STATUTE OF FRAUDS & $500+
Do you know someone that has been sued by a credit card company for a value of over $500? Do you know if a third-party was using this credit account without the authorized user's authorization?
It happens all the time... People getting sued by these credit card companies. As I walk the halls at court, I see individual defendants lining up to sign their names to yet another piece of paper that will hold them accountable to a debt that they may have a valid defense for.
Statute of Frauds ("SOF") is one of them. There are various issues where a court of law will deem a claim unenforceable if it does not comport to well established legal principles such as the SOFs. Let's see how the Statute of Frauds comes into play.
Contract Involving sale of goods over $500:
When a contract involves the sale of goods over $500, it must be in writing. See the Uniform Commercial Code (UCC) stating that "a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is 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 authorized agent or broker." 2-201; Illinois Statute 810 ILCS 5/2- 201(1) (West 2012).
Therefore, if you're involved in the business of buying or selling goods at a value of over $500, your agreements must be in writing to be enforceable under the law.
Unauthorized Third-Party User of debt over $500:
In Illinois, the Fraud Act states that "[no] action shall be brought *** whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person *** unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized." Illinois Statute: 740 ILCS 80/1 (West 2012).
Illinois courts have consistently stated that the purpose of the statute of frauds is to prevent frauds–" 'to give greater security to property, to guard against false contracts, set on foot by fraud and supported by perjury.' " RP Lumbar Company vs. Green, 2016 IL App (5th) 150060-U (2016) (citing Fleming v. Dillon, 370 Ill. 325, 332 (1938); Rosewood Care Center, Inc. v. Caterpillar, Inc., 226 Ill. 2d 559, 568 (2007) (quoting Hite v. Wells, 17 Ill. 88, 90 (1855)).
I recently dealt with this issue whereby my client was sued by a credit card company for an account she was never aware of and an extreme amount of security debt was racked up in her name. We put on a defense for her and alleged various affirmative defenses, one of which was the statute of frauds. My client has never signed an agreement with the credit card company for the line of credit, nor did she sign a separate agreement for a third-party user. Therefore, any charges made on the account were fraudulently made. By law, she should not be called to answer for the debts of another when it was predicated upon fraud and to which a valid written agreement could not be shown.
Other States:
Every state has their own statute of frauds. The UCC is national and governs any transaction involving the sale of goods. The UCC would be a good start to determine if there is a violation of this statute and if you can either bring a case or properly position a defense based on this statute.
Does the SOF cover any other issues?
Yes. The SOF covers various issues like service contracts that cannot be performed in one-year, purchase of real estate, leases of over $1,000.00 and more. If you have a particular issue and belief that the SOF may be applicable, you should always consult with counsel to determine your best course of action.
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