Statute of frauds vs. Statute of limitations

by | Jul 8, 2021 | Language of Real Estate | 0 comments

Statute of frauds vs. Statute of limitations

The statute of frauds requires that certain contracts be in writing to be enforceable, whereas the statute of limitations sets time limits on the ability to file a lawsuit to enforce a right.

Statute of frauds — State law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable. Most state statutes of frauds are based on the original English Statute for Prevention of Frauds and Perjuries (1677). Statutes of frauds generally require that all contracts for the sale of land or any interest therein (and some listings) be written. Oral leases for a period not exceeding one year, however, are generally valid and enforceable. The law does not require a single, formal contract; the writing could consist of a memorandum of the contract or several items of correspondence, so long as the material terms agreed on are stated. In one case, the commission terms were jotted on the back of the broker’s business card and initialed by the seller. The writing can even be a subsequent confirmation of an earlier oral contract (“. . . this letter is to confirm our prior telephone understanding . . . ”).

It is generally held that a valid written agreement can be canceled by a subsequent oral agreement. This is so because the statute of frauds deals only with the making of a contract.

The parties to an oral real estate contract may have a valid contract (i.e., one containing all the essential elements), but the contract is not enforceable if it is not in writing. The statute of frauds relates to the remedy only and not to the inherent validity of the contract. Thus, the parties to a fully executed or performed oral agreement cannot thereafter assert the statute of frauds to seek rescission of the contract. The statute may only be pleaded as an affirmative defense to a lawsuit seeking enforcement of the oral contract.

The purpose of the statute of frauds is to prevent the perpetration of fraud by one seeking enforcement of an executory contract that was never in fact made; it is not designed to prevent the performance of oral contracts. Thus there are exceptions to the statute of frauds, mostly where the assertion of the statute of frauds as a defense against an oral contract would in itself amount to a fraud or result in unjust enrichment or unconscionable injury. In some instances, part performance of an oral agreement will take the case out of the statute of frauds. For example, a contract will be “taken out” of the statute of frauds if the buyer, in reliance on a seller’s oral promise to sell the property, pays part or all of the purchase price, enters into possession and makes substantial improvements on the property. In such a case of part performance, some courts refuse to allow the seller to assert the statute of frauds as a defense against the buyer’s action to force the seller to fulfill the terms of the oral agreement to sell.

The Uniform Commercial Code states that contracts for the sale of personal property in excess of $500 must be in writing. If a seller wishes to retain a fixture (regardless if under $500), this fact must be clearly stated in the contract, because a fixture is considered to be real estate.

Statute of limitations — That law pertaining to the period of time within which certain actions must be brought to court. The law is intended to protect the vigilant against stale claims by requiring the prompt assertion of claims; thus an action must be brought (i.e., the complaint filed) within a specified time of the occurrence of the cause of action. After the time period expires, the claim is said to be “outlawed” and may not be enforced in court. The theory behind the statute of limitations is that there must be some end to the possibility of litigation. It is said that stale witnesses and stale records produce little truth and result in accidental justice, if any.

If a partial payment is made before the time period has expired, then the full period starts running anew. If the payment is made afterward, then the debt is not revived and remains outlawed or barred.