Chapter 20: Statute of Frauds and Parol
Evidence Rule
Elizabeth Necka, Emilie Baugh, and Julie Sztukowski
Edited by Nikki Meltabarger
I.
Statute of Frauds
Oral contracts are typically binding, though it is sometimes difficult to prove their
existence if they are challenged in court. However, some types of agreements are only valid and
enforceable when they are in writing. These contracts are covered by the Statute of Frauds.
If a type of contract (often abbreviated K) is listed in the Statute of Frauds, it is only
enforceable if it is written.
A. Real Estate
6
Real estate contracts are the first
provision in the Statute of Frauds. Any
contract pertaining to an exchange of
land or real estate property must be in
1. Real estate Ks
writing. These include the following: 1.
2. Long term Ks
Mortgages, 2. Long term leases, which
3. Someone else’s debt
pertain to a period of one year or greater,
4. Debt of deceased
3. Easements, which pertain to the
5. Dowry
permanent right to use another party’s
6. $500+ in goods
property. The only exception to this
element of the Statute of Frauds is
substantial performance on the grounds
of the contract. Substantial performance
can be payment on the property, buyer
possession of the property, or buyer improvement on the property. Most states require two or
three of the conditions to be met before the courts will enforce an oral contract.
There are six main types of
contracts that are covered by
the Statute of Frauds.
Consider the following scenario under the Statute of Frauds:
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Mike and Jim have been best friends for as long as they can remember. Even though
their friendship became long distance after college--Mike lives in Washington and Jim lives in
Illinois--they have maintained contact. One day, Mike decides he wants to move to California to
soak up the sun and coincidentally Jim’s job forces him to relocate to Washington. Since they
are best friends, the two make an oral contract. Mike tells Jim, “You can have my place.”

Jim is buying the house from Mike.
o Their oral contract is unenforceable. Because this is a real estate contract, it is
covered by the Statute of Frauds.

Jim is renting the house from Mike, but Jim is only going to live there for six months.
o Their oral contract is enforceable. Although this is a real estate contract, the duration
of Jim’s lease makes this an exception to the Statute of Frauds. Real estate contracts
must only be in writing if they are long-term leases. Long-term leases pertain to a
period of time greater than one year.

Mike tells Jim that he can use a private road on his property indefinitely.
o Their oral contract is unenforceable. This is a real estate contract covered by the
Statute of Frauds. The contract is an easement, or an agreement between two parties
stating that one party gives another party the permanent right to use some of the first
party’s property.

Jim bought the house from Mike, moved in, painted some rooms, and made renovations.
When Mike gets too sun-burnt and wants to go back to Washington, he tries to kick Jim
out, claiming their contract is voidable.
o Their oral contract is enforceable. While real estate contracts must be in writing
according to the Statute of Frauds, courts will typically enforce an oral deal if there is
already substantial performance on the grounds of the contract.
B. Long-term contracts
The second provision of the Statute of Frauds pertains to long-term contracts which
cannot be completed within one year of their creation. This also pertains to contracts for a
service or employment which is ongoing for over a year or an unspecified amount of time that
could likely be over a year.
Consider this example under the Statute of Frauds:
Samantha and Eleanor work as secretaries in an office and they hate paperwork. On
June 1, 2009, they decide to make an oral contract.
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
Eleanor has a quick brain for numbers and agrees to balance Samantha’s checkbook and pay
her bills for her from now until December 31, 2010, when Samantha plans to have paid off
her credit-cards.
o Their oral contract is unenforceable. Under the Statute of Frauds, contracts that
cannot be performed within one year of the date of the contract must be in writing.
Because Eleanor will not complete this service until 18 months after the contract was
made, there must be a written contract.

Eleanor agrees to watch Samantha’s four-year-old son every Saturday, except for holidays,
until the end of summer, September 1, 2009. Samantha will be employing Eleanor as a
babysitter.
o Their oral contract is enforceable. Because this employment period will be
completed three months from when the contract is made, it does not fall into the
domain of the Statute of Frauds and does not need to be in writing.

