The Statute Of Frauds

Introduction

A contract is a promise that the law will enforce. In situations where a promise is breached, the law provides remedies. A contract is created when a promise that is made by a party creates a duty. Contracts all contain common elements of Offer, Acceptance, and Consideration, and may have two more parties known as promisors, promises, or beneficiaries. For a contract to be enforceable it must be made by competent parties. For example, if a contract is entered into where one party is a minor, not mentally competent, or insane, even if the other person believes it to be an enforceable contract, it will likely be found to be invalid in court.

Contracts are principally governed by statutory and common law at the state level. The

Uniform Commercial Code, or UCC, which was first published in 1952 has been adopted in whole or in part in all fifty states. The UCC is a comprehensive code which addresses most aspects of commercial actions and sales. Contracts
Elements of a Contract
All contracts have three basic elements. These are offer, acceptance, and consideration.

Offer
A promise that is conditional upon an act, forbearance, or a return promise being given in exchange for the promise or its performance is an offer (Net Industries, 2014). An offer provides a demonstration of willingness to enter into a bargain. It must be made in a manner so that it is understood by another party that their assent to enter into the bargain will conclude it. Offers must include a definite proposal that is certain in terms, a statement of present intent to enter into a contract, and be communicated to the offeree. If any of these things are missing an offer has not been made.

Acceptance
Acceptance is the expression of assent to terms of an offer. The acceptance must be made by the offeree in the manner requested or that is authorized by the offeror. Whether or not an acceptance is valid is determined by whether the promise or the act by the offeree was the response that was bargained for by the offeror. Acceptance can be inferred from an offeree’s acts or conduct.
In the case of a unilateral contract, which requires an act rather than a promise, it is not necessary to provide notice of intended performance unless it is requested by the offeror. In the case of bilateral contracts the offer is effective upon receipt by the offeree.
Rejection of an offer or revocation of a conditional acceptance of an offer is effective immediately upon receipt by the offeror.
With regards to contracts that do not involve the sale of goods, an acceptance must comply exactly with the requirements of the offer that was made. No omissions are permitted from the promise or performance that is requested.
Consideration
A legal detriment that is suffered by a promise and that is requested by the promisor in exchange for his or her promise is consideration (All Answers Ltd, 2014). Valid contracts require an exchange of consideration. Generally speaking in bilateral contracts, one promise equates to valid consideration for the other. In unilateral contracts, the offeree’s agreed performance is typically consideration and also acts as acceptance of the offer.
Parties to a Contract
There are typically three types of parties that may be involved in a contract. These are promisors, promisees, and beneficiaries.

Promisor
A promisor is properly the party who undertook to do a thing in answer to the interrogation of the other party. (Blacks Law Dictionary, 2014).

Promisee
A promisee is one to whom a promise has been made (Blacks Law Dictionary, 2014). Generally a promise can maintain an action on a promise made to him, but when the consideration moves not from the promise, but some other person, the latter, and not the promise, has a cause of action, because he is the person for whose use the contract was made (Farlex, 2014)

Beneficiary
Offerors and offerees are the two principal parties to most contracts. Contract terms bind one or both parties to provide performance to the one party in consideration for having received the other party’s performance. Some contracts however allow that the benefits accrued by one party to be conferred on a third party. In these cases either a creditor beneficiary or a done beneficiary become a party to the contract.
Someone that receives the benefit of a contract as a result of promise being made to satisfy a legal duty is a creditor beneficiary. For example, if a creditor was owed $1,000.00 by a debtor, and the debtor loans $1000.00 to a third person, who then promises to use that money to pay the creditor for the debtors debt, the creditor would be a creditor beneficiary. In this situation the third party, who made the promisee would be the promisor, and the person to whom the promisee was made, the debtor, would be the promisee. The debtor and the third person have entered into a contract. Consideration in this contract would be the $1,000.00 loan that the third person received from the debtor, and the beneficiary would be the creditor.
If $1,000.00 is not paid to the creditor by the promisor, the creditor can sue the promisor, even though the creditor was not a party to the contract between the promisor and the promisee. The promisee may also sue the promisor for not paying the creditor the $1,000.00.
Someone that benefits from a promise that is made with the intent of making a gift to them is a donee beneficiary. For example, if a donor desires to give a gift of $1,000.00 to a donee as a birthday present, and plans to sell a car to a third party for $1,000.00, who in turn promises to give the $1,000.00 directly to the donee, the donee would be a donee beneficiary. In these situations the donee does not have a claim against the donor, who is the promisee, since the donor does not have a legal duty to the donee and is only giving the donee a gift. The donor does however have the ability to sue the third party for refusal to give him $1,000.00 as it was a condition of the terms of their contract.
Types of Contracts
Contracts are either express or implied. If implied, they may be implied in fact or implied in law. The below discusses each of these types of contracts.

