Purpose and Origin
The Statute of Frauds is a law requiring certain agreements to be in writing. Its purpose is to prevent fraud and perjury by requiring certain evidence, typically written, for specific contracts to be enforceable in court. It aims to aid human memory and prevent injustices due to faulty recollection. The Statute originated in England in 1676 with the "Act for Prevention of Frauds and Perjuries".
Agreements Covered
Pursuant to Article 1403(2) of the Civil Code, the following agreements must be in writing to be enforceable under the Statute of Frauds:
- An agreement that by its terms is not to be performed within a year from the making thereof.
- A special promise to answer for the debt, default, or miscarriage of another.
- An agreement made in consideration of marriage, other than a mutual promise to marry.
- An agreement for the sale of goods, chattels, or things in action, at a price not less than five hundred pesos. An oral sale below P500 is valid and enforceable.
- An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein.
- A representation as to the credit of a third person.
A written "note or memorandum" signed by the party charged, or their agent, is required. This memorandum does not need a particular form but must contain the essential terms of the contract. It can consist of multiple connected documents.
Effect of Non-Compliance
Contracts that fall under the Statute of Frauds but do not comply with its requirements are unenforceable by court action. They are merely unenforceable, not void ab initio. Oral evidence to prove such contracts is generally inadmissible if the defense of the Statute of Frauds is properly raised.
Ratification and Exceptions
The defense provided by the Statute of Frauds is personal and can be waived. Waiver occurs in two ways:
- Failure to object to the presentation of oral evidence in court to prove the contract.
- Acceptance of benefits under the contract.
Complete or partial execution or performance of a contract takes it out of the Statute of Frauds. Oral testimony is admissible to prove partial performance. The doctrine of partial performance is based on equity to prevent fraud.
Applicability
The Statute of Frauds applies only to executory contracts, meaning those that have not been fully or partially performed. It does not apply to actions seeking damages for the violation of an agreement where specific performance is not sought. The defense of unenforceability under the Statute of Frauds cannot be assailed by third persons (strangers to the contract).