Samantha and Eleanor decide to open their own Taco Bell franchise. Samantha’s husband,
Chris, who works for Taco Bell, tells them they can be part of the Taco Bell franchise for the
next five years. However, Chris did not clear this with his boss, gets in trouble, and tries to
convince the women not to open the store.
o Their oral contract is unenforceable. Franchise agreements are long-term business
contracts and, therefore, need to be in writing.

Samantha starts a business and because she knows Eleanor is a good worker, employs her as
her Office Supervisor. When she decides she cannot afford an Office Supervisor in
December of 2010, she tries to get rid of Eleanor by claiming their contract was voidable.
o Their oral contract is unenforceable. Because this contract pertained to employment
of over a year (if no ending date of employment is set, it is assumed that employment
will last over a year), the Statute of Frauds requires it to be in writing. However,
Eleanor must pay Samantha for the work she has already done.
An example of a long-term oral contract can be seen in the Doherty v. Doherty case below.
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Doherty v. Doherty
Insurance Agency, Inc.
878 F.2d 540 (1989)
United States Court of Appeals, First Circuit
Brothers Bill and Jim Doherty founded an insurance and real estate agency in the 1930s in Andover,
Massachusetts. Bill became seriously ill in 1955. He did not want Jim to have to run the business alone in
case something was to happen to him. Due to this, Bill and Jim asked their brother Joseph to join the
family business. Joseph was hesitant to join because he already had a job as a superintendent of schools
in Easthampton, Connecticut and feared he would lose his retirement benefits. On the business’ behalf,
Jim orally offered Joseph “retirement benefits for his remaining life” equal to his salary when he retired
at 65. Based upon this promise, Joseph quit his job as a superintendent and joined the family business
with his brothers. In 1970 Bill retired on a full salary. In 1978 Joseph retired, receiving $2,000 a month in
benefits. Finally, in 1980 Jim retired on a full salary. With the three brothers all retired, the business was
left to Jim’s and Joe’s children. In 1981 a disagreement occurred between the children. Joe’s children left
the business. As such, Jim’s children ceased the retirement benefits being paid to Joe. In turn, Joe sued.
Jim’s children argued that under the Statute of Frauds, the oral retirement contract was unenforceable
due to the fact that it took longer than one year to complete. The trial court held in favor of Joe, and
Jim’s children appealed.
In the opinion of Chief Judge Campbell, the oral contract in this instance was enforceable. He believes that a
contract for a term of years is distinguishable from one pertaining to a lifetime of a person. The provided
retirement benefits for Joe from Insurance Agency, Inc. in conjunction with the dispute of the children does
not signify that the contract could not have been completed within the first year. In this case, the jury found
that based upon the promise of Jim to pay include lifetime retirement benefits along with Joseph’s
compensation, Joseph would “work with [the brothers] for the balance of his working days.” Had Joseph
passed away with in the first year his promise to work the balance of his working days would have been
fulfilled; Insurance Agency, Inc. would have fulfilled its duty of providing compensation for Joseph’s remaining
life.
The oral agreement between Jim on behalf of Insurance Agency, Inc. and Joseph is considered to be beyond
the scope of the Statute of Frauds, and is thus enforceable under Massachusetts law. The appellate court held
that this oral agreement was enforceable.
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C. Someone else’s debt
The third type of contract which must be in writing is a promise to pay someone else’s
debt. There is one exception to this rule: If a party promises to pay off another party’s debt in
order to receive a benefit, such as an organization trying to get a tax break, this qualifies as a
main purpose exception and the oral contract is enforceable under contract law.
Consider the following scenario under the Statute of Frauds:
Rachel is Catherine’s mother. In college, Catherine declared herself as independent and
emancipated from her parents, but still maintained close ties with them. Catherine is now in her
30s and carries a large amount of debt from her student loans that she’s having difficulty paying.
Rachel volunteers to help her out.

