Chapter 20: Statute of Frauds and

Parol Evidence Rule

Elizabeth Necka, Emilie Baugh, and Julie Sztukowski

Edited by Nikki Meltabarger

I. Statute of Frauds

Oral contracts are typically binding, though it is sometimes difficult to prove their
existence if they are challenged in court. However, some types of agreements are only valid and
enforceable when they are in writing. These contracts are covered by the Statute of Frauds.

If a type of contract (often abbreviated K) is listed in the Statute of Frauds, it is only

enforceable if it is written.

A. Real Estate
6
Real estate contracts are the
There are six main types of contracts
first provision in the Statute of
that are covered by the Statute of
Frauds. Any contract pertaining to an
Frauds.
exchange of land or real estate
1. Real estate Ks property must be in writing. These
2. Long term Ks include the following: 1. Mortgages,
3. Someone elses debt
2. Long term leases, which pertain to
4. Debt of deceased
5. Dowry a period of one year or greater, 3.
6. $500+ in goods Easements, which pertain to the
permanent right to use another partys
property. The only exception to this
element of the Statute of Frauds is
substantial performance on the grounds of the contract. Substantial performance can be payment
on the property, buyer possession of the property, or buyer improvement on the property. Most
states require two or three of the conditions to be met before the courts will enforce an oral
contract.
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 Consider the following scenario under the Statute of Frauds:

Mike and Jim have been best friends for as long as they can remember. Even though
their friendship became long distance after college--Mike lives in Washington and Jim lives in
Illinois--they have maintained contact. One day, Mike decides he wants to move to California to
soak up the sun and coincidentally Jims job forces him to relocate to Washington. Since they
are best friends, the two make an oral contract. Mike tells Jim, You can have my place.

Jim is buying the house from Mike.

o Their oral contract is unenforceable. Because this is a real estate contract, it is
covered by the Statute of Frauds.

Jim is renting the house from Mike, but Jim is only going to live there for six months.
o Their oral contract is enforceable. Although this is a real estate contract, the duration
of Jims lease makes this an exception to the Statute of Frauds. Real estate contracts
must only be in writing if they are long-term leases. Long-term leases pertain to a
period of time greater than one year.

Mike tells Jim that he can use a private road on his property indefinitely.
o Their oral contract is unenforceable. This is a real estate contract covered by the
Statute of Frauds. The contract is an easement, or an agreement between two parties
stating that one party gives another party the permanent right to use some of the first
partys property.

Jim bought the house from Mike, moved in, painted some rooms, and made renovations.
When Mike gets too sun-burnt and wants to go back to Washington, he tries to kick Jim
out, claiming their contract is voidable.
o Their oral contract is enforceable. While real estate contracts must be in writing
according to the Statute of Frauds, courts will typically enforce an oral deal if there is
already substantial performance on the grounds of the contract.

B. Long-term contracts

The second provision of the Statute of Frauds pertains to long-term contracts which
cannot be completed within one year of their creation. This also pertains to contracts for a
service or employment which is ongoing for over a year or an unspecified amount of time that
could likely be over a year.

Consider this example under the Statute of Frauds:

Samantha and Eleanor work as secretaries in an office and they hate paperwork. On
June 1, 2009, they decide to make an oral contract.
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 Eleanor has a quick brain for numbers and agrees to balance Samanthas checkbook and pay
her bills for her from now until December 31, 2010, when Samantha plans to have paid off
her credit-cards.
o Their oral contract is unenforceable. Under the Statute of Frauds, contracts that
cannot be performed within one year of the date of the contract must be in writing.
Because Eleanor will not complete this service until 18 months after the contract was
made, there must be a written contract.

Eleanor agrees to watch Samanthas four-year-old son every Saturday, except for holidays,
until the end of summer, September 1, 2009. Samantha will be employing Eleanor as a
babysitter.
o Their oral contract is enforceable. Because this employment period will be
completed three months from when the contract is made, it does not fall into the
domain of the Statute of Frauds and does not need to be in writing.

Samantha and Eleanor decide to open their own Taco Bell franchise. Samanthas husband,
Chris, who works for Taco Bell, tells them they can be part of the Taco Bell franchise for the
next five years. However, Chris did not clear this with his boss, gets in trouble, and tries to
convince the women not to open the store.
o Their oral contract is unenforceable. Franchise agreements are long-term business
contracts and, therefore, need to be in writing.

