Not all contracts are equal. While it is true that many oral contracts (that is, contracts entered into between two parties without a written agreement) are enforceable in California, many are not. In California, the Statute of Frauds contained in California Civil Code Section 1624 requires that to be enforceable in court, certain contracts must be in writing, or at least “some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent.” California Civil Code Section 1624(a). These contracts include, but are not necessarily limited to:

• One that by its terms will not or cannot be performed within one year
• Promises to answer for the debt of another
• Leases of real property for terms in excess of one year
• Real estate agency or brokerage agreements
• A contract to purchase real property (i.e., a house)
• A contract to loan money or extend credit in an amount of $100,000.00 or more
• An agreement that by its terms is not to be performed during the lifetime of the “promisor”

As can be seen from the examples listed above, these contracts tend to be ones that are significant in terms of their value or their term. The reason these contracts must be in writing is to protect the parties alleged to have made them. Without the Statute of Frauds, it would be easy for one person to claim that they, for instance, agreed to purchase a piece of real property upon certain terms and for a certain price to perpetrate a fraud upon the supposed seller or buyer of that property. Similarly, it would be unfair to hold one person liable for the debts of another without some assurance that the person so liable was either actually indebted to a creditor or had voluntarily agreed to pay the debt of one so obligated.Take for the example the case of a single father wishing to live in a particular neighborhood believing his young son would benefit from the unique qualities it possessed. Driving through the upscale neighborhood in La Jolla, the father sees a house with a sign in the front yard advertising it is “for sale by owner.” Upon inquiry of the resident of the house, the father learns that the owner, who lives in the house, has decided to sell it for a price of $500,000.00, but that the owner absolutely refuses to use the services of a real estate broker or agent. After talking with the owner, the single father believes the owner is a man of his word and the two agree to enter into agreement whereby the owner will in fact sell upon the price stated and the father agrees to that price. They agree that the father will return the next day with $300,000.00 in cash and will execute a deed of trust for the balance of $200,000.00 after which the owner will execute and deliver a grant deed to the father, thereby transferring title to the father. The young father then learns by attempting to deliver the deed of trust, and contrary to the seller’s agreement, the owner refuses to sign the grant deed until the father pays an additional $400,000.00. While this scenario seems preposterous to most, and most people could not fathom simply handing $300,000.00 in cash to anyone, it is a true story (it occurred in Orange Hills, California).Without California’s Statute of Frauds, the young father could potentially be the unwitting victim of an unscrupulous con artist who preyed upon his belief in his fellow man. Although a different set of circumstances may occur in any of the agreements listed above which fall under the provisions of the Statute of Frauds, the result could easily be the same. Even assuming that an agreement is not required to be in writing to be enforceable under the Statute of Frauds, a good rule of thumb is that every contract should be reduced to some form of writing, to ensure that the parties bargain is performed according to its terms.If you would like to arrange for a consultation to discuss whether your contract must be in writing to satisfy the Statute of Frauds, or any employment or business-related matter, call Michael Leonard, Esq. of San Diego Corporate Law, a rising star in San Diego. He has the experience and knowledge to ensure all of your agreements are appropriate under the circumstances and enforceable in the California courts. Mr. Leonard can be contacted by visiting San Diego Corporate Law or by calling (858) 483-9200.