More About Formalism: The Statute of Frauds Introduction

The Statute of Frauds was enacted by Parliament in 1677, seventy-five years after the Court of Exchequer Chamber rendered its opinion in the celebrated lawsuit known as Slade's Case.^[1] With its declaration that "every contract executory imports in itself an assumpsit," Slade's Case marked a final stage in "the evolution of the action of assumpsit for breach of promise, and its victory over the action of debt sur contract."^[2] After Slade's Case, a disappointed promisee suing to enforce an informal agreement could always bring his action in assumpsit rather than in debt. This was of tremendous advantage to plaintiffs: in assumpsit, disputed issues of fact were resolved by jury trial, whereas in debt the ancient (and from a plaintiff's point of view irrational) method of compurgation continued to be employed.^[3] But if the availability of jury trial was a boon to plaintiffs, defendants tended to view it less favorably. In the seventeenth century, the jury was still in a state of transition — it was no longer a body of neighbors familiar with the parties and the facts of the dispute, and not yet a panel of disinterested strangers composing a tabula rasa on which the law of evidence would permit only certain facts to be inscribed.^[4] The lack of a developed law of evidence, the absence of satisfactory methods for controlling jury verdicts, and the rule barring testimony by the parties to a lawsuit (or others interested in the case) put defendants at a disadvantage and exposed them to considerable risks.

If the medieval common law, with its restrictive attitude to parole agreements, and its use of compurgation, had been excessively biased in favor of defendants, it was at least arguable that seventeenth century law had come to be excessively biased in favor of plaintiffs. And in evaluating the law of the time, it must be borne in mind that contemporaries were, by modern standards, extremely litigious, so that opportunities to bring groundless suits were likely to be taken.^[5]

The Statute of Frauds sought to reduce such opportunity by requiring written evidence for a variety of important transactions, including six different classes of contracts (enumerated in sections four and sixteen of the original statute).^[6] Without written evidence, the Statute declared, no action could be brought to enforce a contract falling within any of these six categories.

The Statute has been a source of litigation from the day of its enactment. Most of the interpretive issues raised by the Statute fall into one of two broad groups. The first concerns the Statute's scope or coverage: which contracts are within the Statute and therefore unenforceable unless in writing, and which may be enforced despite their informality? For example, if Smith agrees to work for Jones for a period of two years, their contract is clearly within the Statute. Does it follow that an oral agreement rescinding a written contract of employment for the same period of time is also unenforceable? And when the debt for which a surety or guarantor agrees to "answer" has been contracted for the surety's own benefit, is it still the debt "of another person" within the meaning of the so-called suretyship provision of the Statute of Frauds? These and a number of other questions regarding the Statute's coverage are the subject matter of the cases collected in the second section of this chapter.

The second major focus of concern in the case law that has grown around the Statute relates to the problem of compliance. The Statute speaks of a "memorandum or note" signed by "the party to be charged." Can a series of writings be pieced together to satisfy this requirement? May parol evidence be introduced for the purpose of reforming a writing in order to satisfy the Statute of Frauds? The third section of the chapter deals with these and similar problems.

The original English Statute of Frauds has been copied, in whole or in part, in nearly all American jurisdictions; in those few states where it has not been enacted by statute it has been incorporated into the common law by judicial decision (with the single exception of Louisiana).^[7] Though varying in their precise language, these American copies for the most part carry forward the provisions of the original, often supplementing it by adding other classes of agreements to the six specified in the English statute. In addition, many states have adopted a hodgepodge of more particularized writing requirements, covering, for example, a promise to pay a debt discharged in bankruptcy or incurred while the promisor was a child.^[8] And in every state except Louisiana, the Uniform Commercial Code imposes several additional writing requirements of its own, including one based on the sale of goods provision in the original Statute of Frauds.^[9]

In 1954, Parliament repealed the Statute of Frauds except for those provisions dealing with suretyship agreements and contracts for the sale of land.^[10] Although scholars and judges in this country have also expressed dissatisfaction with the Statute, the result has been a movement for reform rather than repeal, as the elaborate treatment of the Statute in the Second Restatement of Contracts demonstrates. It would be fair to say, however, that both here and in England the Statute has often met with a chilly reception in the courts and has been narrowly construed. Modem critics have frequently declared the Statute to be an anachronism whose usefulness as a method for preventing the deception of juries has been negated by changes in the law of evidence, and whose provisions today more often tend to be a cause of fraud than a guard against it. Corbin's attitude in this respect is typical:

