Business Law exam 2

NYKCool A.B. v. Pacific Fruit, Inc.

- partial performance is evidence of oral agreement

1. Contracts for Interest in Land

-A contract for the sale of land is not enforceable unless it is in writing. -Land is real property and includes all physical objects that are permanently attached to the soil. -Statute of Frauds also applies to the transfer of other interests in land, such as mortgage agreements, leases or options to purchase. -Sloop v. Kiker

Collateral promise example

-A promise to pay another's debt only if that party fails to pay is a secondary obligation. - writing requirement

Statute of Frauds

-A state statute requiring that certain types of contracts be evidenced by a signed writing (or its electronic equivalent) in order to be enforceable. -Varies state to state -Doesn't actually apply to fraud -Primary purpose is to prevent harm to innocent parties by requiring written evidence of agreements concerning important transactions and their terms.

4. Promises Made in Consideration of Marriage:

-A unilateral promise to make a monetary payment or give property in consideration of a promise to marry must be in writing to be enforceable. -Includes prenuptial agreements. These are agreements made before marriage that define ownership rights in other partner's property.

Exception to Collateral Promise: The "Main Purpose" Rule

-An oral promise to answer for the debt of another as a secondary obligation is covered by the Statute of Frauds unless the guarantor's main purpose is to secure a personal benefit.

example of the main purpose rule

-Creditor guarantees a debtor's debt to another creditor to forestall litigation. -Creditor's personal benefit = keeping debtor in business long enough to generate more profits to pay off both debts to both creditors. -Here, guarantee does not need to be in writing to be enforceable.

Examples of Marriage Promises

-Evan promises to buy Celeste a condo in Maui if she marries him. Celeste needs this promise in writing to enforce it. -Prenup: Nicole Kidman agreed to pay Keith Urban $640k for every year of marriage upon divorce unless Urban starts using drugs again, then he would get nothing.

Sufficiency of the Writing

-The writing requirement can be satisfied by a written contract, a written memorandum, or an electronic record that evidences the agreement and is signed by the party against whom enforcement is sought. -Signatures can be anywhere in the writing and can consist of a typed name or even just initials. -A writing can consist of any order confirmation, invoice, sales slip, check, fax, or e-mail—or a combination of these items. -The written contract can consist of multiple documents that are physically attached or placed in the same envelope or incorporated by expressly referring to them. -A memorandum or note evidencing an oral contract only needs the essential terms of the contract, not every term. -There must also be some indication that the parties voluntarily agreed to the terms. -The essential terms: Most states require quantity, signed by party to be charged, names of parties, identify subject matter and consideration with reasonable certainty. -Sales of land must also state the price and property description with sufficient clarity.

Collateral Promise example 2

-Uncle tells orthodontist he will pay for braces for his niece only if his sister, her mother, does not pay for them. This is a secondary obligation of a third party to the debt, so a writing is required to enforce.

One Year Rule Example

-University and Professor agree to teaching contract for the next academic year (August 15 - May 15) and sign the agreement in March. - Writing required, as cannot perform within 1 yr (objectively impossible). -If sign agreement in July, no writing required, can perform within 1 yr.

2. One Year Rule

-When performance of a contract is objectively impossible during the one-year period, the contract must be in writing to be enforceable. -Reason is people's memories are less reliable after a year.

1. Partial performance

-an unmistakable indication that one party believes there is a contract. -When the contract has been partially performed, and the parties cannot be returned to their original positions, a court may grant specific performance, an equitable remedy that requires performance of the contract according to its precise terms (including oral contracts). -For oral contracts for transfer of interests in land, courts usually look at whether justice is better served by enforcing the oral contract when partial performance has taken place.

