Ch. 16: The Writing Requirements

Exceptions. Can show Parole evidence IF:

1. Contracts subsequently modified. - not enforceable under Statute of Frauds 2. Voidable or void contracts. 3. Contracts containing ambiguous terms. 4. Incomplete contracts 5. Prior dealing, course of performance, usage of trade. 6. Contracts subject to orally agreed-on conditions precedent. 7. Contracts with obvious/gross typos or clerical errors

Requirements of the Statute of Frauds

1. contract is in writing, and 2. signed by the party against whom enforcement is sought (or by the party to be charged w/ the damages for breach or the party to be sued)

example of contract impossible to perform within 1 year:

A contract to provide five crops of tomatoes to be grown on a specific farm in Illinois would be objectively impossible to perform within one year. No farmer in Illinois can grow five crops of tomatoes in a single year.

Statute of Frauds

A state statute under which certain types of contracts MUST be in *writing* to be enforceable enforceability to certain contracts that do not comply with its writing requirements (avoiding fraud)

Which of the following job offers are under the Statute of Frauds? a. you have a job w/ this co. until you reach retirement age b. you have a job w/ this co. as long as we are in business c. you have a job w/ this co. for life

a. you have a job w/ this co. until you reach retirement age (it's more than 1 year) b & c: anything can happen - can be out of business within that year, or something can happen to you that same year

What constitutes a writing?

- any order confirmation, invoice, sales slip, check, fax, e-mail, or even text messages can be enough - can be more than a single doc

what must be contained in the writing?

- memorandum or other writing evidencing the contract need ONLY contain the basic, *essential terms* of the contract - contract for the sale of goods ==> quantity must be indicated - other contracts ==> parties, subject matter, consideration, and any other essential terms must be indicated w/ reasonable certainty - contract for the sale of land ==> in some states, the writing must contain the price & description of the property

Contracts that Require a Writing (must meet the Statute of Frauds requirements)

1. Contracts involving interests in land 2. Contracts that cannot by their terms be performed within 1 year from the day after the date of formation (for >1 year) 3. Collateral Promises 4. Promises made in consideration of marriage 5. Under the Uniform Commercial Code (UCC), contracts for the sale of goods priced at $500 or more. (all not enforceable unless in writing)

Main purpose rule example

Carlie Braswell contracts with Winsom Manufacturing Company to have some machines custom-made for her factory. She promises Newform Supply, Winsom's supplier, that if Newform continues to deliver the materials to Winsom for the production of the custom-made machines, she will guarantee payment. This promise need not be in writing, even though the effect may be to pay the debt of another. This is because Braswell's main purpose in forming the contract is to secure a benefit for herself.

Example of collateral promise:

Connor tells Leanne Lu, an orthodontist, that he will pay for the services provided for Connor's niece, Allison. Because Connor has assumed direct financial responsibility for his niece's debt, this is a primary obligation and need not be in writing to be enforceable. In contrast, if Connor commits to paying Allison's orthodontist bill only if her mother does not, it is a secondary obligation. In that situation, Lu must have a signed writing or record proving that Connor assumed this secondary obligation for it to be enforced.

Under the Statute of Frauds, a signature must be handwritten at the end of the written contract.

False a signature can be a typed name or initials and can be anywhere in the writing

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 can occur at any stage of the court proceedings example: Rachel, the president of Bistro Corporation, admits under oath that an oral agreement was made with Commercial Kitchens, Inc., to buy certain equipment for $10,000. A court will enforce the agreement only to the extent admitted ($10,000), even if Commercial Kitchens claims that the agreement involved $20,000 worth of equipment.

Special Exceptions under the UCC

Oral contracts for customized goods may be enforced in certain circumstances. oral contracts between merchants

2) The "One-Year" Rule

Rule: if contract cannot be performed WITHIN 1 YR --> needs to be in writing to be enforceable - time period starts the day AFTER the contract is formed, not the date which performance is to begin - if the time for performance is of uncertain duration, but depends upon some contingency that may occur within 1 year, an oral contract is enforceable

5. Contracts for the Sale of Goods

Statute of Frauds requires written evidence of contracts for the sale of goods at $500 or more

example of time period starts the day after formed contract:

Superior University forms a contract with Kimi San stating that San will teach three courses in history during the coming academic year (September 15 through June 15). If the contract is formed in March, it must be in writing to be enforceable—because it cannot be performed within one year. If the contract is not formed until July, however, it does not have to be in writing to be enforceable—because it can be performed within one year.

16-2

The parol evidence rule prohibits the introduction at trial of evidence of the parties' prior negotiations or agreements or contemporaneous oral agreements if that evidence contradicts or alters the terms of a written contract. The written contract is ordinarily assumed to be the final embodiment of the parties' agreement. But when, for example, the terms of a written contract are ambiguous, evidence is admissible to show the meaning of the terms. Here, the terms of the lease are not ambiguous, the contract can be interpreted on its face, and parol evidence is not admissible.

