What contracts must be in writing under the Statute of Frauds?

Contracts on the Real Estate Exam

This is one of the most heavily tested contract law concepts on real estate exams. Understanding what must be in writing is fundamental because it directly affects whether a contract is enforceable. Agents and brokers regularly encounter disputes where someone claims an oral agreement was made. Knowing the Statute of Frauds allows you to advise clients correctly and protect your transactions.

Understanding Contracts: Key Concepts

What It Means

The Statute of Frauds is an ancient common law rule, now codified in every state's statutes, requiring that certain contracts must be evidenced by a written document signed by the party against whom enforcement is sought (called the 'party to be charged'). For real estate, the rule is simple: any contract for the sale of land or any interest in land must be in writing.

This rule applies to: - Contracts to buy or sell real property - Contracts to lease real property for more than one year (in many states) - Contracts granting easements, covenants, or other interests in land - Option contracts to purchase land - Right of first refusal agreements

Requirements

The key requirement is that the writing must be signed by the party being sued (the party to be charged). If a buyer sues a seller, the seller's signature is required. If a seller sues a buyer, the buyer's signature is required. A written memorandum is sufficient; it does not need to be a formal contract. The writing must contain the essential terms: the parties, a description of the property, the price, and any material conditions.

Additional Considerations

Importantly, oral evidence can support a written contract but cannot create one where none exists. If a seller makes an oral promise to sell land and nothing is put in writing, the buyer generally cannot enforce that promise.

Exceptions and Limitations

There is one important exception called 'part performance.' In many states, if a buyer has taken possession of the property and paid part of the purchase price (or made substantial improvements), a court of equity may enforce an otherwise unwritten contract because allowing the seller to keep the money and the property would be unjust. However, part performance is narrowly applied and varies significantly by state.

Why is this rule so important? It prevents fraud and perjury by requiring that major real estate transactions be documented. Without the Statute of Frauds, someone could claim an oral agreement existed and have no way to prove it. The requirement that transactions be in writing protects both parties.

Contracts Rules by State

Each state has its own rules when it comes to contracts. Here are a few examples of how requirements differ: