The Statute of Frauds: When Oral Contracts in Utah May or May Not Have Teeth

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Written vs. Oral Contracts
Not all contracts have to be in writing. Generally, if one party makes a valid offer and another party accepts that offer, these two parties create a binding and enforceable contract. This does not mean, however, that an oral contract is just as good as a written contract. When parties write the contract terms down in a signed document, those terms do not change (unless one of the parties fraudulently alters the written contract). After parties enter oral contracts, on the other hand, the parties can forget the terms, sincerely disagree about what the terms are, or simply lie about what the terms are. If you want a contract where expectations are clear and unforgettable, get it in writing. Also, if you want to be able to better enforce the contract in a Utah court of law, get it in writing. Trying to prove the terms of an oral contract is usually a matter of “he said, she said.” Written contracts, on the other hand, can often speak for themselves, and what the parties say about the contract and what it means is often irrelevant.

The Statute of Frauds
Some types of contracts cannot be enforced under Utah law if the parties’ agreement is an oral agreement. These contracts are governed by what is called “the statute of frauds” and must be contained in some type of writing to be enforced. These include:

  • Contracts conveying an interest in land, except leases for a year or less
  • Contracts that, by their terms, cannot be performed within one year
  • Contracts in which a party becomes a surety (or guarantor) of a debt of another
  • Contracts in consideration of marriage, such as prenuptial agreements
  • Contracts by the executor of a will to pay with his or her own money a debt of the estate
  • Any agreement authorizing an agent or broker to purchase or sell real estate for compensation
  • Any credit agreement
  • Contracts for the sale of goods at a price of $500 or more

As its name suggests, the statute of frauds is meant to prevent parties from acting fraudulently and injuring others. The law believes, apparently, that more harm will come from parties making up terms about an oral agreement than the amount of harm resulting from parties attempting to renege on certain oral agreements.

Some Exceptions to the Statute of Frauds
There are exceptions to the statute of frauds. Even if parties enter an oral contract that—under Utah law—must typically be in writing, a court can nonetheless enforce its terms. Below are just a few examples.

  • Admitting the Contract Exists: One exception to the statute of frauds is when a party admits that the contract exists. For example, let’s suppose Larry Lawnkeeper from Layton mows your lawn for $50 a week, but he offers you a deal: “I’ll do it for $40 a week if you agree to two years of lawn mowing.” Your response: “You’ve got a deal.” You two shake hands and smile but make no written record of this agreement. Since this contract cannot be performed within one year, Utah’s statute of frauds demands that it be in writing. A few months later, you meet Mary Mower from Magna who says she’ll mow your lawn for $30 a week. You tell Larry goodbye, and he sues you in small claims for the lost benefit of the contract. At trial, you admit to the judge that you entered the two-year agreement with Larry but claim the agreement isn’t enforceable, proudly explaining your knowledge of the statute of frauds. Unfortunately for you, based on your admission, the judge enforces the contract. Under Utah law, you can waive the statute of frauds as a defense by “admitting at trial the existence and all essential terms of the contract,” as stated in one Utah court decision.
  • Partial Performance of the Contract: Another exception to the statute of frauds is partial performance. Let’s say, for example, that Old Olga can’t take care of herself very well in her old age, and she offers to sell Caretaker Carrie her house in exchange for three years of care. Carrie accepts this oral offer, and relying on this agreement, Carrie sells her own house, moves in with Olga, and cares for Olga for a year. However, after a year, Olga has a change of heart and wants to keep her house. She denies ever making the agreement to sell her house. It may be that the doctrine of partial performance helps Carrie get around the general rule that land sales (except for leases under a year in length) must be in writing. Under Utah law, reliance on an oral agreement that is partially performed (here, selling the house and working for Olga for a year) may negate the need to have the agreement in writing.
  • Written Confirmation of the Sale of Goods: Generally, when a contract for the sale of goods over $500 is only made orally and not in writing, it is unenforceable. However, such an agreement is likely enforceable if the party trying to enforce the contract sent a written confirmation of the agreement to the other party and received no objection. For example, suppose that Wholesale Harry buys 1000 widgets from Wanda’s Widgets over the phone for a price of $10,000 and then, a few days later, sends Wanda an email stating: “Boy am I glad I ordered those 1000 widgets for $10,000. They are much more expensive everywhere else!” Then, let’s suppose, Wanda never delivers the widgets and, months later, claims she never signed a written agreement. According to Utah’s law on the sale of goods, the fact that Wanda did not object to Harry’s email may likely create a binding agreement.

Help with Statute of Frauds: The exceptions and examples stated above do not thoroughly explain each exception to the statute of frauds or address all legal issues related to the statute of frauds. If you are dealing with a potential statute of frauds issue in Utah, it would be wise to talk with a qualified Utah contract attorney.

Skoubye, Nielson, Johansen Attorneys Salt Lake City Utah

If you need help or would like to speak with an experienced attorney, please call (801) 365-1030 or click here to contact us.