Rachel realizes that if she helps Catherine pay, her other two daughters will ask for her
financial assistance as well. She decides to help Catherine find other ways of paying off her
debt.
o Their oral contract is unenforceable. Rachel does not have to pay off Catherine’s
debt because their contract was not in writing and the Statute of Frauds pertains to
these types of promises.

Rachel knows that if Catherine’s debts are paid off, she will finally move to Hollywood to
pursue her acting career. If she is successful, Rachel might get famous riding Catherine’s
coattails as her mother. She plans to use this new-found fame to publicize the novel she has
been writing. She considers Catherine’s debt a small price to pay for all of the benefits she
will receive by being a famous author, the mother of a famous daughter. One month,
however, she forgets to pay the debt and Catherine becomes angry with her mother.
Frustrated, Rachel decides not to pay at all.
o Their oral contract is enforceable. Rachel is legally and contractually bound to pay
Catherine’s debt. This is due to the main purpose exception to the Statute of Frauds.
A promise to pay someone else’s debt for selfish reasons is legally binding, whether it
was an oral or written contract.
D. Debts of deceased
The fourth type of contract under the Statute of Frauds’ domain pertains to paying the
debts of the deceased. If an administrator of an estate is going to pay the debts of the deceased
personally, a written document is required.
Consider the following scenario under the Statute of Frauds:
Janet and Simon are brother and sister in their elderly years. Simon has tremendous debt,
so Janet frequently helps him out, just like she used to do when they were kids. Janet says to
Simon, “I promise I’ll help you pay off your debts. I don’t want to see you stressing out because
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of all these financial issues, so I’ll just pay out of my pocket.” The next month, Simon has a
heart attack in his sleep and dies, leaving Janet as the administrator of his estate. Now, credit
companies are coming after her for her own personal money to pay off Simon’s debt.

Their oral contract is unenforceable. Simon and Janet did not have a valid contract
under the Statute of Frauds, which requires that promises by an administrator of the estate
who will be personally paying for the deceased’s debts be made on paper. Therefore,
Janet cannot personally be held accountable for her brother’s debts.
E. Dowry
Dowry is the fifth division of the Statute of Frauds. Any property that will change hands
as part of an agreement to get married is considered dowry and an oral contract is not
enforceable.
Consider the following scenario under the Statute of Frauds:
Mark is madly in love with Eileen and cannot wait for their wedding day. Eileen’s
parents are so excited to give away their only daughter to the man of her dreams that they forget
to make a written contract pertaining to her dowry--a house in the countryside and a goat. When
Eileen and Mark get divorced two years later, Mark wants his lawyer to fight for custody of the
countryside house and their goat, Jacob. Mark believes these things to be his property, given to
him as a dowry gift from Eileen’s parents when they got married.

Their oral contract is unenforceable. According to the Statute of Frauds, all property that
changes hands as part of a marriage agreement must be in writing.
F. Goods
The final element of the Statute of Frauds pertains to goods worth $500 or more.
Contracts for goods of $500 or more must be in writing, according to the Uniform Commercial
Code, under the Statute of Frauds. However, there are many exceptions to this rule. For
example, oral contracts for specially manufactured goods that cannot be resold are binding no
matter the total cost. Also, if a seller-written confirmation is exchanged between the parties,
which verifies the oral goods contract and is not objected to by either party within ten days, both
parties are bound to the contract, despite the monetary amount of the goods.
In addition, it is allowable for some oral contracts for goods to be partially fulfilled. If an
oral contract is for sixty units of a good which are priced $10 each, the total cost of the goods is
$600. Though this is unenforceable under the Statute of Frauds because the total is over $500, if
$200 of the transaction is exchanged, twenty goods of the sixty dictated in the contract, must also
be exchanged, or vice versa. This is because the contract is being partially performed.
However, if the contract was for one large good which cost $600 individually and there was a
payment of $200, it is not possible to only exchange part of the good. Therefore, the good must
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be exchanged and the party making the payment must make the payment in full. This type of full
performance is enforceable in court, even if there is no written contract. See the examples below
for a better understanding of the application of full and partial performance.
Consider the following under the Statute of Frauds:
Susanne has sold lilacs from her garden to Ryan, the local florist, for over ten years and
they have a healthy relationship. So, when Ryan orders 400 lilacs from Susanne, she starts
feeding her lilac plants plenty of fertilizer, preparing for Ryan’s order.

