NUMBER: 29005488

COURSE: LAW OF
CONTRACT 2

LECTURER: LT COL MILANZI

INTRODUCTION

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This assignment will elucidate on the statute of frauds and the nature of contracts that apply to it

as well as the nature of memorandum required.

What is the statute of frauds?

A statute of frauds is the statute requiring that certain contracts to be memorialized in writing,

signed by the party against whom they are to be enforced, with sufficient content to evidence the

contract.1

The term statute of frauds comes from an act of parliament of England passed in 1677. Many

common law jurisdictions have made similar statutory provisions, while a number of civil law

jurisdictions have equivalent legislation incorporated into their civil codes

Nature of contracts to which the statute of frauds applies to

the statute of fraud applies to land sales and most purchases of goods over $ 500. There are

significant exceptions, such as oral contracts where work has already started.2

Contracts that are to be evidenced in writing

Contracts of guarantee (where one party guarantees the obligation of another, such as a parent

guaranteeing a daughter’s bank overdraft) are required by the Statute of Frauds 1677 to be

‘evidenced in writing’. In Pereira Fernandez v Mehta (2006) the High Court held that this

requirement had been satisfied where a contract was made by e-mail, though it was not

enforceable on the facts because the claimant had not typed his name at the bottom of the e-mail

to amount to a signature.

1
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2
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Contracts for the sale or disposition of an interest in land made before 27 September 1989 are

still covered by the old law prior to the Law of Property (Miscellaneous Provisions) Act 1989,

and only have to be evidenced in writing.

‘Evidenced in writing’ essentially means that although the contract itself need not be a written

one, there must be some written evidence of the transaction. The evidence must have existed

before one party tried to enforce the contract against the other, and it must be signed by the party

against whom the contract is to be enforced. If a note or memorandum containing the terms of a

contract was signed only by one party to that contract, the contract could be enforced by the non-

signer against the signer, but not vice versa. Such a note or memorandum does not have to have

been created for the purpose of enforcing a contract, and in fact a string of documents can be

added together to form evidence of a contract – if, for example, there is a document signed by the

defendant which contains an express or implicit reference to another document, and that second

document contains the terms of the contract.

The House of Lords case on this subject is Action strength Ltd v International Glass Engineering

(2003). The first defendants were builders who contracted to build a new factory for the second

defendant in Yorkshire. The claimant, Action strength Ltd, was a recruitment agency based in

Italy, which provided construction workers for its clients. The first defendants continually paid

the recruitment agency late for its workforce, so that the recruitment agency threatened to

withdraw its labour. The recruitment agency alleged that at this point the second defendant made

a verbal promise that if the agency kept its workforce on site it would see that they were paid

anything due, if necessary by paying the agency money that the second defendants were due to

pay to the main contractor. Later the main contractor became insolvent, the work was

abandoned, and the recruitment agency was owed over £1 million by the main contractor.

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The agency brought an action against the second defendant, seeking to rely on the alleged oral

agreement to recover the money owed. The House of Lords rejected this claim because, even if

the claimant’s story was true, the contract involved was a contract of guarantee which was

unenforceable as it had not been evidenced in writing as required under the Statute of Frauds.

Justice might be better achieved if the Statute of Frauds was restricted to consumer contracts, and

not applied between two businesses, as there is no justification for allowing a businessman who

knowingly offers a guarantee to then avoid liability under the guarantee because it was not put in

writing.

Other contracts to which the statute requires signing

 contracts in consideration of marriage. This covers prenuptial agreements.

 Contracts that cannot be performed within one year. However, contracts of indefinite

duration do not fall under the statute of frauds regardless of how long it takes

 Contracts for the transfer of an interest in land.

 Contracts by the executor of a will to pay a debt of the estate with his own money

 Contracts in which one party becomes a surety for another person’s debt or other

obligation

Raising the defense

A defendant in a contract case who wants to use the statute of defense must raise it as an

affirmative defense in a timely manner. The burden of proving that a written contract exists

comes into play only when a statute of fraud defense is raised by the defendant. 3

3
En.m.wikipedia.org

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Exceptions to the statute of frauds

There are several common exceptions to a statute of frauds. Sometimes, even though a contract

falls within a statute of frauds, it can be enforced without meeting the two requirements. These

exceptions are4

 Admission

 Performance

 Promissory estopel

4
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CONCLUSION

In conclusion, to meet the requirements of the statute of fraud, there must be a sufficient writing

to demonstrate that the contract exists. The writing can be typed, handwritten, or electronic. The

agreement must be generally signed by the party against whom it is being enforced.

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BOOKS

Contract law- Elliot

CASES

Actionstrength Ltd v International Glass Engineering

Pereira Fernandes v Metha

E-RESOURCES

En.m.wikipedia.org

www.investopedia.com

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