Jul 5, 2019 in Business

Introduction

Business law is a widely taught or used law that is normally applicable to various business entities that include partnerships and corporation. As a result, business law normally touches various areas such as contracts agreement, the law of corporation and other business organizations, intellectual property, and employment law among others (Miller & Jentz 2009, p.219). In essence, business law is a branch of law that normally impacts the operations of a given business. While there are various categories of business law, this paper will only concentrate on discussing the statute of frauds.

As defined by Murray (2009, p.1), the statute of frauds describes the provisions that must be included in any kind of contract. They are set out in writing in order to be enforced by contracting parties. In any contract law, failure for certain situations of promises to be made in writing can undermine the enforcement of such statutory provisions. In such a particular situation, it means that it will be unenforceable of a valid contract especially if it does not comply with the required formalities as stated in the state’s law. In essence, a contract can be deemed to be within or covered by statute of frauds if the provisions mandate that sort of contract to be evidence by writing (Smith 2012, p.1). Therefore, the sole purpose of the statute of frauds is to limit or eliminate business fraud cases that are related to unwritten contracts.

The Statute of Frauds

According to Hamilton (2008 p.1), the statute of frauds was first enacted in 1677 as an Act for the Prevention of Frauds and Perjuries by the Parliament of London in England. The statute imposed various requirements for which agreements involving transfer of land must be done in writing and signed by the related parties. This was to eliminate the existence of widespread fraud associated with the use of false witnesses in proving claims devised by masquerading fraudsters towards disputed property. Based on this, most common law jurisdictions enacted by various countries have adopted, in some way, the provision of the statute of frauds. This is especially the requirement that the contracts for the sale of land are duly signed and made in writing. This has helped in addressing various cases dealing with fraud disposition or transfer of land. This was evident in two cases of 2008 that were executed by the Alberta Court of Queen in England. The first case was that of Leoppky vs. Meston, and the second case was Wasylyshyn vs. Wasylyshyn (Hamilton 2008, p.1).

In both 2008 Alberta cases, there were alleged agreements between the parties in resolving the dispute that involved parcels of land. In the case of Wasylyshyn v. Wasylyshyn, the focus of the court was to establish whether the alleged agreement was based on the provision of the statute. On the other hand, Leoppky vs. Meston case dealt with the issue of the availability of sufficient written evidence.

In summary, Wasylyshyn v. Wasylyshyn case involved Lillian Wasylyshyn, the defendant, whom the family estate had been transferred to by the mother leaving out Steve Wasylyshyn and Vera Bociurk. The two siblings left out of the mother’s will claimed that they had reached an agreement with Lillian to settle dispute by ensuring that she transfers one of the two houses to them. However, the transfer never happened thereby prompting Steve and Vera to sue Lillian on the breach of agreement. On her defense, Lillian argued that no agreement had been made, because there was not writing of such; therefore, section 4 of the statute of frauds was not applicable in that case (Hamilton 2008, p.1).

According to Hamilton (2008 p.1) section 4 of statute of frauds is applicable where “any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them.” In the case of Wasylyshyn v. Wasylyshyn, Justice Miller was of the view that enforcing the settlement of agreement between the parties was based on the action of the contract but not on the land; therefore, section 4 could not be applied. This was due to the fact that the agreement claimed to have been made by the parties was neither for contracting nor for the sale of land. It therefore establishes the challenges associated with the application of statute of frauds in resolving business disputes.

In Leoppky vs. Meston case, unmarried couples, William Leoppky and January Meston, purchased a house in Edmonton where they lived for six years and then broke up after which they tried to negotiate a settlement that would see benefits on the interests of their home (Hamilton 2008, p.1). Leoppky claimed that Meston did not honor what she was entitled to do as established on their negotiated agreement and therefore requested the court to order the defendant to fulfill her duties as had been agreed. However, Meston denied the existence of any agreement and pleaded not guilty of the breach of the statute of frauds for which the plaintiff claimed that an enforceable agreement had been reached. In such a case, the judge had to establish if any written agreement existed and further assess whether the agreement was compiled according to the statute of frauds.

However, Madam Justice Read found out that there were sufficient writings that were generated from emails between the two parties and satisfied the requirements of the statute of frauds (Hamilton 2008, p.1). Significant to these documents were the emailed signatures of Ms. Meston which provided sufficient evidence of her connectivity and respect to the documents. However, the case was dismissed not because of statute of fraud requirements, but rather due to the content of writings set out in the entire agreement (Hamilton 2008, p.1). It therefore establishes the need to adequately ensure that when any business contract is being made, the description of the contract and its objectivity is clearly outlined.

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Even though there can be variability in the application of statute of frauds by different states’ jurisdictions, there are certain common types of contracts in which this particular law is applicable. These include contracts made on sale or transfer of land, contracts that are related to debt or duty of another, the contracts that are not liable for completion within one year, and more significantly, contracts that are made for sale of good as stipulated in the Uniform Commercial Code (Tepper 2011, p.168). However, it is essential to point out that in order to satisfy the requirements of the statute of frauds, the agreement must ensure that writings effectively identify contracting parties and has a well recited subject matter that will sufficiently identify and present important terms and conditions for the agreement between parties.

It is important to point out that a statute of frauds itself does not render any contract to be void. The statute cannot lead to the enforcement of a business contract if one of the parties has not followed the terms and conditions as stipulated in the agreement (Larson 2009, p.1). Often, the statutory of frauds has been confused by the parol evidence rule even thought their purposes and scopes are different. While the statute of frauds is engaged in order to prevent any perturbed testimony in the proof of a purported contract, the patrol evidence rule is applicable to any type of contract. It ensures that parties’ final understanding that is deliberately expressed in writing shall not in any way be changed (Larson 2009, p.1). This distinction between the statute of frauds and the patrol evidence rule is essential in understanding how the statute cannot be confused in dealing with frauds issues within the bracket of the provision.

As it was already highlighted, the main purpose of a statute of frauds is to prevent any injury that can originate from a fraudulent conduct. However, the provision has often been criticized for its continual existence, because the statute is often used by parties who freely wished to enter into a business contract yet they want to avoid fulfilling their agreements. On the other hand, proponents of these statutory provisions argue that the abuses for which this law was designed to prevent are real and therefore should continue to remain a binding agreement. Based on this, issues relating to statute of frauds can effectively be addressed if they can be identified rather than being overlooked by the provisions.

Summary

The statute of frauds is an essential provision that should be taken into account for any business contracting that is done by associated parties. It can help in addressing fraud cases resulting into settling business disputes. It is imperative for the contracting parties to clearly adhere to the requirements of the statute especially by making their agreement in writing clearly describing the scope and responsibility of each party, and more so, including signatures of both parties. In doing so, statute of frauds will provide enough evidence that will be used in resolving business dispute that arises from the alleged agreement made through negotiation.

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