The Requirement Of Writing

In general, there is no legal requirement that contracts must be in writing to be binding. However, to avoid disputes and costly litigation, all important contracts should be in writing, and some should be witnessed as well to attest to their authenticity.

When a contract is wholly oral, it may be difficult for the parties themselves, let alone a court of law, to be entirely sure exactly what they agreed to. When contracts are part oral and part written, it can still be difficult to be sure what was agreed to. Even when contracts are in writing, words may still be open to several interpretations. Not only does it make good business sense to enter into written contracts, the law requires some contracts to be written if the parties want to ensure that their interests are protected by law.

The Statute of Frauds

The Statute of Frauds renders some types of contracts unenforceable unless they are in writing. Despite the fact that an oral contract is otherwise valid, if it falls within the Statute, it is unenforceable. Thus, neither party will be able to sue the other party to force the party to perform as promised. Figure outlines contracts that the Statute of Frauds requires to be in writing.

Figure : Contracts Covered by the Statute of Frauds

Except in British Columbia, indemnities do not need to be in writing to be enforceable. In contrast to a guarantee, a person who makes a promise to indemnify makes himself primarily liable to pay the debt.

In the case of land, the doctrine of part performance stipulates that performance begun by a plaintiff in reliance on an oral contract related to land may be accepted by the courts as evidence of the contract in lieu of a written memorandum. For instance, if the plaintiff has taken possession of the land and has begun to make improvements on it, this would constitute part performance.

Requirements for a Written Memorandum

The Statute requires a “note or memorandum of the contract,“ which must:

1. Contain all essential terms of the contract, including the parties, a description of the subject matter of the contract, and all material terms such as price; and

2. Be signed by the party who is being sued; it need not be signed by the other party. (This has been liberally construed by the courts so that handwritten initials or a hand-printed name will suffice.)

It may be one document or several taken together; it may be a formal contract or something less formal such as a letter or note.

Effect of Contracts within the Scope of the Statute

The Statute of Frauds makes an oral contract unenforceable. Although no action may be brought on the contract itself, the contract still exists for other purposes. The Statute has these implications:

1. The court will not permit the repudiating party to gain further advantage by allowing recovery of a down payment after her own breach.

2. A party who has accepted goods and services under a contract that is unenforceable will not be able to retain any benefit without paying for it (the other party will have a quantum meruit claim).

3. A written memorandum brought into existence after the contract was formed but before the action was launched will suffice.

4. The defendant must expressly plead the statute as a defence to the legal action.

5. An oral contract may effectively vary or dissolve a prior written contract even though the oral contract could not itself be enforced.

6. Only the party who has signed can be sued.