The Statute of Frauds: What Is It, and How Does It Affect the Enforceability of a Contract?

The Statute of Frauds requires certain contracts to be in writing to be enforceable and understanding it can save your business from invalid agreements.

Introduction

In a previous post, we addressed oral vs written contracts. While oral contracts can be, and often are, enforceable, there are certain contracts that must be in writing. Each state has its own statute or statutes that specify what contracts must be in writing, which are commonly referred to as The Statute of Frauds. This guide explores how this rule impacts your business deals and how to avoid pitfalls. By understanding when a written contract is mandatory, you can protect your business from unenforceable agreements.

Historical context: Why is it called the Statute of Frauds?

English courts in the 1670s were often called upon to settle disputes between people who claimed they had reached an oral agreement. Without a writing, the proceedings were prone to break down into two people with vastly different stories but no actual evidence to support either.

In 1677, Parliament acted to put a stop to the rampant perjury by passing a law with the official title: “An Act for Prevention of Frauds and Perjuries.” The fix was simple: for the important matters—selling land, guarantees, contracts that last longer than a year, big-ticket goods, etc.—if it wasn’t in writing and signed, it couldn’t be enforced by a court.

When the American colonies (and later the states) copied English law, they kept both the rule and the catchy name. Three hundred and fifty years later, every state still has its own “Statute of Frauds” for exactly the same reason it was invented in 1677: to prevent fraud and perjury in support of imaginary handshake deals.

The Mechanics

In general, the Statutes of Fraud in different states are similar. This post focuses on the North Carolina version. In North Carolina, the following types of contracts must be in writing pursuant to the Statute of Frauds:

• All contracts to sell or convey lands, or any interest in or concerning the land, must be in writing and signed by the party to be charged or their authorized agent. This also applies to leases exceeding three years in duration.
• Contracts for the Sale of Goods priced at $500 or more.
• Lease contracts requiring total payments of $1,000 or more.
• A promise to pay the debt of another person (guaranty) must be in writing and signed by the party to be charged.
• Separation agreements between married couples must be in writing, signed by both parties, and acknowledged before a certifying officer.
• Contracts between licensees for matches or exhibitions held in North Carolina must be in writing to comply with administrative rules.
• Modifications of contracts within the Statute of Frauds must also comply with the writing and signature requirements.

For example, if you verbally agree to lease warehouse space for five years at $2,000/month, that’s unenforceable. The landlord could back out the day before you’re set to move in, and you’d have no legal recourse—no matter how much you’ve already spent preparing. Similarly, if you verbally agree to purchase real estate, that agreement will not be enforced by the courts, and the seller may elect to sell to someone else or keep the property.

There are exceptions to the Statute of Frauds. If you partly perform the contract—like paying a deposit on the building—a court might enforce it.

But relying on exceptions is risky. Written contracts avoid these issues, providing proof of terms. Without a written contract, you can’t sue for breach if the other party backs out, leaving you without remedies like damages or specific performance. For instance, a verbal lease for a year-long rental might seem binding, but if disputed, a court could dismiss it. Always put high-stakes deals in writing to align with Revolution Law’s advice.

Practical Tips

Stay compliant with these five tips:

• Write Key Contracts: Put real estate, long-term, or high-value deals in writing.
• Get Signatures: Ensure all parties sign to meet Statute of Frauds requirements.
• Keep Records: Save emails, texts, or even notes from meetings that confirm terms—these can sometimes satisfy the writing requirement.
• Know your state’s rules: check local statute of frauds laws, as they vary.
• Consult a Lawyer: Have a lawyer review contracts for compliance.

Conclusion

The Statute of Frauds ensures certain contracts are written to be enforceable, protecting your business from disputes. For more on oral agreements, see our post on Oral Contracts vs. Written Contracts. To handle breaches, check our guide on What to Do When a Contract Is Breached. A written contract is your best defense. Visit Revolution Law for more insights and consult a lawyer for high-stakes deals.

Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit Revolution.law or call 336-333-7907.

The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.