It is important to notice first that the Statute of Frauds says absolutely nothing about the formation of contracts. The statute doesn’t address the enforceability of a contract directly. Instead, it establishes a rule of evidence for use in Oregon courts. The common understanding that the Statute of Frauds makes certain contracts that are not in writing “illegal” is simply wrong.
What the Statute of Frauds says in reality is that certain evidence cannot be admitted in court to prove the existence of particular kinds of agreements. Without the required evidence, the agreement is considered void. “Void” here means of no legal force or effect. So the Statute of Frauds says certain agreements will not be enforced (not that they don’t exist) unless the proper evidence is introduced in court. As you can see, that has nothing whatever to do with the contract itself.
Not only does the Statute of Frauds have nothing to do with the contract itself, it requires more than just that the “contract” be “in writing.” Indeed, the Statute doesn’t even mention “contracts.” Instead, it speaks in terms of an “agreement” or some “note” or “memorandum” of an agreement. This agreement or note or memorandum must “express” the consideration for the agreement and be “subscribed by the party to be bound.” “Subscribed” means signed at the end of a document.
A more accurate restatement of the Statute of Frauds, for real estate purposes, might be that an agreement for the sale of real property, lease for a year or more or a listing, or some note or memorandum regarding the sale, lease or listing, must be in writing, express the consideration and the person against whom you want to enforce the agreement must have signed at the end of the document. This restatement is important because it draws out a number of unintuitive aspects of the Statute.
First, the Statute of Frauds is asymmetrical. That is the case because the only signature necessary is the signature of the person against whom the agreement is being enforced. For instance, a seller who signed a sale agreement accepting an offer a buyer did not sign could not use the Statute of Frauds to defend against a suit by the buyer, but the seller could not enforce the contract against the buyer. This asymmetry makes possible the other important unintuitive aspect of the Statute of Frauds: you don’t really need a written contract at all.
As mentioned above, the Statute of Frauds talks about an “agreement or some note or memorandum thereof.” Suppose I drop my mother a note that says “I agreed to sell my house to Bill Smith for $250,000” and I sign the letter. Can Bill Smith use the letter to my mother as evidence of an agreement to sell my house? Yes, he can! Can I use the letter against Bill if he backs out of the deal? No, I cannot because he didn’t sign anything. How about using an addendum signed by both parties that references a sale agreement neither signed? Sure, either party could use it to satisfy the Statute of Frauds but that doesn’t mean there was actually a contract. Whether there was actually a contract in the first place is never a Statute of Frauds issue.
As you can see, the Statute of Frauds is not as straight-forward as commonly believed. Actually, the worse is yet to come. Because the Statute of Frauds is a rule of evidence, courts do not consider it a substantive provision of law that makes all agreements that fall within its preview void if they do not meet the requirements of the Statute. Instead, courts will consider whether there is other evidence of the existence of an agreement and if there is, and injustice would result from not enforcing the agreement, they will take the agreement “out of the Statute of Frauds.” This neat judicial trick makes it very unwise to rely on the Statute of Frauds to avoid a contract that actually existed.
A person who uses the Statute of Frauds to avoid a contract actually agreed to is committing a fraud himself. They are using a rule of evidence to avoid doing something they actually agreed to do. Courts do not like being party to such manipulation and will avoid it if they believe it to be happening. It is for this reason courts hold that a contract the terms of which have been partially performed, is “taken out of the Statute of Frauds.” Courts will also enforce an oral agreement notwithstanding the Statute of Frauds if there is other evidence there was a contract and one party relied on the contract to their detriment. In an ordinary real estate transaction or listing agreement, either or both of these factors will come into play almost immediately – which explains why such contracts are almost never successfully avoided using the Statute of Frauds.
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