Statute of Frauds
The primary purpose of the “Statute of Frauds” (SOF) is to protect the interests of parties once they are involved in litigating a contract dispute (Spagnola, 2008). The relevant statutes are reliant upon state jurisdictions to determine whether the contract falls under the SOF, and whether the writing of the contract satisfies the requirements of the statute of frauds (Spagnola, 2008). However, all contracts are not covered under the SOF. In essence, for a contract to be deemed as legal by definition of the SOF, there must be verification of the following requirements for formation of the contract, which are as follows: (1) There must be least two parties to the contract, (2) There must be a mutual agreement and acceptance on the price to pay for goods and services offered, (3) The subject matter or reason for entering the contract, must be clearly understood by all parties to the contract, (4) and there must be a stipulated time for performance of duties under the contractual obligations (Spagnola, 2008). Lastly, there are five categories of contracts that are covered under the SOF, which are as follows: (1) The transfer of real property interests, (2) Contracts that are not performable within one year, (3) Contracts in consideration of marriage, (4) Surtees and guarantees (answering to the debt of another), and (5) Uniform Commercial Code (U.C.C.) provisions regarding the sale of goods or services, legally valued over five hundred dollars ($500.00) (Spagnola, 2008).
Polly owns two commercial properties in down town Chicago valued at one (1) million dollars ($1,000,000.00), which she bought for the purpose of renting to entrepreneurs that are striving to open and operate profitable businesses. On May 1, 2010 Polly enters a contract to sell both properties to Joe for $1,000,000.00. As part of the conditions of the contract, Joe paid Polly $500,000.00 as consideration of intent to fulfill his contractual obligations to pay Polly the remaining $500,000.00 in monthly installments of $8,333.33 over a period of five years. On May 1, 2011 Joe decided he no longer wanted to operate his business from the premises purchased from Polly because he did not earn the profits he forecasted, and wrote a letter to Polly notifying her of his intention to forfeit the contract and cease payments as of June 1, 2011. The statute of fraud applies to this case where (1) the contract is memorialized in written form, (2) the contract is not performable with a year, and (3) the consideration of the contract is for the transfer of real property (Spagnola, 2008). Therefore, Joe materially breached the contract, and his best legal defense is loss of profits. Polly can offer relief to Joe by mitigating the payments for a period of six months, until Joe can improve profits, and resume the payments arrangement of the original contract. Joe and Polly must agree on the...