Exceptions to the Statute of Frauds

As stated in the post on whether a contract is subject to the statute of frauds, when the statute of frauds is asserted as a defense against the enforcement of an alleged contract, one should ask the following questions:

1. Is the contract subject to the statute of frauds?

2. If it is subject, is the statute of frauds satisfied?

3. If it is not satisfied, do the factors invoke one of the exceptions to the statute of frauds?

If the answer to the first question is “yes” and the second question is “no,” then you need to look to see if one of the exceptions to the statute of frauds applies. Below is a list of the exceptions to the statute of frauds under common law and the UCC:

COMMON LAW EXCEPTIONS

1. Part Performance (Restatement section 129). If it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement. This exception is very similar to promissory estoppel and only applies in situations where a transfer of interest in land exists and with specific performance. This exception also has no application in an action at law for money damages.
2. Full Performance (Restatement section 130. As soon as any one party fully performs under the contract, then the SOF does not apply. This exception only applies to contracts that cannot be completed within one year
3. Promissory Estoppel – Although this is not really an exception, promissory estoppel can be used anytime. A minority of jurisdictions bar promissory estoppel actions through the statute of frauds because they see it as an impermissible way to circumvent the statute of frauds.

 

UCC EXCEPTIONS

1. Part Performance – Note: In an installment contract you need to show acceptance at every installment to show part performance.  Also if there is a partial payment figure out what the parties intended.
2. Admissions Exception – If the party against whom enforcement is sought makes an under oath admission of facts that in the court’s view establish that such a contract was indeed made
3. Special Manufacture Exception – If goods are specially manufactured for the buyer and “not suitable for sale to others in the ordinary course of  the seller’s business (e.g. making mugs for ACME, Inc. that has their logo and slogan.)
4. Merchant Confirmation Exception – Here you will need something in writing that is signed but does not need to be signed by the person against whom enforcement is sought. It only needs to be signed by any party to the contract. However, the following must be present:

1. Both parties must be merchants under the UCC
2. The writing (confirmatory letter) has to be sent to and received by the party to whom enforcement is sought
3. The party has ten days to objection. The objection has to be in writing .
   1. NOTE: You want to be careful that you are not creating a writing that satisfies the statute of frauds
   2. In order to do so, the objection should explicitly state or object to the terms