Susanne decides to give Ryan a deal--the low price of $1 per lilac, an order total of $400.
Later that week, Ryan calls apologetically to tell Susanne that he does not need the lilacs
anymore and cancels his order. Susanne claims he is breaching the terms of their contract.
o Their oral contract is enforceable. Because the price of the goods is less than $500,
the Statute of Frauds does not cover this goods contract and an oral contract is enough
to make a binding contract.

Susanne charges Ryan $2 per lilac, an order total of $800. Later that week, Ryan calls to
cancel his order. Susanne claims he is breaching the terms of their contract.
o Their oral contract is unenforceable. The Statute of Frauds dictates that contracts
pertaining to goods which total more than $500 must be in writing. Ryan does not
have to pay for the lilacs.

Susanne charges Ryan $2 per lilac, an order total of $800, which he will pay when he
receives the order in full. Later that week, Susanne drops off $400 worth of lilacs. The next
week, right before Susanne is about to drop off the second batch of lilacs, Ryan calls to tell
her not to bring them over--he actually cannot afford to pay for any of the lilacs.
o Their oral contract is enforceable for up to $400. Because the order total is $800, the
Statute of Frauds requires a written contract for the goods. However, because only
$400 of the contract was actually exchanged, this falls under the partial performance
exception. Four hundred dollars is less than the minimum of $500, so that much of
the contract was legally binding and Ryan must pay for $400 worth of lilacs.
Ryan and Susanne decide that a more efficient exchange for both of them would be for
Susanne to just sell her lilac bush to Ryan for $800. He gives her $200 and tells her he
cannot afford to pay any more money.
o Their contract is enforceable for the full amount. Though this is an order over $500
and should have a written contract under the Statute of Frauds, partial payment on a
contract for one item, no matter the total, enforces the contract for the entire purchase.


Ryan requests that Susanne dip the lilacs in a pink dye for his special order. The order total
is $800. Susanne begins working on the order.
o Their oral contract is enforceable. An exception to the Statute of Frauds rule about
goods is that the contract is valid if it pertains to goods which cannot be resold
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because they were manufactured specifically for the buyer. If the special item cannot
be readily resold and the seller has already begun work on the order, the good is
covered by this exception to the Statute of Frauds.

Ryan brings Susanne to court because he’s not getting his order as he correctly ordered it. In
court, under oath, Susanne admits to their oral contract.
o Their oral contract is enforceable. Court admissions are an exception to any rules
about goods that fall under the Statute of Frauds. If the party in question admits in
court that there was an oral contract, then the contract is valid.