Samantha starts a business and because she knows Eleanor is a good worker, employs her as
her Office Supervisor. When she decides she cannot afford an Office Supervisor in
December of 2010, she tries to get rid of Eleanor by claiming their contract was voidable.
o Their oral contract is unenforceable. Because this contract pertained to employment
of over a year (if no ending date of employment is set, it is assumed that employment
will last over a year), the Statute of Frauds requires it to be in writing. However,
Eleanor must pay Samantha for the work she has already done.

An example of a long-term oral contract can be seen in the Doherty v. Doherty case below.

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B

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C. Someone elses debt
The third type of contract which must be in writing is a promise to pay someone elses
debt. There is one exception to this rule: If a party promises to pay off another partys debt in
order to receive a benefit, such as an organization trying to get a tax break, this qualifies as a
main purpose exception and the oral contract is enforceable under contract law.

Consider the following scenario under the Statute of Frauds:

Rachel is Catherines mother. In college, Catherine declared herself as independent and

emancipated from her parents, but still maintained close ties with them. Catherine is now in her
30s and carries a large amount of debt from her student loans that shes having difficulty paying.
Rachel volunteers to help her out.

Rachel realizes that if she helps Catherine pay, her other two daughters will ask for her
financial assistance as well. She decides to help Catherine find other ways of paying off her
debt.
o Their oral contract is unenforceable. Rachel does not have to pay off Catherines
debt because their contract was not in writing and the Statute of Frauds pertains to
these types of promises.

Rachel knows that if Catherines debts are paid off, she will finally move to Hollywood to
pursue her acting career. If she is successful, Rachel might get famous riding Catherines
coattails as her mother. She plans to use this new-found fame to publicize the novel she has
been writing. She considers Catherines debt a small price to pay for all of the benefits she
will receive by being a famous author, the mother of a famous daughter. One month,
however, she forgets to pay the debt and Catherine becomes angry with her mother.
Frustrated, Rachel decides not to pay at all.
o Their oral contract is enforceable. Rachel is legally and contractually bound to pay
Catherines debt. This is due to the main purpose exception to the Statute of Frauds.
A promise to pay someone elses debt for selfish reasons is legally binding, whether it
was an oral or written contract.

D. Debts of deceased

The fourth type of contract under the Statute of Frauds domain pertains to paying the
debts of the deceased. If an administrator of an estate is going to pay the debts of the deceased
personally, a written document is required.

Consider the following scenario under the Statute of Frauds:

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 Janet and Simon are brother and sister in their elderly years. Simon has tremendous debt,
so Janet frequently helps him out, just like she used to do when they were kids. Janet says to
Simon, I promise Ill help you pay off your debts. I dont want to see you stressing out because
of all these financial issues, so Ill just pay out of my pocket. The next month, Simon has a
heart attack in his sleep and dies, leaving Janet as the administrator of his estate. Now, credit
companies are coming after her for her own personal money to pay off Simons debt.

Their oral contract is unenforceable. Simon and Janet did not have a valid contract
under the Statute of Frauds, which requires that promises by an administrator of the estate
who will be personally paying for the deceaseds debts be made on paper. Therefore,
Janet cannot personally be held accountable for her brothers debts.

E. Dowry

Dowry is the fifth division of the Statute of Frauds. Any property that will change hands
as part of an agreement to get married is considered dowry and an oral contract is not
enforceable.

Consider the following scenario under the Statute of Frauds:

Mark is madly in love with Eileen and cannot wait for their wedding day. Eileens
parents are so excited to give away their only daughter to the man of her dreams that they forget
to make a written contract pertaining to her dowry--a house in the countryside and a goat. When
Eileen and Mark get divorced two years later, Mark wants his lawyer to fight for custody of the
countryside house and their goat, Jacob. Mark believes these things to be his property, given to
him as a dowry gift from Eileens parents when they got married.

Their oral contract is unenforceable. According to the Statute of Frauds, all property that
changes hands as part of a marriage agreement must be in writing.

F. Goods

The final element of the Statute of Frauds pertains to goods worth $500 or more.
Contracts for goods of $500 or more must be in writing, according to the Uniform Commercial
Code, under the Statute of Frauds. However, there are many exceptions to this rule. For
example, oral contracts for specially manufactured goods that cannot be resold are binding no
matter the total cost. Also, if a seller-written confirmation is exchanged between the parties,
which verifies the oral goods contract and is not objected to by either party within ten days, both
parties are bound to the contract, despite the monetary amount of the goods.

