The statute of frauds in the email age: Druet v Girouard.

• Author: Ogilvie, M.H.

Introduction

It is still too early to compose the final obituary for the Statute of Frauds. (1) Notwithstanding its repeal in whole or in part in some common law jurisdictions, this late 17th century legislation has once again proven its adaptability, this time to the age of the Internet, and to the making of contracts for the sale of land by email communications. Commercial parties have operated for much of the last decade on the assumption that enforceable agreements relating to land can be made by email. However, several recent English and Canadian decisions demonstrate that there are legal issues which must be resolved when using email to make contracts for the sale of an interest in land or for guarantees. Druet v Girouard, (2) in particular is a salutary reminder that the underlying reasons for the Statute of Frauds continue, mutatis mutandis, to justify why certain types of agreements ought to be in writing and authenticated by the signature of the person against whom they are to be enforced. This commentary will focus on these cases within the larger context of the reasons for the Statute of Frauds and suggest that those reasons continue to resonate even in the modern Internet age.

Some Historical Background

When first enacted in 1677, the Statute of Frauds applied to six types of contracts. Section 4 covered contracts by executors or administrators of estates to cover damages out of their own estates, contracts in consideration of marriage, contracts to be performed more than a year after their formation, contracts for the disposition of interests in land, and contracts of guarantee. Section 17 covered contracts for the sale of goods with a value of at least 10 [pounds sterling]. The preamble to the Act proclaimed its purpose to be the "prevention of many fraudulent practices which are commonly endeavoured to be upheld by perjury and subornation of perjury." The reason these were problematic is explained partly by then recent changes in the substantive law of contract and the lingering of older rules relating to evidence. The medieval action in covenant had required a sealed writing for enforceability but after Slade's Case (3) in 1602, the King's Bench permitted actions in assumpsit to be enforced. However, two procedural rules made the enforcement of oral agreements difficult. Neither parties to the action nor their spouses could give evidence, even when the action was to enforce an oral promise against a party, and juries were still permitted to decide cases on the basis of their own knowledge. The possibility of dishonest witnesses being used to perpetrate fraud was considerable. In light of the extreme litigiousness following the turbulent period of the English Civil War (1641-1649) and the Commonwealth (1649-1660), Parliament enacted the Statute of Frauds, the first statute ever to deal with contract, to provide greater certainty for agreements relating to particular economically significant categories of contracts, and to restore the older requirement of writing for enforceability.

Some 70 years ago, Professor Fuller suggested that the writing requirement served three main functions: (i) an evidentiary function in relation to significant transactions; (ii) a cautionary function to warn against precipitous or ill-considered agreements; and (iii) a channelling function to signal that a contract has now resulted from the negotiations. (4) While it may be debated whether the Act fulfils each of these functions completely, it cannot be doubted that it was intended to do so. The Act has therefore been subjected to a number of criticisms over the three centuries of its operation, these include: (i) the use of the Act as a defence for non-compliance with the writing and signature requirements to avoid liability when there was a promise to enter an agreement; (ii) the multiple problems of statutory interpretation which have resulted in thousands of cases over the centuries; (iii) the disappearance of the prevailing legal and social conditions of the 17th century, such as the procedural rules stated above, the subsequent admission of parol evidence to prove oral agreements, the increasing experience and skill of courts in adjudicating large financial transactions, and more stable socio-economic conditions in comparison to 17th century England; (iv) the growing divergence over time with actual contract making by oral agreement even for high value transactions; (v) the ambiguous nature of an unenforceable agreement that is still valid, which facilitated the equitable part performance exception undercutting the writing requirements; and (vi) the doubts that the Act ever served cautionary or channelling functions because it requires only a note or memorandum, and not a full contract in writing. (5)

In England, the Statute of Frauds has been subject to further additions, deletions and statutory reform over the centuries. In 1828, Lord Tenterden's Act (6) amended the Statue of Frauds by adding two new categories that were required to be in writing: ratification of infants' contracts on attaining the age of majority and representations as to the credit worthiness of another for which the representor was liable; and by adding sales of future goods to the categories required to be in writing. In 1856, the Mercantile Law Amendment Act (7) clarified that in contracts of guarantee, the consideration for the guarantor's promise did not have to be included in writing. In 1893, the Sale of Goods Act (8) (SOGA) removed the written requirement from s. 4 of the Statute of Frauds into SOGA, and in 1925, contracts for the sale of interests in land were removed from the Law of Property Act. (9) In 1954, the Law Reform (Enforcement of Contracts) Act, (10) repealed the SOGA provisions and the Statute of Frauds provisions relating to executors, marriage contracts and contracts to be performed after a year. In 1989 the Law Reform (Miscellaneous Provisions) Act (11) superseded the Law of Property Act, 1925, but retained the written requirement for transactions relating to land. The 1987 Law Commission Report preceding the 1989 changes expressly rejected the abolition of the written requirement for contracts relating to land because of the need for certainty and protection of those making what are likely to be the most valuable transactions they will ever make. (12) Indeed, the 1989 changes are more rigorous than the original Statute of Frauds', s. 2(1) states that such contracts "can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each." Thus in England, it is now necessary to have the entire contract in one document or in exchanged documents and signed by both parties. Failure to comply renders the agreement void rather than unenforceable. (13) The operation of part performance is effectively eliminated, although contracts can still be rectified or subject to properly authenticated collateral agreements, and restitution remains as a remedy for the recovery of a deposit on the ground of total failure of consideration. Briefly, in England, of the original categories of the Statute of Frauds, 1677, only guarantees remain enforceable if there is a signed note or memorandum by the party to be charged, while contracts for an interest in land must now comply with the 1989 Act. (14)

In Canada, the Statute of Frauds was originally in force in the common law jurisdictions by virtue of enactment prior to the specific provincial reception date for that jurisdiction. Four provinces have enacted their own versions of the 1989 Act; (15) one has since abolished it but retained the formal written requirements for transactions relating to land, (16) and one has since abolished it completely. (17) In all provinces, provisions relating to the sale of goods have been transferred to provincial consumer protection legislation, (18) but the formal written requirements remain in most provinces for transactions relating to land.

The relevance of the question of whether email is an appropriate means for making contracts relating to land is not limited to real property transactions. Other categories of agreements have been subsequently required by legislation to be evidenced in writing and signed, including various...