other forms.
The original (and modern) statutes require the writing to be "signed" by the party to be charged, i.e. the party against whom we are trying to enforce the contract. The definition of "signed," however, is very broad. It does not have to be a full signature. Initials will do. It can be printed, typewritten or word-processed. Even a company letterhead may very well suffice.
Right now, any contract for the sale of goods (any kind of goods) with a price of $500 or more must be evidenced by a signed writing. Between businesses, however, if an oral contract is followed by a confirmation sent by one of the parties (either buyer or seller) and the recipient does not object to that confirmation within ten days, the confirmation signed only by the sender will be effective against the recipient. This was a modern change in the law to overcome the earlier problem of one party sending a confirmation and being bound while the other party who sent no confirmation was not bound because he signed nothing. The moral here is, if you receive a confirmation of a contract for equipment or other goods but you never made such a contract, do not simply toss the confirmation in the waste basket. Send an immediate notice of objection to the seller stating that you did not make such a contract. This will preserve your statute of frauds defense that will not only win a lawsuit, but will probably prevent one from occurring.
The end of the millennium brings new problems to lawmakers concerning this ancient statute of frauds. Many contracts are no longer in "writing" and the day may come when virtually no contract will be in a traditional "writing." Moreover, such contracts are not "signed" in the usual way because they are electronic contracts. Throughout the country, many efforts are under way and, in some states already effective, to recognize electronic "records" and electronic signatures. Statutes of frauds will undoubtedly be changed in the future to no longer require a "writing." They will, instead, require a "record" which is broad enough to include a traditional written document as well as an electronic file. Future statutes of frauds will no longer require a record to be "signed." The new term will be "authenticated," which is broad enough to include the typical signature as well as new forms of electronic signatures including encrypted signatures.
There have been numerous efforts to repeal the statute of frauds in the United States but, to this point, they have failed. Apparently, we still like the idea of having some permanent record of certain kinds of transactions if we are going to make someone legally responsible. While we will modernize these statutes of frauds to recognize the digitalized economy, some record that is retrievable in perceivable form will still be necessary in the 21st century to make agreements enforceable at law.
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