STATUTE OF FRAUDS


Dating back to 17th century England, the Statute of Frauds was enacted to fraud between parties wherein one had an obligation to the other. In short, it required certain obligations be in writing and signed by the person for whom enforcement of the contract will be sought. Now enacted by statute in all fifty states, the Statute of Frauds minimally applies to the sale of goods worth at least $500, marriage, repaying the debts of others, any agreement that takes more than a year to complete, real estate. For our purposes, we will be focusing on the latter two. See California Civil Code §1624(a).

By definition, the rental of facilities is to be in writing when the lease is for more than a year. This begs the question, what about a month-to-month rental.

Requirements:
Although there are some exceptions to the general rule, to be enforceable under the State of Frauds, there must be a written agreement that identifies the subject matter of the obligation, includes the material terms of meeting that obligation, and is signed by both parties. Note, for an agreement to be valid, it may not be necessary for the contract itself to be in writing as opposed to oral.

However, there must be some type of writing signed by the party that holds the obligation, (party to be charged). This is particularly true when the agreement has been completely performed by both parties. Such is the case when a seller transfers title to real property to a buyer or when a buyer pays all or part of the purchase price and performs some act explainable only by the contract’s existence. In both instances, the court would likely find that there was a valid contract between the parties.

Additionally, to meet the requirement of being in writing, a single document is not always necessary as several separate writings can be used to demonstrate a single agreement when there is some reasonable relationship between them. Be that as it may, the term “writing”, when used by the California Courts, has become rather broad to even include e-mails between the parties which summarize the terms previously agreed to orally.

See California Civil Code §1624(d).
“An electronic message of an ephemeral nature that is not designed to be retained or to create a permanent record, including, but not limited to, a text message or instant message format communication, is insufficient under this title to constitute a contract to convey real property, in the absence of a written confirmation that conforms to the requirements of subparagraph (B) of paragraph (3) of subdivision (b).”

Exceptions:
There are several exceptions in which the court will find a valid contract between the parties when there is no written agreement, many pertain to merchants who regularly deal in the sale and/or purchase of goods as opposed to real property. 

As it pertains to real property, there are only a few exceptions to the general rule which requires a written contract:

  • If the party against whom enforcement of an oral obligation is sought admits the existence of the agreement in court;
  • If one party partially or fully performs the obligations to an oral agreement, he may be able to enforce the oral agreement to the extent he has satisfied his duties under the contract. 
  • Promissory estoppel whereby it is clear that an offer was made with an expectation that one would rely one would reasonably rely on that offer, and that one’s reliance led to a significate loss. In short, the courts use this doctrine to avoid unfairness by allowing one to be unjustly enriched.

Short Term Rentals:
In California, when a lease/rental is for more than a year, it must be in writing to be enforceable. However, a rental agreement for a term of less than a year, such as a month-to-month rental may be created by an oral agreement and enforceable as it falls outside the Statute of Frauds. The same would be true for a one-day rental for a special occasion.

However, the length of the actual rental is not the determining factor. As stated above, the Statute of Fraud also applies to any agreement that takes more than a year to complete. As an example, the church rents out the multi-purpose room for a one-day reception. If that event takes place in a couple of months, the Statute of Fraud would not apply. However, if that same one-day rental is not scheduled for twelve months from now, the Statute of Frauds would apply simply because the agreement would not be completed for more than a year…

Note: Unwritten leases that are for a term of longer than one year or that expire more than one year after the agreement is reached are unenforceable. If a tenant enters into possession under an unenforceable lease, the tenant becomes a tenant at-will.

Conclusion:
There are several instances where the California Courts have either invalidated or enforced contracts that lacked essential terms depending on the circumstances and the evidence presented in court. Therefore, every attempt should be made to memorialize the agreement in the form of a written contract that sets forth as much as possible. When in doubt, contact an attorney for assistance.

Please see our other related articles

Don’t Sign a Letter of Intent
Church Officer and Director Liability
Real Property Fraud
Why Use Bushore Real Estate

Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional services. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.

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