California Partition Law Blog
In most breach of contract actions, the court must find that a valid contract has been created. There are several requirements that need to be fulfilled in order to have an enforceable contract. In certain circumstances, evidence of the existence of a contract in writing is required for the contract to be valid.
In general, contracts are not required to be in writing; oral contracts are enforceable. However, under the Code of Civil Procedure section 1624, certain contracts are required to be in writing. Code of Civil Procedure section 1624 is also known as the Statute of Frauds, and it renders certain contracts invalid if there is no writing to evidence the terms of the contract.
Code of Civil Procedure section 1624 sets forth a list of different categories of contracts that, per the Statute of Frauds, are required to be in writing. Specifically, there are seven types of contracts defined by section 1624 that a party to a breach of contract lawsuit should be aware of. At Underwood Law Firm, our attorneys are more than familiar with the Statute of Frauds and the writing requirements for a contract.
What is the Governing Law?
Before understanding the Statute of Frauds, it is important to understand the law that governs Contracts. In California, when a contract is for the sale of movable goods, the contract is governed by the California Commercial Code. All other contracts are governed by the California Code of Civil Procedure.
This distinction is important as the Statute of Frauds for contracts for the sale of goods is codified in California Commercial Code section 2021. For example, “Marty” wants to buy a condo on the beach from “Jenna.” Marty and Jenna enter into a contract for the sale of the condo. A condo is not a movable good; therefore, Marty and Jenna’s contract will be governed by the Code of Civil Procedure and not the California Commercial Code.
What Types of Contracts Fall Under the Statute of Frauds?
The Statute of Frauds applied to a contract for the sale of goods is codified in the California Commercial Code section 2021. Under California Commercial Code section 2021, a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable unless there is some writing that is sufficient to support the existence of the contract. (Cal. Com. Code § 2021(1).)
When a contract is for something other than the sale of movable goods, the contract is governed by the Code of Civil Procedure. The Statute of Frauds is codified in the Code of Civil Procedure section 1624. Under Code of Civil Procedure section 1624, there are seven types of contracts that are required to be in writing.
These contracts include: (1) a contract that by its terms cannot be performed within a year, (2) a contract promising to answer the debt, default, or miscarriage of another, (3) an agreement for the leasing of real property for a longer period than one year, or for the sale of real property, or of an interest therein, (4) an agreement authorizing or employing an agent, broker or any other person to purchase or sell real estate, or to lease real estate for a longer period than one year, (5) an agreement that by its terms is not to be performed during the lifetime of the promisor, (6) a contract by a purchaser of real property to pay an indebtedness secured by a mortgage or deed of trust upon the property purchased, unless assumption of the indebtedness by the purchaser is specifically provided for in the conveyance of the property, and (7) A contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit (CCP § 1624.)
Therefore, when a contract is for the sale of real property, it must be evidenced in writing. Accordingly, in our previous example above, the contract between Marty and Jenna for the sale of the condo must be in writing; otherwise, the contract would not be enforceable.
What Does the Statute of Frauds Require?
That these contracts that fall under the statute be in writing is not the only thing required by the Statute of Frauds. First, it is important to note that under the Statute of Frauds the contract must be signed by the party that the contract is being enforced against. (CCP § 1624(a).)
For example, Marty and Jenna created a written contract for the sale of the condo, but Jenna never signed the contract. A month later, Jenna backed out of the sale. If Marty wanted to sue Jenna for a breach of contract by proving the existence of the written contract for the sale of the condo, the contract would not satisfy the Statute of Frauds because it was not signed by Jenna.
In addition to having the contract signed by the party charged, the Statute of Frauds also requires that the writing contains essential terms sufficient to prove that a contract existed between the parties. “A memorandum satisfies the statute of frauds if it identifies the subject of the parties’ agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty.” (Sterling v. Taylor (2007) 40 Cal.4th 757, 766 [55 Cal.Rptr.3d 116, 123, 152 P.3d 420, 425].)
In Sterling, the prospective buyers of a piece of real property sued the sellers to enforce the alleged sales agreement between the parties. The trial court held that the price term in the writings was too uncertain and did not comply with the Statue of Frauds. The Court of appeals reversed the trial court’s holding, stating that the extrinsic evidence was sufficient to clarify the price term.
The Supreme Court of California reversed the Court of appeal’s holding, ruling that although extrinsic evidence could be considered, the writing itself was insufficient to satisfy the statute of frauds for lack of essential terms. The court reasoned that the price term for the sale of real property was an essential term and, therefore, needed to be clearly stated in writing.
How Can the Attorneys at Underwood Law Assist You?
Overcoming the Statute of frauds is just one step in a breach of contract claim. It follows, then, that actually proving that a party breached the contract can be a lengthy and complex process.
As each case is unique, property owners would be well-served to seek experienced counsel familiar with the ins and outs of the Statute of Frauds and the law surrounding it. At Underwood Law, our knowledgeable attorneys are here to help. If you are attempting to assert a breach of contract claim, are worried about the enforceability of your contract, or if you just have questions, please do not hesitate to contact our office.
Go here to get more details.