When dealing with contract issues, the first question your attorney will probably ask is: did you get it in writing? The attorney isn’t asking to make her job easier. The attorney is asking because of a concept known as the statute of frauds. Generally, oral and written contracts are equally enforceable, but there are exceptions to this rule. In North Carolina, there are certain contracts that have to be in writing in order to be enforceable. The most common types are: 1) selling goods that cost $500 or more; 2) leases that will last more than three years; and 3) transferring real property.
Let’s break down the statute of frauds. To satisfy the statute of frauds, the contract must be in writing and signed by the party against whom enforcement is sought.
First, the writing requirement. Do you have to have a document filled with legal terminology? Not at all. Your document needs to include who is involved, what they are doing, and any other important terms. These include things like the price involved or date everyone agrees to perform. (See our blog on Essential Elements of a Contract) For example, Mary and Sue agree that Mary will lease Sue’s apartment. The lease starts November 1, 2014 and ends November 2, 2017. The price is $700 per month. This contract needed to be in writing because it involved a lease lasting longer than 3 years. The terms are simple yet satisfy the writing requirement. We know the parties (Mary and Sue). We know what they are doing (leasing Sue’s apartment). Finally, we know the other key terms (the duration of the lease and cost). There’s no guess work involved.
There is one quick exception to the necessity of having these three writing requirements. If the contract is for the sale of goods at $500 or more, the only term that the writing has to contain is quantity.
Another interesting point is that several documents together could satisfy the statute of frauds writing requirement. What if Sue owned several apartments and the lease agreement forgot to mention exactly which apartment Mary was to lease? If there was another document that listed the correct apartment, the lease and that document could coupled together. This would satisfy the statute of frauds.
Second, the contract must be signed by the party against whom enforcement is sought. This is a fancy way of saying the breaching party has to have signed. Returning to the first example (where Sue only owned one apartment), let’s assume that Mary no longer wants to lease the apartment, but Sue still wants Mary to. Mary’s signature is the one necessary to satisfy the signature requirement because she is the party who we want to comply with the agreement. On the other hand, if Mary still wanted to lease but Sue refuses, Sue’s signature would be required.
Statute of Frauds
To summarize, when in doubt, get the basic terms of your agreement in writing and have everyone sign. The writing does not have to be complicated, but without it, you could find yourself with a very complicated legal issue.
For further information on the difference on whether your contract satisfies the statute of frauds, contact us at email@example.com or by calling 919-912-9640.