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 In addition, it is allowable for some oral contracts for goods to be partially fulfilled. If an
oral contract is for sixty units of a good which are priced $10 each, the total cost of the goods is
$600. Though this is unenforceable under the Statute of Frauds because the total is over $500, if
$200 of the transaction is exchanged, twenty goods of the sixty dictated in the contract, must also
be exchanged, or vice versa. This is because the contract is being partially performed. However,
if the contract was for one large good which cost $600 individually and there was a payment of
$200, it is not possible to only exchange part of the good. Therefore, the good must be
exchanged and the party making the payment must make the payment in full. This type of full
performance is enforceable in court, even if there is no written contract. See the examples below
for a better understanding of the application of full and partial performance.

Consider the following under the Statute of Frauds:

Susanne has sold lilacs from her garden to Ryan, the local florist, for over ten years and
they have a healthy relationship. So, when Ryan orders 400 lilacs from Susanne, she starts
feeding her lilac plants plenty of fertilizer, preparing for Ryans order.

Susanne decides to give Ryan a deal--the low price of $1 per lilac, an order total of $400.
Later that week, Ryan calls apologetically to tell Susanne that he does not need the lilacs
anymore and cancels his order. Susanne claims he is breaching the terms of their contract.
o Their oral contract is enforceable. Because the price of the goods is less than $500,
the Statute of Frauds does not cover this goods contract and an oral contract is enough
to make a binding contract.

Susanne charges Ryan $2 per lilac, an order total of $800. Later that week, Ryan calls to
cancel his order. Susanne claims he is breaching the terms of their contract.
o Their oral contract is unenforceable. The Statute of Frauds dictates that contracts
pertaining to goods which total more than $500 must be in writing. Ryan does not
have to pay for the lilacs.

Susanne charges Ryan $2 per lilac, an order total of $800, which he will pay when he
receives the order in full. Later that week, Susanne drops off $400 worth of lilacs. The next
week, right before Susanne is about to drop off the second batch of lilacs, Ryan calls to tell
her not to bring them over--he actually cannot afford to pay for any of the lilacs.
o Their oral contract is enforceable for up to $400. Because the order total is $800, the
Statute of Frauds requires a written contract for the goods. However, because only
$400 of the contract was actually exchanged, this falls under the partial performance
exception. Four hundred dollars is less than the minimum of $500, so that much of
the contract was legally binding and Ryan must pay for $400 worth of lilacs.
Ryan and Susanne decide that a more efficient exchange for both of them would be for
Susanne to just sell her lilac bush to Ryan for $800. He gives her $200 and tells her he
cannot afford to pay any more money.
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 o Their contract is enforceable for the full amount. Though this is an order over $500
and should have a written contract under the Statute of Frauds, partial payment on a
contract for one item, no matter the total, enforces the contract for the entire purchase.

Ryan requests that Susanne dip the lilacs in a pink dye for his special order. The order total is
$800. Susanne begins working on the order.
o Their oral contract is enforceable. An exception to the Statute of Frauds rule about
goods is that the contract is valid if it pertains to goods which cannot be resold
because they were manufactured specifically for the buyer. If the special item cannot
be readily resold and the seller has already begun work on the order, the good is
covered by this exception to the Statute of Frauds.

Ryan brings Susanne to court because hes not getting his order as he correctly ordered it. In
court, under oath, Susanne admits to their oral contract.
o Their oral contract is enforceable. Court admissions are an exception to any rules
about goods that fall under the Statute of Frauds. If the party in question admits in
court that there was an oral contract, then the contract is valid.

Susanne tells Ryan his order total will be $800. She goes home that night after the oral
contract is made and writes a confirmation note for her own records. She photocopies it and
sends it in the mail to Ryan. Ryan receives it and forgets about it, but then sends a letter
objecting to the order and the contract two weeks later.
o Their oral contract is enforceable. Because both parties involved are merchants,
under the Statute of Frauds, a written confirmation sent by one party makes an oral
contact valid, no matter the total cost. If Ryan had objected within ten days, the
contract would have been void.

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 Here is an easy way to remember the Statute of Frauds:

Five hundred marriages will die from real

estate debt in the next one year if they dont
sign a contract.

