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?
Below is the analysis that should be conducted under the UCC and Common Law to answer this first question, “Is the contract subject to the statute of frauds?”
The UCC presents the easier test as to whether a contract is subject to the statute of frauds. Under the UCC, the only thing we care about is whether the contract is for $500 or more.
Under common law we don’t care about the dollar amount of the contract. Restatement (Second) 110 states that “[t]he following classes of contracts are subject to the Statute of Frauds, forbidding enforcement unless there is a written memorandum or applicable exception:
- A contract of an executor or administrator to answer for a duty of his decedent (the executor-administrator provision)
- A contract to answer for the duty of another (the suretyship provision)
- A contract made upon consideration of marriage (the marriage provision);
- A contract for the sale of an interest in land (includes leases) (the land contract provision);
- A contract that is not to be performed within one year from the making thereof (the one-year provision)”
The majority of these classes are self-explanatory but a few notes on the fifth class, the one-year provision. This class requires a contract not to be performed within one year from the date the contract is made to be in writing. The standard view is that a contract is not subject to the statutory provision if it is possible to be performed within a year, even if the prospect of such performance is remote or unlikely. Therefore, the question you should ask is, “At the time of the formation, could it have been completed within a year?” If the answer is “yes,” no matter how remote or unlikely it is, then most courts will deem that the contract fits this class and is not subject to the statute of frauds. Something to remember is that many courts are looking for reasons to exclude things from the statute of frauds.