Start Here: 5 Things You MUST Know
6 types of contracts must be in writing under the Statute of Frauds — land, 1+ year, another's debt, marriage, executor, UCC $500+
Most P&C policies are NOT subject to the Statute of Frauds because they can be performed within one year
The Parol Evidence Rule bars outside oral/written evidence from contradicting a written contract
4 exceptions let parol evidence in: incomplete contract, ambiguity, fraud/mistake, failed condition precedent
The UCC is more flexible — only requires quantity term and allows trade usage and course of dealing as evidence
1. What Is the Statute of Frauds?
Statute of Frauds
A law designed to prevent fraud and perjury by requiring that certain types of contracts be put in writing and signed by the party responsible for performing the contract. Without a writing, these contracts are generally unenforceable.
Plain English: The law says, "Some deals are too important to rely on a handshake. Write it down or it won't hold up in court."
Six Types of Contracts That MUST Be in Writing
Sale of Land
Any interest in land — purchases, leases, easements, mortgages
Exception: Buyer took possession AND made substantial improvements
Cannot Perform Within 1 Year
By its terms, contract is impossible to complete in under 12 months
Key: If it is POSSIBLE within 1 year, writing NOT required
Another's Debt
Suretyship/guaranty — promising to pay someone else's debt
Exception: Primary purpose serves your OWN business interest
Marriage Consideration
Prenuptial agreements must be in writing
Executor's Own Funds
Executor/administrator promising to pay estate debts from personal funds
UCC: Personal Property $500+
Sale of goods for $500 or more under the UCC
Only REQUIRED term: quantity
Real-World Scenario: Oral Land Sale Enforced
The Setup: Tom orally agrees to sell his farm to Sarah for $200,000. No written contract is signed.
What Happens: Sarah moves onto the property, builds a barn, and plants crops — all in reliance on the deal.
The Result: Even without a written contract, most courts will enforce the oral agreement because Sarah took possession AND made substantial improvements in reliance on it. This is the major exception to the land sale writing requirement.
Real-World Scenario: The 1-Year Possibility Test
The Setup: An employer orally agrees to hire someone for a 14-month project.
What Happens: The employee wants to enforce the oral contract.
The Result: Because 14 months CANNOT be completed within one year, the contract needed to be in writing. BUT if the contract said "until the project is done" (indefinite), it could theoretically finish within a year, so a writing might NOT be required. The test is possibility, not probability.
What Form of Writing Is Required?
- A written note or memorandum is sufficient — no formal contract needed
- Must be signed by the party to be charged (the person against whom enforcement is sought)
- Under the UCC, only the quantity term is required in the writing
Insurance Contracts & the Statute of Frauds
Only 2 of the 6 Categories Apply to Insurance
Cannot perform within 1 year — Policies with terms exceeding one year
Another's debt — Such as surety bonds
Exam Trap: Insurance & the 1-Year Rule
Most P&C policies have terms of one year or less, so the Statute of Frauds generally does NOT apply. Life insurance policies can theoretically be performed within one year (the insured could die within a year), so many courts hold the one-year rule does NOT apply to life insurance either.
2. The Parol Evidence Rule
Parol Evidence Rule
A rule of evidence that limits the terms of a contract to those expressed in writing. Once you have written down your deal, you cannot introduce outside oral or written evidence to contradict or add to what is already in the written contract.
Plain English: "Parol" means "oral" or "spoken." The rule says: you wrote it down, so that is the deal. No take-backs with verbal side agreements.
Three Purposes of the Rule
Carry Out Intent
If they wrote it down, that is what they meant
Certainty & Finality
Achieve certainty about the parties' rights and duties
Exclude Fraud
Prevent someone from fabricating terms later
Four Exceptions: When Parol Evidence IS Allowed
Incomplete Contracts
To prove terms of contracts that are not complete on their face. If the written agreement clearly leaves gaps, outside evidence can fill them.
Ambiguity
To clarify ambiguous terms in a contract. If a term can mean two things, outside evidence helps the court determine the intended meaning.
