statute of frauds and 1677 and pleading exception and admissions exception

Careful study of the evolution of the Statute of Frauds ("SoF") between the time of the USA of 1906 and Article 2 of the 1950s discloses the introduction in the latter of 2-201(3)(b). This section provides:

"(3) A contract that does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable if: (b) If the party against which enforcement is sought admits in the party's pleadings, or in the party's testimony or otherwise under oath that a contract for sale was made,..."

This provision says that it is an exception to the writing requirement for enforceable contracts over $5,000 if the party against whom the contract is to be charged has admitted, by way of responsive pleading, deposition or in testimony in open court, the existence of the contract. Since one of the original purposes of the SoF when passed in 1677 was to eliminate incentives for perjury, an admission by the defendant that the contract existed should, the UCC drafters believed, be an exception to take the contract out of the statute. Thus, if you plead the statute as an affirmative defense but, at the same time admitted the existence of the oral contract in deposition, your plea would be struck, the deposition testimony credited and the contract would be enforced by the court. The purpose of this and the next essay is to show the evolution of case law from the early 18th century through the 20th century which led to the UCC drafters' adding this exception to the writing requirement of the SoF.

The History/Problem in a Nutshell

In the only law review article that carefully sifts the evidence, Robert S. Stevens showed that the case law has gone through three shifts in the 300 years of the SoF's existence. "Ethics and the Statute of Frauds," 37 CornellLQ 355 (1952). For the first 100 or so years after 1677, the courts concluded that a defendant's admission of the existence of a contract would preclude his successful interposition of the SoF defense. Then, from about 1790-the early 20th century the dominant position was the opposite--even if the defendant admitted the existence of an oral contract, it would not be enforced against him if he pled the SoF. Finally, beginning in most jurisdictions in the early 20th century, there was a return to the first century of SoF interpretation. The UCC is an example of this tendency. However, since this "modern" trend, which really is quite ancient, only began to arise after the USA was drafted, the USA has no mention of this concept.

One wonders at first why there should have been any "problem" at all. Doesn't it seem quite natural that if a defendant is to be so foolish (or honest) to admit the existence of the oral contract, that it naturally would be enforced against him? But it is precisely in the psychology of admission that we have a problem. If a defendant knows that his admission will not protect him, i.e., that the statute of frauds will not successfully disallow an oral contract if he admits to its existence, why would he ever admit the existence of a such a contract if it was detrimental to him? That is, by adopting the rule that admissions should be construed against the defendant, defendants have an incentive to do the very thing that the statute was meant to evade: perjure themselves. But if you allowed defendants to plead honestly that there was a contract but that the plaintiff ought to be estopped from enforcing it, then you would both fulfill the goal of the statute--honest contracting--and give force to the statute. It was this problem that tangled the courts for 300 years and, as we will see in the next essay, tangles them now.

A Statement of Each Theory

Thus, Stevens argues that from its inception until about 1800, courts generally held as follows, in words taken from a 1733 case:

"In this case the Court declared, and the Council agreed likewise, that if a man brings a bill for specific performance of a parol agreement, setting forth the substance of it in a bill, and the defendant by his answer confesses the agreement, that the court may in such a case decree an execution thereof, notwithstanding the Statute of Frauds and Perjuries, because the defendant confessing the agreement, there can be no danger of perjury from contrariety of evidence, which was the only mischief that statute intended to obviate" Symondson v. Tweed (1733, cited in Stevens, at 362).

This sounds pretty persuasive until some courts began to realize around 1790 or so that allowing a defendant's admission to undercut the defense of the SoF was tantamount to making the statute a dead letter. What is the purpose of the SoF if it can be so easily evaded? In the words of a case from 1792:

"It is said in those cases (such as Symondson), and has been adopted in the argument, that when the defendant confesses the agreement there is no dangery of perjury, which is the only thing the statute intended to prevent. But this seems to be very bad reasoning, for the calling upon a party to answer a parol agrement certainly lays him under a great temptation to commit perjury..." Rondeau v. Wyatt, cited in Stevens, at 369.

That the Rondeau opinion persisted at the time of the USA can be seen by a quotation from the leading treatise on the SoF from 1895:

"But by the unbroken course of more modern decisions, it is now well settled that although the defendant admits the agreement, it cannot be enforced without the production of a writen memorandum, if he insist upon the bar of the statute" (Browne, Statute of Frauds, 5th ed. at sec. 515, quoted in Stevens, at 356.)

Conclusion

Though things may have been seemingly "well settled" in 1906, so that defendant's admissions would not bar the use of the SoF, they became unsettled in the 20th century, and the UCC exception, cited above, is the result of the process. But even though we now have seemingly the "original" meaning of the SoF in place, headaches remain. The next essay shows you why.

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