Under California law, for the most part, oral contracts are valid and enforceable. However, California (as well as most States) require by statute that particular types of contracts, in order to be valid and enforceable, need to be in writing (versus oral contracts) and signed by the person (or the person’s agent) against whom you would like to charge or enforce the contract.
In essence, certain types of contracts need to be not only in writing but also signed by the person (or their agent) who you seek to bind to the contract and enforce against them. This concept requiring certain contracts to be in writing and signed is a long-standing legal theory called the Statute of Frauds.
To start with, let’s talk generally about the types of contracts are required under California Statute and the Statute of Frauds to be in writing and signed by the person (or their agent) who you seek to bind to the contract and enforce against them.
The following are just a few of the more common types of contracts that are subject to the Statute of Frauds:
- An agreement that by its own terms cannot be performed within one year from the date of making the contract;
- An agreement that by its terms is not to be performed during the lifetime of the person making the promise of performance;
- A special promise to answer for the debt, default, or miscarriage of another (with exceptions);
- An agreement for the sale of real property (or an interest in real property), but there are exceptions;
- An agreement for the leasing of real property for longer than one year
- An agreement to find a purchaser or seller of real estate or a tenant of landlord of real estate where the lease is for a longer period than one year and made for compensation or commission (a finder’s fee);
- A contract for the sale of goods for a price of $500.00 or more (with exceptions); and
- A contract or promise to loan money or to grant or extend credit in an amount greater than one hundred thousand dollars ($100,000.00) made for business purposes.
As may or may not be noted above, there are exceptions to the Statute of Frauds and such exceptions allow the enforcement of an oral or partially oral contract that is subject to the Statute of Frauds. California law on this point is complicated. As such, it is advisable to always have an attorney review the facts when two or more people wish to engage in an agreement or contract.
So, what is the general purpose of the Statute of Frauds?
The Statute of Frauds is the necessity to prove, by providing evidence, that you and the other person have actually engaged in a contract and then those involved in the contract have fulfilled (or not) the contract obligations. You can foresee the problem; oral contracts or agreements, although enforceable in many instances, often tend to fall into the “he said/she said” category when a dispute arises. The potential exists for both parties to be dissatisfied with the oral agreement, yet have no protection from the legal system to remedy the issue when one of the persons does not perform in part or in full on the contract.
As such, the safest thing to do is always put a contract in writing, even if the contract is between you and your parent, child, spouse or other extremely trustworthy person. The bottom line is that the contract is your evidence in a court of law.
There are two concepts that relate to why the Statute of Frauds is essential.
The cautionary function of the Statute of Frauds suggests that when the parties involved in the contract actually write down the terms of the agreement and sign it, then both sides are more likely to keep up their end of the contract. The evidentiary function is the thought that the Statute of Frauds helps to eliminate issues like fraud, misrepresentation, ambiguity, etc., in an agreement. There’s no opportunity to falsify information if it’s already been written down and signed by both parties and usually written contracts limit or eliminate ambiguity, etc.
The Statute of Frauds is complex and there are many exceptions to it. Anyone engaging in a contract or who would like more information on the Statute of Frauds should contact the Chilina Law Firm or another California attorney who practices in the areas of contracts, business law, transactions, etc.
Authored by Greg Chilina and Co-Authored by Karen Chilina
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