. . . The purpose of the statute of frauds is to prevent the enforcement of alleged promises that never were made; it is not, and never has been, to justify contractors in repudiating promises that were in fact made. The writer's study of the cases, above referred to, has fully convinced him as follows: 1. that belief in the certainty and uniformity in the application of any presently existing statute of frauds is a magnificent iilusion; 2. that our existing judicial system is so much superior to that of 1677 that fraudulent and perjured assertions of a contract are far less likely to be successful; 3. that from the very first, the requirement of a signed writing has been at odds with the established habits of men, a habit of reliance upon the spoken word in increasing millions of cases; 4. that when the courts enforce detailed formal requirements they foster dishonest repudiation without preventing fraud; 5. that in innumerable cases the courts have invented devices by which to "take a case out of the statute"; 6. that the decisions do not justify some of the rules laid down in the Restatement of Contracts to which the present writer assented some 20 years ago.^[11]

Why, then, after more than three centuries, is the Statute still with us? Some have attempted to explain the Statute's longevity on the grounds that it performs a cautionary and channelling function, as well as an evidentiary one. Like other formalities, it is argued, the Statute of Frauds continues to have value as a stimulus to reflection and a convenient method for the easy resolution of disputes arising out of certain especially important transactions.^[12] In addition, as Llewellyn suggests, the endurance of the Statute may in part be attributable to the growth of literacy and the bureaucratization of commercial enterprise.

That statute is an amazing product. In it de Leon might have found his secret of perpetual youth. After two centuries and a half the statute stands, in essence better adapted to our needs than when it first was passed. By 1676 literacy (which need imply no great consistency in spelling) may well have been expected in England of such classes as would be concerned in the transactions our period here in which that would hardly hold — we counted our men of affairs, in plenty, who signed by mark. But schooling has done its work. The idea, which must in good part derive from the statute, that contracts at large will do well to be in writing, is fairly well abroad in the land. "His word is as good as his bond" contains a biting innuendo preaching caution. Meantime the modern developments of business — large units, requiring internal written records if files are to be kept straight, and officers informed, and departments coordinated, and the work of shifting personnel kept track of; the practice of confirming oral deals in writing, the use of typewriters, of forms — all these confirm the policy of the statute; all these reduce the price in disappointments exacted for its benefits.^[13]

Along with the doctrine of consideration and the rules of offer and acceptance, the Statute of Frauds has been challenged in recent years by those who place protection of the reliance interest above a strict adherence to form. The doctrine of promissory estoppel is the banner under which the proponents of this anti-formalistic view have gathered and here, as in other areas of contract law, promissory estoppel continues to make headway. Whether this development points to the eventual demise of the Statute is impossible to say. In any legal world we can imagine however, it is likely that the Statute will continue to play a useful disciplining role.

[1] 4 Co. Rep. 91a, Velverton 21, Moore K.B. 433, 667 (1602).

[2] Simpson at 599.

[3] Milsom at 353-354.

[4] See T. F. T. Plucknett, A Precise History of the Common Law (5th ed. 1956) 127-138.

[5] Simpson at 599.

[6] In addition to these six classes of contracts, the Statute also required certain conveyances to be in writing; the conveyancing provision of the Statute may well have been regarded by contemporaries as its most important one.

[7] 1 Uniform Laws Annotated III, 146-149, U.C.C. §2-201; 8 L.S.A. Civil Code Art. 2277-2278 (1952).

[8] See, e.g., 43 Mass. Gen. Laws Ann. c. 259, §3; 10 N.C. Gen. Stat. §22-4; 3 Va. Code §11-2.01 (promise to pay a debt discharged in bankruptcy); 5 Miss. Code Ann. §15-3-1; 3 Va. Code §11-8 (promise to pay a debt incurred while an infant).

[9] U.C.C. §2-201; see also §§8-319 (investment securities), 9-203 (security agreement between debtor and secured party), and 1-206 ("Statute of Frauds for kinds of property not otherwise covered").

[10] Law Reform (Enforcement of Contracts) Act, 2 & 3 Eliz. 2, ch. 34.

[11] The Uniform Commercial Code — Sales; Should It Be Enacted?, 59 Yale L.J. 821, 829 (1950); Stephen & Pollock, Section Seventeen of the Statute of Frauds, 1 L.Q. Rev. 1, 5-7 (1885); ". . . I can only recommend that it should be thrown out of the window that — the 17th Section should be repealed, and the cases upon it be consigned to oblivion."

[12] For the various functions of legal formalities, see Fuller, Consideration and Form, 41 Colum. L. Rev. 799, 800-803 (1941).

[13] Llewellyn, What Price Contract? — An Essay in Perspective, 40 Yale L.J. 704, 707 (1931). See also note 12 in the Introduction.