California’s Statute of Frauds is a section of California’s state civil code. It explains when and what a written contract must contain. With a few exceptions, this statute requires that most contracts be in writing for them to be valid. This is how to determine whether a verbal agreement is valid in California.
Sometimes, a breach of contract cannot enforced because there is no written agreement. There are exceptions to the rule. A verbal contract, or a written agreement that does not meet standard requirements, can be enforced.
Contracts must be in writing, according to the Statute of Frauds California Civil Code (1624).
The sale of goods and real estate are the two main areas where the California statute of Frauds has an impact on the average citizen. These are not the only types of contracts that must have been in writing for them to be valid.
- Debt collection contracts: A promise to pay for another person’s default or debt must be written to be legally binding in California.
- Probate contracts: A written contract must be signed in California if an agreement is to be made while the promisor remains alive.
- Credit contracts:Any credit contract exceeding $100,000 must be written and comply with federal guidelines. If they are not used for household, personal or family purposes, they must be in writing. This does not apply to a mortgage on a primary residence.
California Statute of Frauds-Sale of Goods (With Exemples)
A written agreement must be signed for any sale of goods exceeding $500. This exception is only in cases where the order is for custom goods already produced and similar situations where there is clear evidence of a completed contract in whole or part.
- Example 1: John agrees that he will buy 6 $100 items directly from James. James keeps the inventory in stock. John withdraws from the sale. James can’t enforce the sale since there isn’t a written contract. He will now need to find buyers for the product.
- Example 2: Assume that the items in Example 1 were custom-made. James has already made the custom items and they cannot be sold to anyone else. John backs out from the sale. James might still be able enforce the contract if there is reasonable evidence that John intended to buy the custom-made items. These contracts can be enforced to cover at least the cost of materials and the production of customized goods.
California Statute of Frauds Real Estate (with Example)
The majority of real estate transactions must be written. Leases of more than one year, deeds of real property and sales of interest in real property are the most commonly written real estate contracts. Other requirements are based on industry regulations. To legally enter into a written contract with a homebuyer’s agent, they must present written authority authorizing them to do so.
If the agent wishes to receive compensation or a commission, a written agreement must be in place. The California Supreme Court decided that the agent’s finder fee could be enforced even without a written agreement. This was because there was sufficient evidence that the work had been done to make the recommendation. This controversial decision can have huge implications in real estate contract law cases.
6 Types of Contracts That Fall under the Statute of Frauds
The Statute of Frauds applies to businesses. However, the majority of situations where a written agreement is not required are between individuals, solo-entrepreneurs and freelancers. These are the six most frequent types of contracts that you might come across under Statute of Frauds.
- Marriage contracts If a couple doesn’t want to share community property, they need to enter into a wedding contract. This can be done either before, during, or after the ceremony. To be valid, all marriage contracts must be written.
- Contracts that last more than one year: A contract cannot be signed if it is not completed within one year. This applies to leases, employment contracts, as well as nondisclosure agreements.
- Contracts to sell or lease land: All real estate must be sold under written contract. The Statute of Frauds California real estate rules are only the tip of the iceberg of laws governing real estate sales, contracts, and transfers.
- Name the executor in contracts: Your executor may not be the same lawyer who drafted your will or other final documents. The client must sign a written contract naming executors and their duties.
- Contracts to sell goods: Any order exceeding $500 must be sold under a written contract.
Summarized from an article by Stone & Sallus LLP.