Five hundred- the goods rule about $500 or more

Marriages- Dowry

Die- Personal payment for the deceased

Real estate- Real estate contracts

Debt- Pay someone elses debts

One Year- Contracts that will take longer than a year

Sign a Contract- All of the above types of contracts must be

Though this is not an incredibly optimistic way to remember which types of contracts fall
under the Statute of Frauds, it would be a pretty pessimistic day if an oral contract was not
enforceable! Do not forget the very important exceptions to each of the rules, as well.

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 http://www.youtube.com/watch?
v=HPYz2IzIii0&feature=related

Technically, Charlie Brown would not even need a written contract to make his contract
with Lucy enforceable. Their agreement does not fall under the Statute of Frauds and, therefore,
an oral contract is acceptable.

G. Who must sign the contract under the Statute of Frauds?

Contracts do not necessarily have to be signed by both parties, though it is prudent for
that to happen. The Statute of Frauds only requires written contacts to have the signature of the
party to be charged, or the person who claimed that there was no deal. Without this signature,
it is likely that the contract will be considered unenforceable. Some real estate documents
(deeds, mortgages, and easements) require the signature of the party selling or giving up the real
estate rights.

II. Parol Evidence Rule

Though oral contracts are generally binding, these few exceptions dictated by the Statute
of Frauds can be hard to keep straight. For this reason, as a rule of thumb, written contracts are
generally more reliable and safe than oral ones. Written contracts are more likely than oral
contracts to stand up in court in the case of a disagreement between parties. However, even
written contracts can be problematic. Sometimes the contract itself is not enough to prove its
validity in court.

The Parol Evidence Rule states that parties cannot normally provide additional evidence
of an agreement that either supplements or contradicts the current written contract. This rule
protects the integrity of the written contract--its terms cannot easily be breached or weakened by
new agreements. New evidence complicates the court hearing and the contracts original terms.
There are four exceptions to the Parol Evidence Rule; four situations where new evidence can be
introduced to make a case on a contract.

The first exception is when a contract is short, or partially-integrated, and much shorter
than normal. Such a contract may contain only one or two lines because the terms of the contract
are fairly standard and well understood. However, additional information may need to be added

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to the contract for claritys sake and to make it more specific. This rule is not applicable if the
additional information directly contradicts the terms of the original contract. Consider the
following: Julie owes Emilie $100. The two orally agree that Julie will sell Emilie textbooks for
$300 and the $100 previously mentioned will be credited against the $300 price. They sign a
written agreement, but it does not mention the $100 of debt, redefined as a credit. Thus, the
written agreement is partially-integrated making the oral agreement from the $100 credit
admissible evidence to enhance the written agreement.

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 Even if a contract is not partially-integrated, it may still be vague or unclear. If additional
clauses are added to the contract to explain unclear provisions, these are also exceptions to the
Parol Evidence Rule. For example, James got distracted when he was typing up his real-estate
contract for his tenant. Under lawn-keeping, he simply wrote, Must look good. When his
tenant Michelle was confused as to the terms, James wrote on the contract that the lawn must be
mowed every other week, leaves must be raked every week in the fall, and the lawn must be
watered every other day during summers hottest months, July and August. This would be
acceptable under the Parol Evidence Rule because it does not change the terms of the contract,
but rather just explains it in further detail.

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 The third situation in which evidence is allowed in the court is when there is a clerical
error, mistake, or a case of fraud. For example, a lease for an apartment may ask for $40 per
month instead of $400 per month. The new evidence would correct the issue.

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 The fourth exception is when an agreement is made after the written contract. The
agreement will be valid evidence as long as it can be proven that the agreement was made after
the original written contract. This allows for situations where both parties are in favor of the new
terms of agreement over the old ones. They should not be forced to follow the original written
contract, but should instead be allowed to introduce evidence of their new agreement. For
example, Kelly bought a wide-screen television from Wal-Mart. The written contract made on
May 2nd stated that the parties agreed the television would be delivered to Kelly at Wal-Marts
expense on May 15th. On May 10th, Kelly contacted Wal-Mart stating she would rather pick up
the television from the store. Wal-Mart would be in favor of this as it would no longer incur
delivery charges. In order to be admissible, it must be proven that these new terms were made
and agreed upon after the original written contract date of May 2nd.

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 The first three types of evidence are typically found on the original document as clauses
handwritten in the margins or in the footnotes, and initialed or signed by both parties.

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 As can be seen in the Yocca v. Pittsburgh Steelers Sports, Inc. case below, once a contract

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