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Why Contracts Should be in Writing

 

We live by them every day. The contract. The legally enforceable agreement between two parties to do something or refrain from doing something. Contracts can be oral or in writing, but is one type of contract better? Does it matter that the contract is oral, or does it matter that the contract is in writing? This blog will answer that question in the following: GET IT IN WRITING!!!!

There are two main reasons why a contract should be in writing: 1) legal; and 2) practical. The first part of this blog will focus on the legal side. The laws of Pennsylvania require certain contracts to be in writing to be enforceable. In other words, if the contract is not in writing, then a court will not enforce the contract. Enter the Statute of Frauds. 

The Statute of Frauds is not quite what it sounds to be. The Statute of Frauds is not about fraudulent contracts. The Statute of Frauds requires that certain contracts in writing. The following is list of the most common contracts that the Statute of Frauds requires to be in writing:

1. Selling of Real Estate;

2. Lease of Real Property over three (3) years;

3. Sale of goods $500 or more;

4. Sale of personal property of $5,000 or more;

5. Leasing of goods of $1,000 or more;

6. Installment retail contracts; and 

7. The promise by a person to pay another person’s debt.

An example will help explain why it is important for the above type of contracts to be in writing. Let’s say that Person A, Buyer, wants to buy a car from Person B, Seller. Buyer and Seller agree that Seller will sell the car to Buyer for $6,000. An offer and acceptance has been made with consideration. These are the usual requirements for a binding contract. Buyer is so excited and goes to the bank to get cash to buy the car. When Buyer returns from the bank, Buyer angrily finds out that Seller sold the car to another buyer for $8,000. Buyer yells at Seller and says, understandingly, that they had an agreement. Unfortunately, if Buyer sues Seller in court, the case would be dismissed since the contract was not in writing. If the contract was in writing, Buyer would prevail in court against Seller. 

The difference between a happy Buyer and an angry Buyer in the above example is a piece of paper that had the agreement between the Buyer and Seller. It is important to what types of contracts fall under the Statute of Frauds. If there is a breach of contract and you sue based on the contract, you do not want to file a lawsuit only to have it dismissed because the contract was not in writing.