Statute of Frauds in the Philippines: What does the Philippine law say about Statute of Frauds?

The Statute of Frauds states that there are transactions that must be in writing to become enforceable in courts. In the United States, Statute of Frauds is listed in the sections 382-A:2-201, Section 506:1, and Section 506:2 of the Uniform Commercial Code. In the Philippines, the Statute of Frauds is stated in Article 1403 of the Civil Code of the Philippines. 

What does Article 1403 say about Statute of Frauds?

The following transactions must be in writing to become enforceable:

(a) An agreement that by its terms is not to be performed within a year from the making thereof.

There is no jurisprudence in the Philippines regarding this specific provision yet, however, a United States jurisprudence stated that the one year prohibition must be agreed upon at the time of the meeting of the minds of the parties. If the parties intended that the terms must be performed within a year but it became impossible to perform immediately, due to reasons beyond the parties’ control, the Statute of Frauds will not apply. 

(b) A special promise to answer for the debt, default, or miscarriage of another.

Contracts of guarantee and surety must be in writing to become enforceable.

(c) An agreement made in consideration of marriage, other than a mutual promise to marry.

All prenuptial agreements between future spouses must be in writing. The failure of the parties to put it into writing will make all agreements unenforceable.

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos (PHP500), unless:

i.  the buyer accept and receive part of such goods and chattels, or the evidence, or some of them, of such things in action;

To illustrate this situation, AA agreed with BB that he will buy 1000 pieces of mugs worth Php10,000. BB sent 500 pieces of mugs to BB but BB is no longer interested and returned the mugs to AA. AA sued BB for performance but BB stated that their contract was unenforceable because it was not in writing. In this case, BB could no longer unilaterally cancel the contract because he already received a part of the goods.

ii. or pay at the time some part of the purchase money; 

Simultaneous exchange of goods and money is an exception to the Statute of Frauds. For example, if AA bought a piece of jewelry worth Php600 and paid for it at the same time, she could no longer question the sale as unenforceable because there was a simultaneous exchange.

iii. but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

(e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein;

(f) A representation as to the credit of a third person.

Oral agreement as to loan is unenforceable without a written instrument to prove it. Many people failed to collect loans because they only made verbal arrangements especially when the debtor is their friend or someone related to them. Every creditor must use a promissory note to collect debts. Without a written instrument, the creditor may go to the court but will not receive relief from the court. 

How to ratify the Statute of Frauds?

1. Partial Performance – A partial performance allows the introduction of oral evidence in lieu of a written instrument.
2. Secondary written evidence – A written instrument, whether formal or not, which embodies the agreement of the parties may be used to prove the agreement.

What are the differences between the Statute of Frauds of the United States and the Philippines?

1. The UCC states that the lease of goods for at least $1,000 must be in writing. The Philippines does not have this provision.
2. The UCC states that the sale of goods amounting to Php 25,000* ($500) must be in writing. The Philippines requires that sales of goods amounting to Php500 ($10*) must be in writing.
3. Section 2-201 of the Uniform Commercial Code states that a written instrument is complied with if the transaction was between merchants who, within a reasonable time, made writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents. An example of which are invoices and order slips. In the Philippines, invoices and order slips fall under secondary written evidence.

Note: * Php50=$1