Susanne tells Ryan his order total will be $800. She goes home that night after the oral
contract is made and writes a confirmation note for her own records. She photocopies it and
sends it in the mail to Ryan. Ryan receives it and forgets about it, but then sends a letter
objecting to the order and the contract two weeks later.
o Their oral contract is enforceable. Because both parties involved are merchants,
under the Statute of Frauds, a written confirmation sent by one party makes an oral
contact valid, no matter the total cost. If Ryan had objected within ten days, the
contract would have been void.
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Here is an easy way to remember the Statute of Frauds:
Five hundred marriages will
die from real estate debt in
the next one year if they
don’t sign a contract.
Five hundred- the goods rule about $500 or more
Marriages- Dowry
Die- Personal payment for the deceased
Real estate- Real estate contracts
Debt- Pay someone else’s debts
One Year- Contracts that will take longer than a
year
Sign a Contract- All of the above types of contracts
must be written! These types of oral
contracts are unenforceable.
Though this is not an incredibly optimistic way to remember which types of contracts fall
under the Statute of Frauds, it would be a pretty pessimistic day if an oral contract was not
enforceable! Do not forget the very important exceptions to each of the rules, as well.
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http://www.youtube.com/watch?v=HPYz
2IzIii0&feature=related
Technically, Charlie Brown would not even need a written contract to make his contract
with Lucy enforceable. Their agreement does not fall under the Statute of Frauds and, therefore,
an oral contract is acceptable.
G. Who must sign the contract under the Statute of Frauds?
Contracts do not necessarily have to be signed by both parties, though it is prudent for
that to happen. The Statute of Frauds only requires written contacts to have the signature of the
party to be charged, or the person who claimed that there was no deal. Without this signature,
it is likely that the contract will be considered unenforceable. Some real estate documents
(deeds, mortgages, and easements) require the signature of the party selling or giving up the real
estate rights.
II.
Parol Evidence Rule
Though oral contracts are generally binding, these few exceptions dictated by the Statute
of Frauds can be hard to keep straight. For this reason, as a rule of thumb, written contracts are
generally more reliable and safe than oral ones. Written contracts are more likely than oral
contracts to stand up in court in the case of a disagreement between parties. However, even
written contracts can be problematic. Sometimes the contract itself is not enough to prove its
validity in court.
The Parol Evidence Rule states that parties cannot normally provide additional evidence
of an agreement that either supplements or contradicts the current written contract. This rule
protects the integrity of the written contract--its terms cannot easily be breached or weakened by
new agreements. New evidence complicates the court hearing and the contract’s original terms.
There are four exceptions to the Parol Evidence Rule; four situations where new evidence can be
introduced to make a case on a contract.
The first exception is when a contract is short, or partially-integrated, and much shorter
than normal. Such a contract may contain only one or two lines because the terms of the contract
are fairly standard and well understood. However, additional information may need to be added
to the contract for clarity’s sake and to make it more specific. This rule is not applicable if the
additional information directly contradicts the terms of the original contract. Consider the
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following: Julie owes Emilie $100. The two orally agree that Julie will sell Emilie textbooks for
$300 and the $100 previously mentioned will be credited against the $300 price. They sign a
written agreement, but it does not mention the $100 of debt, redefined as a credit. Thus, the
written agreement is partially-integrated making the oral agreement from the $100 credit
admissible evidence to enhance the written agreement.
Even if a contract is not partially-integrated, it may still be vague or unclear. If additional
clauses are added to the contract to explain unclear provisions, these are also exceptions to the
Parol Evidence Rule. For example, James got distracted when he was typing up his real-estate
contract for his tenant. Under lawn-keeping, he simply wrote, “Must look good.” When his
tenant Michelle was confused as to the terms, James wrote on the contract that the lawn must be
mowed every other week, leaves must be raked every week in the fall, and the lawn must be
watered every other day during summer’s hottest months, July and August. This would be
acceptable under the Parol Evidence Rule because it does not change the terms of the contract,
but rather just explains it in further detail.
The third situation in which evidence is allowed in the court is when there is a clerical
error, mistake, or a case of fraud. For example, a lease for an apartment may ask for $40 per
month instead of $400 per month. The new evidence would correct the issue.
The fourth exception is when an agreement is made after the written contract. The
agreement will be valid evidence as long as it can be proven that the agreement was made after
