Describe the effect of a failure to comply with the statute of frauds.

Question

What will be an ideal response?

Answer 1

In most states, the statute of frauds makes oral contracts that come within its provisions unenforceable, not void or voidable. This means several things. If the parties to such an oral contract have both fully performed their obligations, neither is allowed to rescind the contract. Their mutual performance is ample evidence that a contract in fact existed. If one of the parties to an executory oral contract files suit to enforce the contract and the other party does not raise the statute of frauds defense, the court will enforce the agreement. If an oral contract is declared to be unenforceable under the statute of frauds, and one of the parties has rendered some performance under the contract that conferred benefits on the other party, he or she can recover the reasonable value of the performance in quasi contract. In some instances, part performance of a contract is sufficientto take the contract outside the scope of the statute or to satisfy the statute's requirement by providing the extra element of proof of a contract's existence beyond the mere oral testimony of a party. One of the troubling things about the statute is its potential for injustice. It can as easily be used to defeat a contract that was actually made as to defeat a fictitious agreement. In recent years, some courts have begun to try to prevent such injustices by using the equitable doctrine of promissory estoppel to allow some parties to recover under oral contracts that the statute of frauds would ordinarily render unenforceable. If the plaintiff has materially relied on the oral promise and will suffer serious losses if the promise is not enforced, courts in these states hold that the other party is estopped from raising the statute of frauds as a defense. The idea behind these decisions is that the statute, which is designed to prevent injustice, should not be allowed to work an injustice. These cases also impliedly recognize that the reliance required by promissory estoppel to some extent provides evidence of the existence of a contract between the parties, because it is unlikely that a person would materially rely on a nonexistent promise.