Video describing what contracts need to be in writing. See below for an enhanced video transcript.
[Enhanced Video Transcript:]
Hello, and welcome to an edition of Genesis Law Firm Teaches. Today’s topic, Does My Contract Need to be in Writing? The rules that I’m about to go over are from Washington law. But those same principles apply in most other states as well. So if you’re in the U.S., these rules probably apply to you. If you have a question as to a specific rule’s applicability in your state, speak with an attorney who practices there.
The General Rule & The Statute of Frauds
The general rule is that contracts do not need to be in writing. The exception would be the contracts falling under the statute of frauds. That’s an important term to remember because if you want to do more research on this topic, that’s probably the key term. For example, if you wanted to know more about contracts that need to be in writing in California, you’d probably want to search for “statute of frauds, California”.
Contracts That Need to Be in Writing
Let’s get into the contracts that need to be in writing:
- The first would be contracts for the sale of goods, in which the purchase price is more than $500 dollars. For example, if you are purchasing a couple pairs of shoes, chances are the purchase price is less than $500 dollars, unless they’re expensive shoes. And in that situation, the statute of frauds would not apply, and the contract would not need to be in writing. But if your buying lots of shoes and the purchase price is more than $500 dollars, then the statute of frauds would apply, and that contract would need to be in writing in order to be enforceable. Now, there’s a difference between contracts for services and goods. Those terms are meant to be opposites. Contracts for goods that are more than $500 dollars need to be in writing. Contracts for services usually don’t need to be in writing regardless the amount.
- A second type of contract that needs to be in writing would be one for the purchase or sale of real estate. In other words, if you’re buying or selling land or buildings, that contract should be in writing.
- A third contract that needs to be in writing would be one that cannot be performed in a year or less on its face. The typical example would be a multi-year lease. On its face, a multi-year lease cannot be performed in a year or less. If it’s a contract that on its face doesn’t indicate the time frame for performance, then it probably does not fall under this rule. So for example, if you have a house that your building and the builder probably cannot complete it in a year because it’s a huge house, in that situation, the statute of frauds probably does not apply. And that contract probably does not need to be in writing unless it is a real estate contract.
- A fourth example of contracts that need to be in writing would be ones that pertain to marriage. Most marriage-related and divorce-related contracts should be in writing.
- A fifth example of contracts that need to be in writing would be settlement agreements. If you’re in active litigation and you want to settle the case, make sure that the contract settling that case is in writing and signed by the parties.
- A sixth example of a contract that needs to be in writing would be a security agreement. A security agreement is a promise to pay that includes a provision allowing the creditor to collect against some assets should you not pay. An example would be if your buying a car and you don’t pay the entire purchase price up front. The creditor can come after you for any unpaid amounts by selling your car.
- A seventh contract that needs to be in writing would be one for real estate brokers commission.
There are other contracts that should be in writing, and I’m not going to get into those today because they’re relatively obscure. They’re probably not going to apply to you.
Exceptions to Statute of Frauds
I should also point out that there are some exceptions to the statute of frauds. That is, there are exceptions to the rules that require that these above-listed contracts be in writing. But don’t rely upon those exceptions, because they often times will not work.
Recommendation: Put All Important Contracts in Writing
Lastly, our firm recommends reducing all important contracts to writing, regardless whether the statute of frauds applies. After all, if you go to court, you’re going to need to prove what the contract is and what the terms are if the parties ever get into a dispute, and that’s more easily accomplished with a written document.
If you would like more information on this or other legal topics, I would encourage you to explore the resources section of our website. Or all our firm toll-free at 866-631-0028 to speak with one of our knowledgeable business law attorneys.