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.

RELATED TERMS
  1. Statute Of Limitations

    A statute of limitations is a law which sets out the maximum ...
  2. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  3. Contract Unit

    The actual amount of the underlying asset represented by a single ...
  4. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
  5. Front Month

    Used in futures trading to refer to the contract month with an ...
  6. Contract Size

    The deliverable quantity of commodities or financial instruments ...
Related Articles
  1. Economics

    Explaining Statute Of Limitations

    A statute of limitations sets the maximum time that parties have to initiate legal proceedings from the date an alleged offense occurred.
  2. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  3. Markets

    Intermediate Guide To E-Mini Futures Contracts - Rollover Dates And Expiration

    A contract month is the month in which a futures contract expires. All of the e-mini stock index futures contracts trade on the March quarterly expiration cycle (March, June, September and December). ...
  4. Professionals

    Contract Requirements

    Contract Requirements
  5. Professionals

    Business Law: Contracts

    Business Law: Contracts
  6. Professionals

    Other Types of Derivatives

    CFA Level 1 - Other Types of Derivatives. Learn four other types of derivative contracts, including the characteristics of Eurodollar futures, currency and stock index contracts.
  7. Professionals

    Long-term Contracts

    Long-term Contracts
  8. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
  9. Professionals

    Terminating a Forward Contract Prior to Expiration

    CFA Level 1 - Terminating a Forward Contract Prior to Expiration. Learn how to terminate your position in a forward contract through use of an offset. Discusses default risk upon terminating ...
  10. Options & Futures

    Why Forward Contracts Are The Foundation Of All Derivatives

    This article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...
RELATED FAQS
  1. When does the statute of limitations clock start on my debts?

    Learn how states treat statutes of limitation on consumer debts, and find out what it means if the statute of limitations ... Read Answer >>
  2. What debts don't have a statute of limitations applied to them?

    Learn what it means to have a statute of limitations applied to a debt, and find out which debts typically do not have a ... Read Answer >>
  3. Do I still owe debt collectors for a debt that's past the statute of limitations ...

    Learn more about the statutes of limitations that govern certain personal debts and why you maintain obligations as a debtor ... Read Answer >>
  4. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  5. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  6. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center