the original written contract. This allows for situations where both parties are in favor of the new
terms of agreement over the old ones. They should not be forced to follow the original written
contract, but should instead be allowed to introduce evidence of their new agreement. For
example, Kelly bought a wide-screen television from Wal-Mart. The written contract made on
May 2nd stated that the parties agreed the television would be delivered to Kelly at Wal-Mart’s
expense on May 15th. On May 10th, Kelly contacted Wal-Mart stating she would rather pick up
the television from the store. Wal-Mart would be in favor of this as it would no longer incur
delivery charges. In order to be admissible, it must be proven that these new terms were made
and agreed upon after the original written contract date of May 2nd.
The first three types of evidence are typically found on the original document as clauses
handwritten in the margins or in the footnotes, and initialed or signed by both parties.
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As can be seen in the Yocca v. Pittsburgh Steelers Sports, Inc. case below, once a
contract is written, the terms included are the enforceable terms. Any previous agreements do
not matter; the written contract is the final contract with which the parties must comply.
Yocca v. Pittsburgh Steelers
Sports, Inc.
2004
578 Pa. 479, 854 A.2d 425.
Supreme Court of Pennsylvania,
In October 1998, Pittsburgh Steelers Sports, Inc. and others (the Steelers) advertised a new stadium that
was to be built. The Steelers sent out brochures to Ronald Yocca and others to give them the chance to
buy stadium builder licenses (SBLs). SBLs give the holders the right to purchase season tickets each year.
The price varies by the seats’ location. In these initial brochures, the Steelers included a diagram in
which Yocca selected his preferred seat location in his application. The Steelers then sent Yocca a
confirmation letter with his seat location and a more detailed diagram. This diagram differed from the
initial one. Also included in this confirmation package were documents defining the terms of the SBL
and contained the phrase “This Agreement contains the entire agreement of the parties”. Yocca signed
the terms and sent them back to the Steelers. When Yocca showed up to the stadium at game time, his
seats were not where he expected. Yocca and other SBLs filed suit against the Steelers claiming a
breach of contract. When the court of Pennsylvania ordered a dismissal of the complaint, the plaintiffs
appealed to the state intermediate appellate court, which reversed the order. The defendants then
appealed to the state supreme court.
Justice Nigro
When the parties put their agreements in writing, the law states that this is the best and only
evidence of their agreement. All previous negotiations are merged in and superseded by the following
written agreement. Its terms and agreements cannot be changed due to parol evidence. Therefore, for
the parol evidence rule to apply there must be a writing that represents the entire contract between the
parties. To determine if the parties’ contract is complete, there must not be any uncertainty as to the
object or extent of the parties’ engagement. An integration clause, which is a provision that says that all
the terms are in the written agreement, signifies that the agreement is just what was written, and only
what was in the agreement. Once it is determined that the entire contract is in the written agreement,
the parol evidence rule now applies. Any previous oral or written agreements involving the same
subject are now inadmissible.
The Pennsylvania Supreme Court reversed the decision. The state Supreme Court held that the
SBL documents which were signed formed the entire contract. Under the parol evidence rule, the
contract is not supplemented by previous negotiations or agreements. Even though the plaintiffs based
their claim that the brochure stated such initial terms, the court held that the brochure was not part of
the contract. The complaint was properly dismissed.
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Vocabulary
Easement: A real estate contract in which one party gives another party the permanent right to use
their property. Must be in writing under the Statute of Frauds.
Long term leases: Real estate contracts pertaining to a period of one year or more. Required to be in
writing by the Statute of Frauds.
Main purpose exception: Oral contracts promising to pay off someone else’s debt are enforceable if
the promise was made for a selfish reason, such as an individual or company aiming to
benefit from paying the debt. This is an exception to the Statute of Frauds.
Partially-integrated contract: Short and brief contract which contains only a few lines because the
terms of the contract are fairly standard and well understood.
Parol Evidence Rule: Rule that states that neither party can introduce additional evidence of an
agreement that either supplements or contradicts the current written contract. There are
four main exceptions.
Party to be charged: The party who claims a written contract is voidable and brings it to court.
Without this person’s signature, the written contract is likely to be unenforceable.
Statute of Frauds: The requirement that certain types of contracts must be in writing to be
enforceable. While oral contracts are normally valid, the Statute of Frauds outlines which
contracts must be in writing. It applies to six different types of contracts.
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