Contracts are everywhere. Yet, in spite of their ubiquity, misconceptions about their validity and enforceability abound. Some assume that if they don’t read a contract, they cannot be bound to it (they can). Others believe that if they sign a false name, they can escape the contract’s consequences just by showing that the name on the contract isn’t theirs (they cannot, and they may be opening themselves up to fraud charges besides). Others presume that only handwritten—not typed—signatures bind the signors (not true; typographic signatures are just as valid as holographic ones). One of the most prevalent misconceptions about contract law is the belief that if a contract is not in writing, it is not enforceable.
Although it is true that certain agreements must be in writing, most contracts are binding regardless of whether pen is put to paper. The rule requiring certain contracts to be in writing to be enforceable is called the statute of frauds.
The rule originated in 17th Century England. At the time, the rules forbade both parties to a contract and their spouses from testifying, including when the trial involved the enforcement of a contract. Thus, using witnesses to perpetrate fraud was common. Parliament enacted the statute of frauds in 1677 as a salutary means to minimize fraud in the courtroom for contract cases.
When enacted, the statute of frauds required six kinds of contracts to be in writing and signed: contracts by a will’s executor to pay a debt
of the estate with the executor’s assets; contracts in consideration of marriage (like a dowry); contracts to be performed more than a year
after formation; contracts for the sale of land; contracts where one party guarantees the debt of another; and contracts for the sale of goods with prices of at least ten pounds sterling.
After the enactment of the statute of frauds, if a party brought allegations that a contract of this kind had been breached, but there
was no signed writing to prove it, the case was dismissed for want of a valid contract.
The statute purportedly served three main functions: first, decrease fraud on the courts by requiring more reliable evidence; second, to
provide a cautionary warning to those entering into these types of agreements; and third, to provide guidance to negotiating parties as
to when their contract was actually formed.
When the United States declared its independence from England, it nonetheless adopted much of England’s laws, including the statute of
frauds. Currently in England, the only remnant of the original statute of frauds is the requirement involving a guarantee of the debt of
another; all other former requirements have been repealed.
In the United States, however, every state has adopted some version of the statute of frauds. Nevada’s statute of frauds is set forth in
various sections of the Nevada Revised Statutes. It renders the following types of contracts unenforceable unless in writing and signed by the party against whom a claim is brought:
—Agreements that, by their terms, are not to be performed within one
year from their formation;
—A promise to answer for the debt of another;
—A promise made upon consideration of marriage (like a prenuptial agreement);
—A promise or commitment made by a person engaged in the business of
lending money or extending credit to loan or extend credit of at least
—A promise to pay a fee for getting a loan for another person, if the
fee is at least $1,000;
—All marriage contracts and settlements (like a stipulated divorce decree);
—All contracts for the sale of any real estate;
—Every grant or assignment of any existing trust; and
—A contract for the sale of goods for the price of $500 or more.
Although seemingly simple, there are nuances to the laws and exceptions. For instance, if the parties involved in the transaction involving goods valued at more than $500 are merchants, different rules apply. And if these goods have been accepted and either paid for or received, a writing is no longer required.
As a practical matter, even though most oral contracts are still enforceable, their terms and the fact of their formation are much harder to prove. And because memories fade much quicker than writings, the statute of limitations in Nevada to enforce an oral contract is shorter (four years) than for the enforcement of written contracts (six years).
If in doubt, you should put your agreement in writing. And if you have questions about an agreement you have made or are contemplating
making, you should consult with an experienced contract attorney.
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Zachariah B. Parry is a civil litigation attorney and partner at his firm, Pickard Parry. He can be reached at 702-910-4300, through his
firm’s website at www. pickardparry.com, or his direct email, email@example.com.