Express Contracts
Where parties specify terms, whether in writing, or orally, at the time of the contracts formation, an express contract is created. An express contract will include a defined offer that is to be accepted by the offeree in a way that expressly demonstrates consent to the contracts terms.

Implied Contracts
Implied contracts consist of obligations that arise from an intended promise and a mutual agreement which has not been expressed in words. Implied contracts are binding just as express contracts are.

When a contract is suggested from circumstances and facts that indicate mutual intention to enter into a contract but are not specifically expressed, an implied in fact contract may exist. Implied in law contracts differ from implied in fact contracts in that they do not require the assent of the parties involved, and can exist without assent. Implied in law contracts only require an obligation required by law.

Bilateral Contracts
A bilateral contract is one where there is an exchange of promises between parties that involve either performance of an act or the forbearance from performance of an act, by each party.

Unilateral Contracts
When a contract only involves a promise made by one party, it is a unilateral contract. Performance constitutes acceptance of an offer in a unilateral contract, and acceptance can only be revoked up until the point that performance has been completed. With unilateral contracts only the offeror, or the person that made a promise is legally bound. An offeree may either act, or choose not to act as requested by the offeror, but cannot be sued for failure to perform since no promise has been made by the offeree.
Statute of Frauds
First enacted by the English Parliament in 1677, the Statute of Frauds has been the law in the United Kingdom and the United States in a variety of forms ever since.

The statute of frauds requires that certain types of contracts must be written. The statute of frauds intended purpose is to prevent a party from being able to prove an agreement that is in reality nonexistent through fraud. While different jurisdictions vary in how the statute of frauds is incorporated into law, its principal characteristic is that no suit or action may be taken on a contract unless there is a written document that identifies the parties and describes all terms and conditions of the contract, that is signed by the party that is to be charged.

Mutual Assent

For a contract to be formed, there must be an agreement between both parties. Both parties must have a meeting of the minds, or a common intention on the contract terms and agree to the same bargain. This agreement is known as mutual assent. Other than exceptions that pertain to the sale of goods which are discussed below in Article 2 of the Uniform Commercial Code, if there are any terms that are not settled or if no settlement method is provided, then there is no agreement.

If both parties intend on the agreement to be binding and concur on the terms, the agreement is binding, even if all of the details of the agreement are not definitely fixed.

The Mailbox

Rule
The mailbox rule is a term of contracts which is used to determine when a contract has been formed in cases where parties are communicating through the mail. This rule states that an offer is considered to have been accepted at the time that the acceptance is mailed. If a communication is sent that rejects and offer, and then a communication is later sent that accepts the contract, the first communication received by the offeror prevails. Performance is a means of acceptance under the mailbox rule as well. The mailbox rule has been expanded from its original form to cover all technology that is modernly used to conduct commercial communication, including telephone, fax, and email. Parties to a contract have the ability to alter the contract to not allow the mailbox rule and may determine between themselves at what time an offer is considered to have been accepted. The mailbox rule does not apply to option contracts.
Parol Evidence Rule
The rule that governs whether evidence other than the actual agreement is admissible when a dispute arises over a written contract is the Parol Evidence Rule. The rule states that where parties to a contract intended for their written agreement to be the full and final expression of their bargain, other written or oral agreements that were made prior to or simultaneous with the writing are inadmissible for the purpose of changing the terms of the original agreement (Legal Information Institute, 2014).
Breach of Contract
When there is a failure to perform all or some part of a contractual duty that is not justified, there is a breach of contract. A breach of contract can happen when a party that has a duty of immediate performance fails to perform and can also happen when one party hinders or prevents the other party’s performance. A total breach, also known as a material breach of contract happens when a material part of the contract is failed to be performed. A partial breach, also known as a minor breach of contract occurs when there is a slight deviation from the level of performance that has been bargained for. When a promisor makes an affirmative statement to a promisee that indicates that they will not or cannot perform their contractual duty without justification, a breach may occur by anticipatory repudiation.

The type of breach of contract that occurs is significant in that it impacts which types of remedies may be available to the party that is aggrieved.

Remedies
The basic remedies available for breach of contract are damages, reformation, rescission, restitution, and specific performance. Each of these remedies are discussed below.

