When engaging in business deals, it is important to have a written agreement that outlines the terms of the transaction. However, not all written agreements are created equal. Some contracts are more legally binding than others, and may even require certain formalities to be upheld in order to hold up in court.
One such requirement is known as the statute of frauds, which dictates which types of contracts must be in writing and signed by the parties involved. The purpose of this law is to prevent fraudulent claims from being made in court by those who may have agreed to a verbal contract, but have no way to prove its existence.
So, what contracts are covered by the statute of frauds? Here are some common examples:
1. Contracts involving the sale or transfer of real estate: Any agreement to sell or transfer ownership of real property must be in writing and signed by the parties involved.
2. Contracts for the sale of goods over a certain amount: The Uniform Commercial Code (UCC) states that any contract for the sale of goods over $500 must be in writing to be enforceable.
3. Contracts that cannot be performed within one year: If the terms of a contract cannot be completed within one year of its execution, it must be in writing to be legally binding.
4. Contracts for the sale of securities: Any agreement to buy or sell securities, such as stocks or bonds, must be in writing and signed by the parties involved.
5. Contracts that involve the assumption of another person’s debt: If one party agrees to take on the responsibility of another person’s debt, it must be in writing to be enforceable.
6. Contracts for the sale of intellectual property: Any agreement to sell or transfer ownership of intellectual property, such as patents or trademarks, must be in writing and signed by the parties involved.
It is important to note that the statute of frauds varies by state and jurisdiction, so it is always a good idea to consult with a legal professional to ensure that your contract meets all necessary requirements. Additionally, while a written contract is not always required for a legally binding agreement, having one in place can provide added protection and clarity for all parties involved.