Partial Performance Examples

-purchaser paid part of the price, took possession and made improvements to the property. -Some states remove Statute of Frauds requirement for mere reliance on oral contract. NYKCool A.B. v. Pacific Fruit, Inc

Contracts that require writing (Five)

1. Contracts for interests in land. 2. One year rule 3. Collateral/secondary contracts 4. Promises made in consideration of marriage. 5. Contracts for Sale of Goods

Statute of Frauds Exceptions

1. Partial Performance 2. Admission 3. Promissory Estoppel

Exceptions to the Parol Evidence Rule

1.Subsequent Modifications to Written Contracts (oral or written, unless modifications required to be in writing). 2. Voidable or void contracts; i.e. mistake, fraud, misrepresentation. Courts frown on this behavior so will allow evidence. 3. Ambiguous Terms in Written Contracts requiring interpretation. 4. Incomplete contracts (ok to "fill in the gaps" of missing essential terms). 5. Prior dealing, course of performance, usage of trade (customary practices) - use to explain or supplement written contract. 6. Contracts subject to orally agreed-on conditions precedent (i.e. condition must be fulfilled before a party can perform). Proof of condition does not alter written terms of contract but affects enforceability. 7. Contracts with an obvious or gross clerical or typographical error. Admit evidence to correct mistake. (Frewill LLC v. Price)

3. Collateral/Secondary Contracts

A collateral promise (or secondary promise) is one that is ancillary (subsidiary) to a principal transaction or primary contractual relationship.

Example of Admission

Buyer admits an oral agreement was made to purchase equipment from Seller for $10k. Court will enforce this only to the extent admitted, even if Seller claims agreement was for $20k.

2. Admissions

If a party against whom enforcement of an oral contract is sought "admits" under oath that a contract for sale was made, the contract will be enforceable to the extent of the quantity admitted.

3. Promissory Estoppel

If a person justifiably relies on another's promise to his or her detriment, a court may estop (prevent) the promisor from denying that a contract exists.

Sloop v. Kiker

Kiker owned a house in Arkansas. Sloop contracted to purchase the house and the land for $850,000. Sloop made the $350,000 down payment, the down payment provision read that if the buyer withdrew, the seller would get to retain the amount and the buyer would vacate the property. By the payment deadline, Sloop informed the Kikers she would be unable to pay the balance by date. Sloop sued, she contended that the contract was deficient because it did not name the Kikers as sellers but since the warranty deed executed on the same day described the property and named the Kikers, the Statute of Frauds was satisfied summary judgement was affirmed.

Frewill LLC v. Price

Price and Smith attending college, contacted Frewil about renting apartment, they were told that it had washer/dryer and dishwasher, even though lease didn't say thatThey found housing elsewhere because there was an absence of those appliances → Frewil sued them for breach of contract, Court decided that because the lease was ambiguous, parol evidence could be used

5. Contracts for the Sale of Goods:

The Uniform Commercial Code (UCC) requires written evidence or an electronic record of a contract for the sale of goods priced at $500 or more. -A writing that satisfies the UCC requirement only needs to state the quantity term, i.e. 6,000 sneakers. This is required. -Other agreed-on terms can be omitted or stated imprecisely in the writing—as long as both parties' intentions are adequately reflected. This includes omitting the buyer or seller name, the terms of payment or the price.

Integrated Contracts:

•A contract that is intended to be the complete and final statement of the terms of the agreement. -Completely integrated: Contains all of the terms of the parties' agreement. -Partially integrated: Contains some of the terms that the parties agreed on but not others. -For integrated contracts, courts reject evidence that contradicts the writing, parol evidence is allowed only to add to the terms of partially integrated contract.

The Statute of Frauds in the International Context

•The Convention on Contracts for the International Sale of Goods (CISG) governs international sales contracts between citizens of countries that have ratified the convention (agreement). •Article 11 of the CISG does NOT incorporate any Statute of Frauds provisions. This is in accordance with the legal customs of most nations. •A contract for sale need not be evidenced by writing or other form requirements to be enforceable.

The Parole Evidence Rule

•What happens when a written contract does not include, or contradicts, an oral understanding reached by the parties before or at the time of contracting? •Example: landlord tells lessee they can have a cat but the lease contract says no pets are allowed. •If a court finds that a written contract represents the complete and final statement of the parties' agreement, neither party is allowed to present parol evidence. •Parol Evidence = testimony or other evidence of communications between the parties that is not contained in the contract itself.