Damages: Damages refer to a sum of money that is awarded when injury occurs as a result of breach of contract as compensation for the injured party. The type of breach that occurs directly impacts the extent of damages that may be awarded. There are a variety of types of damages that may be awarded. These include compensatory damages, liquidation damages, punitive damages, nominal damages, and punitive damages.

Compensatory damages are damages in a monetary amount that are intended to compensate the party that does not breach the contract for losses that occur as a result of the contract breach. There are two types of compensatory damages. These are expectation damages and consequential damages. Expectation damages are those that are intended to cover what the non-breaching party expected to receive from the contract. Consequential damages are the damages these are intended to reimburse the non-breaching party for damages indirectly occurred other than the contractual loss such as a loss of profits due to an undelivered item.

Damages that are specifically stated in a contract are called liquidation damages.

Liquidation damages are available when damages may be hard to foresee. They must be a fair estimate of what damages would be in the event of a breach. These damages are included in the contract and both parties must agree to them during negotiations.

Nominal damages are awarded by a judge when an injured party does not actually incur a monetary loss, but the judge wishes to show that the non-breaching party was in the right. Typically nominal damages are awarded in tort cases that involve a breach of contract and are rarely awarded in contract cases due to the fact that most contract breaches involve some level of loss to one of the parties involved.

Punitive damages are damages that punish a party that commits a breach with the intent of deterring that party from committing future contract breaches. Like nominal damages, they are not often awarded in contract cases and are much more common in tort cases.

Reformation: An equitable remedy that is applied when a written agreement doesn’t correspond with the contract that was formed as a result of either fraud or a mutual mistake in the drafting of the agreement is known as

reformation.
Rescission: When parties are restored to the position they were in had they never entered into the contract in the first place, the remedy of rescission has taken place. Rescission can be obtained by agreement if both parties agree to discharge the other from their obligations, or through substantial nonperformance or breach of a party to the contract.
Restitution: In contract law restitution is a remedy designed to restore an injured party to the position they were in before the contract was formed. Restitution is also found in criminal law where offenders are required to pay money or donate services as part of their sentence as well as in tort law, and in general describes an act of restoration.
Specific Performance: Specific performance is defined as an extraordinary equitable remedy that compels a party to execute a contract according to the precise terms agreed upon or to execute it substantially so that, under the circumstances, justice will be done between the parties (Farlex, 2014). A contract to sell land is an example of a contract that is specifically enforceable. Land is considered to be unique and not to be compensable by money. Property that is unique or is a one of a kind item, has sentimental value, or is an heirloom would be considered impossible to estimate damages on as well and would be specifically enforceable.
Uniform Commercial Code
The Uniform Commercial Code, also known as the UCC is a comprehensive code that addresses almost all aspects of commercial law. The Universal Commercial Code is generally accepted as one of the most important developments in United States contract law and was developed with the purpose of addressing two primary problems in contract law. These are differences in state laws that make it difficult for businesses to conduct business in different states, and unmanageable legal and contractual requirements of doing business in general. The UCC is a model code. It has no legal effect in any jurisdiction. UCC provisions however have been enacted by state legislatures as statutes and have been adopted either in part or in their entirety with some level of variation in all fifty states as well as Puerto Rico, the U.S. Virgin Islands, and in the District of Columbia.

The UCC affords contracting parties to design contracts according to their individual needs and requirements. The code however also requires that missing provisions are filled with UCC provisions in places where the contracting parties are either silent or fail to address those areas in the agreement. By its design, the code imposes streamlining and uniformity in transactions such as the processing of negotiable instruments such as checks and notes. Most UCC transactions involve secured property that is financed with a title to the property being held by the lender as security until the point in time the loan is paid in full.

The UCC provides different provisions for merchants and consumers. Merchants are generally held to a different standard than consumers due to merchants being more familiar with commerce than the typical consumer.

The Universal Commercial Code is divided into 11 Articles. In the most recent edition of the UCC, Article 1 consists of generalized provisions that are applicable to all of the remaining articles. Article 2 addresses sales and leases. Article 3 speaks to negotiable instruments, which were known previously as commercial paper in earlier editions of the UCC. Bank deposits, collections, and funds transfers are addressed in Article 4. Article 5 relates to letters of credit, and Article 6 addresses bulk sales, which were known as bulk transfers in earlier editions of the UCC. Article 7 addresses documents of title. Article 8 addresses investment securities, and Article 9 addresses secured transactions. Articles 10 and 11 contain provisions for repeals, transitional matter, and effective dates.