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Do We Really Have to Write It Down? Which Contracts Must Be in Writing?

Business Finances / Business Litigation / Business Productivity/Practices / Legal Agreements / Sticky Situations

Have you ever wondered which types of contracts must be in writing to make sure you get the benefit of your bargain? All of the U.S. states have some form of what is known as the “Statute of Frauds.” Under this law, or laws, some contracts must be in writing to be enforceable.

The Statute of Frauds originated in England in the 1600s. As its name suggests, the law was designed to prevent people from defrauding each other by claiming the benefit of nonexistent contracts. From this standpoint, the Statute of Frauds serves a very important public purpose.

The vast majority of contracts can be made orally, with no written component. There are certain types of contracts, however, which must be in writing to be enforceable. Common examples of contracts that must be written are land contracts, contracts for goods valued at $500 or more, and contracts to be responsible for the debt of another person.

Land Contracts

One of the most common examples of a contract that must be in writing is a contract relating to the sale of an interest in land. This includes contracts to sell or buy land or mineral rights in land, as well as mortgage contracts and options to purchase real estate. Most states, however,  have an exception for leases that are shorter than one year.

Goods in Excess of $500

The Uniform Commercial Code has been adopted by most states in some form, which provides that contracts or sales of goods in the amount of $500 or more must be in writing. There are only a few exceptions to this rule, which usually involve goods that have already been accepted by the buyer, goods for which a partial payment has been made, and contracts to manufacture specialty goods.

Contracts to Be Responsible for Someone Else’s Debt

When a person promises a creditor that he or she will be responsible for someone else’s debt, this is known as a suretyship. Suretyships are a third example of contracts that must be in writing to be enforceable. However, if the person makes the promise to the debtor rather than the creditor, the Statute of Frauds does not apply. Also, if the person takes primary responsibility to repay the debt, the Statute of Frauds does not apply.

What type of writing is required? The statute of frauds usually does not require the contract to be highly technical or formal. Instead, any writing will do if it includes the names of the parties, the contract’s subject matter, and the basic conditions of the agreement. Also, keep in mind, a person cannot be held responsible for a written contract if he or she did not sign it.

From vendor agreements to purchase agreements, from leases to independent contractor agreements, contracts are a part of everyday business life. It is important to make sure your contracts are valid, enforceable, and protecting you like they should.

Because the Statute of Frauds varies from state to state, you should obtain advice about your contracts from an experienced lawyer licensed in the state in which you do business. One of the services we provide is a comprehensive contract review, and this review can help you get paid more often, more easily and bring in more money for your business.

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