What is the statute of frauds?

Nebraska, along with every other state, has what is called a statute of frauds.  The purpose of the statute of frauds is to protect all parties to a contract; it is, as the name suggests, to prevent fraud.

Sales and Leases of Land:

For sales and leases, Neb. Rev. Stat. § 36-105 requires “Every contract for the leasing for a longer period than one year, or for the sale of any lands, shall be void unless the contract or some note or memorandum thereof be in writing and signed by the party by whom the lease or sale is to be made.”

We begin with a discussion of leases.  As § 36-105 states, “every contract for the leasing for a longer period than one year … shall be void unless the contract … be in writing and signed by the party to whom the lease … is to be made.”  If you have a lease for five years, that lease must be in writing and it must be signed by you, the person leasing the property (otherwise known as the tenant).  But what if you have a lease that is only for one year?  A one-year lease does not fall into the requirements for the statute of frauds.

(Keep in mind, however, that there are other good reasons to obtain a written lease, regardless of the statute of frauds.  It is a good idea to memorialize the essential terms of a contract, such as names of the parties, description of the land, price/rent, other general terms, and signatures.  This allows for a reference point in the future about the terms of the contract and can hopefully dispel disputes before they begin.)

The other category of contracts considered by the statute of frauds is the sale of land.  The “sale of any lands[ ] shall be void unless the contract or some note or memorandum thereof be in writing and signed by the party by whom the … sale is to be made.”  Again, this is a seemingly simple statement, that the sale of land must be accompanied by a written agreement signed by the seller.

There is an exception to the above, found in Neb. Rev. Stat. § 36-106.  A contract may be enforced in cases of part performance.  What this means is if a person is seeking to enforce the contract (specific performance), that person is required to prove an oral contract, the terms of which are clear, satisfactory, and unequivocal.  Additionally, the person must prove acts done in part performance of the oral contract were referable solely to the contract sought to be enforced, and not such as might e referable to some other or different contract.  Finally, the person must prove that nonperformance of the oral contract by the other person would amount to a fraud upon the person seeking specific performance.  See American Central City, Inc. v. Joint Antelope Valley Authority, 281 Neb. 742 (2011).

What does that mean?  To be frank, it means that you should get a written contract and not rely upon the exception in § 36-106.

Uniform Commercial Code:

If you are a farmer who is considered a merchant, the Uniform Commercial Code (“UCC”) provides that a contract for the sale of goods of $500 or more is not enforceable without some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized agent or broker.  Neb. U.C.C. §2-201.  There are specialized provisions in § 2-201 and we will discuss those at a later date.

A merchant, for our purposes, is defined as “a person who deals in goods of the kind or otherwise by his or her occupation holds himself or herself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.”  Neb. U.C.C. § 2-104.

Keep in mind that this provision is for ‘goods’, such as crops, dairy, or livestock.  It is not for land leases or sales.  If you want to read an in-depth discussion today, this publication from the Farmers’ Legal Action Group is great.

Clearly, this is not a simple topic and we’ve only scratched the surface.  Feel free to contact us if you have specific questions, especially if you are a beginning farmer!