Opinion ID: 1578890
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Heading: The law generally. Iowa's Statute of Frauds states in relevant part:

Text: Except when otherwise specially provided, no evidence of the following enumerated contracts is competent, unless it be in writing and signed by the party charged or by the party's authorized agent: .... 2. Those wherein one person promises to answer for the debt, default, or miscarriage of another, including promises by executors to pay the debt of the decedent from their own estate. .... 4. Those that are not to be performed within one year from the making thereof. Iowa Code § 622.32. This statute does not render the oral promises mentioned invalid. Rather, the statute merely renders incompetent oral proof of such promises. For this reason, the statute is a rule of evidence and not of substantive law. The statute provides a defense, and the party asserting it must therefore raise it by answer or by objection to evidence at trial. Sun Valley Iowa Lake Ass'n v. Anderson, 551 N.W.2d 621, 630 (Iowa 1996). B. Oral promise to answer for the debt of another. As mentioned, Iowa Code section 622.32(2) bars evidence of an oral contract under which one person promises to answer for the debt, default, or miscarriage of another. Iowa Code § 622.32(2). As one treatise has noted, the Statute of Frauds has been confined to promises made to the creditor. 9 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 22:3, at 233 (4th ed.1999). The Restatement of Contracts similarly provides that [a] contract is not within the Statute of Frauds as a contract to answer for the duty of another unless the promisee is an obligee of the other's duty, the promisor is a surety for the other, and the promisee knows or has reason to know of the suretyship relation. Restatement (Second) of Contracts § 112, at 292 (1981). The Restatement explains the purposes underlying the Statute of Frauds: In general the primary purpose of the Statute of Frauds is assumed to be evidentiary. In the case of suretyship contracts, however, the Statute also serves the cautionary function of guarding the promisor against ill-considered action. The suretyship provision is not limited to important or complex contracts, but is limited to suretyship and to promises made to an obligee of the principal obligation. Such promises serve a useful purpose, and the requirement of consideration is commonly met by the same promise or performance which is consideration for the principal obligation. But the motivation of the surety is often essentially gratuitous, his obligation depends on a contingency which may seem remote at the time of contracting, and natural formalities which often attend an extension of credit are likely not to provide reliable evidence of the existence and terms of the surety's undertaking. Hence the requirement of a writing. Reliance of the kinds usual in suretyship situationsextension of credit or forbearance to pursue the principal obligordoes not render the requirement inapplicable. Id. cmt. a. According to the Restatement of Contracts, The word duty is used here as a substitute for the words debt, default or miscarriages used in the English statute to describe the principal obligation. Those words and corresponding words in the American statutes include all kinds of duties recognized by law, whether or not contractual and whether already incurred or to be incurred in the future. The person owing the duty is called the principal debtor or obligor. The duty may be conditional, voidable or unenforceable; but if there is no duty at all, the Statute does not apply. Id. cmt. b (emphasis added). As the Harriotts contend, this is not a suit by a creditor on a promise to the creditor. Rather, this is a suit by shareholders of a corporation against another shareholder based on an alleged promise to contribute to the corporation to cover cash shortfalls. What is missing here is a promise by the Harriotts and Tronvold to a specific creditor of the corporation to pay a debt the corporation owes to the creditor. The alleged promise here is therefore not within the scope of section 622.32(2). That brings us to Tronvold's alternative Statute of Frauds ground. C. Promises not to be performed within one year. As also mentioned, section 622.32(4) bars evidence of oral contracts that are not to be performed within one year from the making thereof. Iowa Code § 622.32(4). As we said in Garland v. Branstad, In deciding whether a particular oral contract is governed by [section 622.32(4)], the question is not whether performance must actually be completed within a year but whether it would be possible to perform the contract within that time frame. Put another way, [c]ontracts of uncertain duration are simply excluded; the provision covers only those contracts whose performance cannot possibly be completed within a year. 648 N.W.2d 65, 71 (Iowa 2002) (quoting Restatement (Second) of Contracts § 130 cmt. a, at 328 (1981)). We therefore agree with the Harriotts that section 622.32(4) is narrowly applied to contracts that are not capable under any circumstances of being performed in one year. So the fact that an oral contract is performed over a period of time in excess of one year does not bar evidence of such a contract. Here the alleged contract to contribute to the corporation to cover cash shortfalls was clearly one of uncertain duration. As the Harriotts point out, any contract that requires or contemplates future payments would not be performable within one year if those payments are in fact made. But the impossibility requirement necessarily recognizes such performance might occur in less than a year. For example, the parties could have sold the ballpark or done a number of things to prevent performance within one year. We therefore conclude that neither provision of the Statute of Frauds barred evidence of the alleged contract to contribute to the corporation to cover cash shortfalls. The court of appeals erred in concluding otherwise.