Statute of Fraud: Which Contracts Are Required by Law to Be in Writing?
From the legal viewpoint, a contract is deemed perfected or given birth when the elements of consent, object or subject matter and consideration are present. When a seller offers to sell goods at an offer price and a buyer agrees to the price, there is a perfected contract of sale. However, the birth of a contract is only achieved when we speak of consensual contracts – those that no longer require that the agreement be in specific form to be valid and enforceable. Enforceability means that the party can bring the case to any competent court of justice to ensure the other party’s performance of the obligation.
Some contracts do not acquire enforceability unless they are in writing, in addition to the three elements mentioned above. These are covered by the Statute of Frauds. According to the Wiki Law Project, “the purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged.” A note, memorandum and other private as well as public instruments may suffice. These contracts are enumerated under Chapter 8, Articles 1403 paragraph (2) of the Civil Code of the Philippines. They include:
1. An agreement that by its terms is not to be performed within a year from the making thereof;
2. A special promise to answer for the debt, default, or miscarriage of another;
3. An agreement made in consideration of marriage, other than a mutual promise to marry;
4. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos;
5. An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
6. A representation as to the credit of a third person.
Again, in order that the agreements or contracts entered into in the manner presented above may be enforceable, they must be in written form and subscribed by the party charged. Subscription by the latter’s agent is sufficient. It must be noted however, that the unenforceability applies only to executory contracts. By executory, this means that either of the party is yet to perform his obligations to the contract. If by any means one party has already rendered or fulfilled his part of the obligation, then the other party has to legally perform his part of the obligation, the defect in the agreement (i.e. only in oral form) notwithstanding.
For instance, on May 1, 2011, John and Carl entered into an agreement whereby John, being an architect, will design the house of Carl on June 2012. The agreement was merely verbal and neither a note nor an acceptance letter was executed. Come June 2012, Carl could not bring an action for performance against John should the latter refuse because of the defect in the form of the contract. However, if John has already received payment from Carl, he is bound to design the latter’s house.