Which of the following agreements is the exception to the Statute of Frauds?

The Statute of Frauds is a legal principle that requires certain types of contracts to be executed in writing to be enforceable. The Statute of Frauds aims to prevent fraud by formalising agreements, especially significant ones that carry serious consequences.

For instance, it applies to contracts for the sale of land, as dictated by section 59 of the Property Law Act 1974 (Qld):

“No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised.”.

The Statute has both evidentiary and cautionary purposes — requiring contracts to be in writing provides evidence if a dispute arises, and encourages parties to carefully consider their obligations under the contract before entering into it.

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Electronic contracts

A document in electronic form, such as one sent via email or over the internet, will be taken to be in writing (and signed) if certain requirements are met.

Section 14 of the Electronic Transactions (Queensland) Act 2001 (Qld) states that a signature requirement will have been met if:

• a method is used to identify the person and to indicate their intention in relation to the information provided;
• the method was either as reliable as appropriate in the circumstances, or was proven to have fulfilled the functions above; and
• the recipient consents to receiving the signature that way.

Section 11 of that Act states that a requirement to give information in writing will have been met by giving the information by electronic communication if:

• at the time the information was given, it was reasonable to expect the information would be readily accessible so as to be useable for subsequent reference; and
• the recipient consents to the information being given by electronic communication.

Exceptions to the Statute of Frauds

There are a number of exceptions to the Statute when only an oral agreement exists, even though the Statute would usually require the agreement to be in writing to be enforceable.

An example is when a party relies on an oral agreement and partially performs their obligations. The courts will usually rule that the oral agreement is enforceable, up to the extent that the contract has been completed.

This doctrine of “part performance” overcomes injustice for that party by allowing equitable relief.

Another example is an implied easement on land. This is an easement not created by grant or reservation or statute but implied by common law so that the land can continue to be used in a certain way.

Effect of non-compliance with the Statute of Frauds

A failure to comply with the Statute of Frauds makes a contract unenforceable rather than void. So, it is possible for parties to choose to proceed with the contract.

Pavey & Matthews Pty Ltd v Paul (1987) 69 ALR 577

Licensed builder, Pavey & Matthews, made an oral contract with Paul to do certain building work on a cottage. Paul made a part payment for the work and refused to pay the balance. When Pavey & Matthews demanded it, Paul claimed that the contract was unenforceable because it was not in writing as was required by section 45 of the Builders Licensing Act 1971 (NSW).

The High Court ruled that Pavey & Matthews was entitled to restitution because Paul had accepted the work that had been done and Paul would otherwise be unjustly enriched at Pavey & Matthews’ expense. Their Honours Mason and Wilson JJ considered that the purpose of the provision was to “protect the building owner against spurious claims by a builder by preventing the enforcement by him of nonconforming contracts”. They continued, however, that “it would be going a very long way indeed to assert that the statutory protection extends to a case where the building owner requests and accepts the building work and declines to pay for it on the ground that the contract fails to comply with the statutory requirements”, concluding that an “interpretation that serves the statutory purpose yet avoids a harsh and unjust operation is to be preferred”.

How Gibbs Wright Litigation Lawyers can help

If you have concerns over the validity of a contract or any other contract matters, you can discuss them with our contract lawyers during a no-obligation, confidential consultation today.

The statute of frauds involves certain contracts that must be executed in written form. While the statute varies across jurisdictions, these contracts generally involve a written contract when one party is paying another party's debt; during the sale of land; with contracts that take more than one year to complete; and when goods are sold above a certain dollar amount.

Information About Statute of Frauds

All U.S. states have a form of the statute of frauds in place. The purpose of the statute is to prevent nonexistent agreements between two parties being "proved" by fraud or perjury. It is an English law dating back to 1677 created for specific types of contracts in order to serve as a means of defense in breach of contract lawsuits.

The objective of the statute of frauds is to not enforce particular contracts unless there is a written memorandum or note signed by the persons involved with the contract. An authorized representative may also sign the written document.

In a breach of contract action, a defendant may invoke the statute of frauds. They must then establish that the unfulfilled contract is legally unenforceable because of its failure to satisfy the requirements of the statute. If the contract is found to be unenforceable, the defendant is not liable for a breach of contract.

Types of Contracts

Several types of contracts should be in writing in case a situation arises where the contract must be enforced. This includes:

• Contracts involving the sale, lease, or mortgage of real property, such as a parcel of land.
• When the terms of a contract cannot be performed within one year from the date of the contract's formation.
• Contracts involving collateral when a promise is made to guaranty the debt of another person.
• Prenuptial agreements when promises are made regarding a marriage.
• When goods valued at $500 or more are being sold.
• Contracts of suretyship.

The categories that the statute apply to have been expanded in some states. In some states, for example, a life insurance contract will not be enforced during the lifetime of the person named in the contract. The statute also applies to contracts that bequeath property by a will and to contracts where an authorized agent can sell real property and be paid a commission.

There are exceptions to the statute of frauds wherein a contract that is considered unenforceable because it is not in written form may be enforced. The first example is considered "partial performance accepted" and involves a situation where a buyer takes partial possession of personal or real property and pays the price attributed to the received property. If the parties involved cannot return to their positions prior to the contract, a court could order that the contract must be performed exactly as stated.

The Uniform Commercial Code supports oral contracts as being enforceable when a seller has accepted payment or when the buyer has accepted delivery of the goods stipulated in the oral contract.

Under the principle of "promissory estoppel," a promisor making a promise to a promisee who then relies on the promise to their detriment may be estopped. This means the promisor cannot deny the existence or the validity of the contract.

Limitations of the Statute of Frauds

A single written document is not always required for a contract to be enforceable. This would be the situation when several pieces of correspondence shared between the parties state the contract in actual terms that are agreed to by the parties. An example would be when a private individual selling a car corresponds to a buyer through written letters or email to negotiate the price and payment terms. Once agreed to by both parties, the agreement could satisfy the requirements to make it an enforceable contract.

Sufficiency of the Writing

A written contract with the signatures of both parties will suffice as satisfying the requirements of the statute of frauds. Signatures may be located anywhere on the agreement. Initials are also acceptable when there is no signature. The written information needs to contain only the essential terms, which includes the names of the parties, the subject of the contract, quantity, and consideration. 

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