The statute of frauds requires that certain agreements be in writing, identify the subject matter of the contact so it is reasonably understood, provide the essential terms and be signed by party contesting the validity of a contract, explains TheLaw.com. The types of contracts covered may vary by jurisdiction.
The statute of frauds is a legal principle founded in law that requires certain types of contracts be in writing and signed by all parties to an agreement in order to be legally binding. No oral or verbal agreements are enforceable under these contracts, notes TheLaw.com.
While the form of the statute of frauds may differ from state-to-state, the basic foundation of the rule requires that a written contract is required for contracts for the sale of land, contracts for the sale of goods above a certain dollar amount, contracts that cannot be completed in less than one year and contracts where one party is required to pay the debt of another party, states Investopedia. The underlying purpose of the law was based on preventing misunderstandings and the potential for fraud that can occur with oral agreements. The requirement of written agreement has increased significance in protecting the parties in transactions where a large amount of money is at stake, explains Investopedia.