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Statute of Fraud Questions

Statute of fraud refers to the statutory provisions which require that certain contracts must be written in order to be valid contracts that can be enforceable. Developed in England in the 17th century, the basis of the statute was to limit the amount of fraudulent claims in unwritten contracts. Most generally, the statute applies to real estate sales and anything that involves a cost of $500 and over. Below are just a few of the more commonly asked questions regarding the statute of frauds.

What voids an oral contract in MI?.

While most contracts can be enforced under the contract law (statute of frauds), there are certain contracts that must be in writing in order to be enforced. Below are the requirements for Michigan. This is a list of contracts that must be in writing to be enforced:

Per Michigan statute of frauds:

Contracts involving the sale or transfer of land;

  • Contracts to answer for the debt or duty of another;
  • Contracts that, by its terms, cannot be completed within one year. (Please note that the fact that a contract is not completed within one year does not mean that it is voidable under a statute of frauds. For the statute to apply, the actual terms of the contract must make it impossible for performance to be completed within one year); and
  • Certain contracts for the sale of goods, under the Uniform Commercial Code.

Why does the Statute of Frauds apply only to certain types of contracts? Why doesn't it include all of the contracts?

The statute of frauds applies to only certain types of contracts due to the specific writing in reference to real estate transactions. However, oral contracts for services are permitted due to the nature of the agreements can be changed and it would be inconvenient to rewrite the contract every time the terms were changed. The law acknowledges the need for written contracts pertaining to real estate and certain contracts due to the credibility of a written agreement blocking a possible conflict between those who enter into the contract.

What are the differences of the Parole evidence rule and the statute of frauds between states?

The Parole Evidence Rule utilized when there is a dispute between two parties regarding a breach of contract. While both parties agree that the contract does exist, one party will argue that there were verbal agreements combined within the contract that were not listed in the "four corners" of the written portion that should be considered while interpreting the contract. Usually the Parole Evidence Rule denies this form of evidence and states that only the writing within the 4 corners of the contract is a valid part of the contract. Verbal agreements or other written portions of the original agreement that are not attached to the contract will be excluded.

As for the Statute of Frauds, contracts that involve the sale of real estate or anything costing $500-$1,000, or any contractual agreement that cannot be satisfied within one year must be written in order to be a valid contract. Oral contracts cannot be used for the sale of real estate or anything that costs over $500.

When entering into a contract, you should know the laws regarding the validity of the contract. Certain contracts are not deemed invalid unless they are in writing. Before you enter into a contractual agreement you should ask an Expert for legal insight on contracts and what would work best for you.
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