Statute of Frauds

DEFINITION of 'Statute of Frauds'

A legal concept that requires certain types of contracts to be executed in writing. The precise form of the Statute of Frauds varies between jurisdictions, but generally requires a writing for the following types of contracts:

(1) Contracts for the sale of land;
(2) Contracts for the sale of goods above a certain dollar amount;
(3) Contracts that cannot be completed in less than one year; and
(4) Contracts where one party is to pay the debt of another party.

In a breach of contract case where the statute of frauds applies, the defendant may raise it as a defense. In this case, the burden of proof is on the plaintiff to establish that a valid contract was in existence.

BREAKING DOWN 'Statute of Frauds'

The statute of frauds has its roots in an act of the English Parliament passed in 1677. The act was meant to help prevent some of the misunderstandings and fraudulent activity that can occur with oral contracts. Therefore, the parliament decided to require a written contract for important transactions where a large amount of money was often at stake. The statute of frauds was adopted by the United States primarily as a common law concept, though it has since been formalized by statutes in certain jurisdictions.

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