Fraud, Accident, Illegality, or Mistake
To support allegations that the contract was tainted by fraud, accident, illegality, or mistake.
Condition Precedent
To prove that a condition precedent (something that had to happen first) failed to occur, meaning the contract never took effect.
Real-World Scenario: The House Sale and the Patio Furniture
The Setup: Barry buys Sam's house for $200,000. The written contract mentions only the property. Barry produces a letter from Sam saying the patio furniture goes with the house, and also claims Sam orally agreed to include a microwave.
What Happens: Barry tries to introduce the letter and the oral conversation as evidence.
The Result: Under the parol evidence rule, this evidence is generally excluded because the written contract governs. HOWEVER, if Barry can prove the contract was incomplete (it did not address personal property at all), ambiguous, or that there was fraud or mistake, the letter and conversation might be admitted.
Parol Evidence Under the UCC (More Flexible)
UCC Is More Lenient Than Common Law
- The contract writing need NOT set forth all material terms
- A letter showing the written contract was not the entire agreement IS allowable evidence
- Evidence of prior course of dealings between the parties is allowed
- Evidence of trade usage (common industry practices) is allowed
- The only REQUIRED term in the basic written agreement is the quantity
Example: Two lumber companies have been trading for 10 years. Their latest written contract just says "500 units of pine." The UCC allows evidence of their past dealings and industry customs to fill in delivery terms, grading standards, and payment timing — even though those details are not in the written contract.
Cheat Sheet
Print this page for quick referenceStatute of Frauds — 6 Types
- 1. Land sales (any interest in land)
- 2. Cannot perform within 1 year (possibility test)
- 3. Another's debt (suretyship/guaranty)
- 4. Marriage consideration (prenups)
- 5. Executor paying estate debts from own funds
- 6. UCC: Personal property $500+ (quantity required)
Parol Evidence — 4 Exceptions
- 1. Incomplete contracts
- 2. Ambiguity in terms
- 3. Fraud, accident, illegality, or mistake
- 4. Condition precedent failed to occur
Insurance + Statute of Frauds
- Only 2 categories apply: 1-year rule & another's debt
- Most P&C policies = 1 year or less = NOT subject
- A note/memorandum is sufficient (no formal contract)
Exam Trap Alerts
1. Possibility vs. Probability (1-Year Rule)
The test is whether performance within one year is possible, NOT whether it is probable. A contract "until the project is done" COULD be done in a year, so no writing is required — even if it will likely take 3 years.
2. Insurance Policies and the Statute of Frauds
Most P&C policies are for one year or less — the Statute of Frauds does NOT apply. Life insurance can theoretically be performed within one year (insured could die), so courts often say the 1-year rule does not apply to life insurance either.
3. Parol Evidence Rule vs. Exceptions
The rule bars outside evidence, BUT the exam loves to test the 4 exceptions. If the contract is incomplete, ambiguous, involves fraud/mistake, or a condition precedent failed, outside evidence CAN come in.
4. UCC Only Requires Quantity
Under the UCC, the ONLY term that must be in the written agreement is quantity. Price, delivery, and other terms can be supplied by trade usage or course of dealing. Do not confuse this with common law, which is stricter.
5. Primary Purpose Exception (Another's Debt)
If someone guarantees another's debt primarily to serve their own business interest, the promise may NOT need to be in writing. This is the "primary purpose" or "leading object" exception.
Quick Reference Summary
Statute of Frauds
Requires 6 types of contracts to be in writing to be enforceable.
Land Sale Exception
Oral OK if buyer took possession AND made substantial improvements.
1-Year Rule
Test is possibility, not probability. If it COULD be done in 1 year, no writing needed.
Parol Evidence Rule
Bars outside evidence from contradicting a written contract.
4 Exceptions
Incomplete, ambiguous, fraud/mistake, condition precedent.
UCC Flexibility
Only quantity required. Trade usage and course of dealing allowed.