4. Promises made in consideration of Marriage

Unilateral promises to pay money or give other property in exchange for promises to marry, must be in writing example - if a mother promises to pay a man 20k if he marries her daughter - that promise must be in writing OR Evan promises to buy Celeste a condo in Maui if she marries him. Celeste would need written evidence of Evan's promise to enforce it.

(Collateral Promises) Mallory promises a local hardware store that she will pay for a lawn mower that her brother is purchasing on credit if the brother fails to pay the debt. Must this promise be in writing to be enforceable? Why or why not?

Yes, as a secondary debtor, the contract must be in writing if the main purpose in accepting secondary liability is to secure a personal benefit (mallory's bro bough the mower for her), then the contract doesn't need to be in writing

(The One-Year Rule) On May 1, by telephone, Yu offers to hire Benson to perform personal services. On May 5, Benson returns Yu's call and accepts the offer. Discuss fully whether this contract falls under the Statute of Frauds in the following circumstances a. The contract calls for Benson to be employed for one year, with the right to begin performance immediately. b. The contract calls for Benson to be employed for nine months, with performance to begin on September 1. c. The contract calls for Benson to submit a written research report, with a deadline of two years for submission.

a. possible to perform contract within 1 year - outside of statute of frauds b. 9 months after Sept. 1 => June 1 May 5th original to June 1 next year - takes longer than 1 year within the statute of frauds - needs to be in writing c. can submit it within 1 year - outside of statute of fraud

Who must have signed the writing?

by the party against whom enforcement is sough (the party charged) or his authorized agent

James telephones Wanda expressing interest in purchasing her famous chocolate ice cream. Wanda receives a purchase order for 100 gallons of ice cream from James for $300. On the appointed delivery date, Wanda delivers James 100 gallons of vanilla ice cream, stating that the contract didn't specify what flavor James wanted. James sues Wanda for the chocolate ice cream. A court will likely find that James:

can submit evidence of the telephone call expressing interest in chocolate ice cream, because the contract was ambiguous on which flavor would be purchased. - when the terms of a written contract are ambiguous, evidence is admissible to show the meaning of the terms

Exceptions to the Statute of Frauds/writing requirement

don't have to be in writing 1. partial performance 2. admissions 3. promissory estoppel 4. special provisions under the UCC

Promissory Estoppel

if a person justifiably relies on another's promise to his/her detriment, a court may estop (prevent) the promisor from denying that a contract exists 1. the promisee must have justifiably relied on it to her/his detriment 2. reliance must have been foreseeable to the person making the promise

Rebecca owns a vacant lot. For years, it has produced nothing but weeds, which she has struggled to keep mowed. She has considered selling it, but it has decreased in value over the years, and she does not want to sell it at a loss. Lou owns the adjoining parcel of land and is planning to build a shopping center on the land. This would cause Rebecca's land to triple in value. Lou now says that he may not build the shopping center, and Rebecca threatens to sue if he does not go ahead with his original plans. In this situation, Rebecca is:

incidental beneficiary - Lou's plans confer an unintended benefit on Rebecca, making her an incidental beneficiary. Thus, she has no right to sue Lou should he choose not to build the shopping center.

Whitewater Canyon Adventures, Inc., and Xtra Overstock Company enter into an oral contract for Xtra's sale to Whitewater of five rafts for $2,000 each. Before Whitewater takes possession of the rafts, this contract is enforceable by:

none Since this contract is for the sale of goods over $500, the Statute of Frauds would apply. Thus, the contract is not enforceable unless some exception applies. Partial performance would be such an exception, but since Whitewater has not taken possession of the rafts, it does not apply here.

if a secondary promise is made to the principal debtor INSTEAD of the creditor, the promise is -

not within the statute of frauds (does not have to be in writing)

3. Collateral Promises

or secondary promise - made by a 3rd party to pay the debt of the primary party to a contract if the primary party fails to pay/perform must be in writing

What do courts look at when a written contract does NOT include/contradicts an oral understanding reached by the parties before or at the time of contracting?

parol evidence rule example - a landlord might tell a person who agrees to rent an apartment that cats are allowed, whereas the lease contract clearly states that no pets are permitted. Courts resolve this using parol evidence

primary obligation v. secondary obligation

primary obligation - a promise to pay debt secondary obligation - a promise to pay ANOTHER's debt only if that primary party fails to pay **primary does NOT have to be in writing to be enforceable, but secondary DOES need to be in writing

collateral promises picture

promise is made to the creditor by a person not presently liable for the debt/has to duty to perform (guarantor)

1) Contracts involving interests in land

real property - all physical objects that are permanently attached to the soil (buildings, fences, trees, soil itself) other interests in land - leases, mortgages - contract must describe the property being transferred w/ sufficient certainty for it to be identified

Partial Performance

specific performance is granted by courts when a contract has been partially performed & parties cannot returned to their positions before the contract's formation example - if the purchaser has paid part of the price, taken possession & made valuable improvements to the property, a court may grant specific performance

Parole Evidence Rule

testimony or other evidence of communications between the parties that is NOT contained in the contract itself. (evidence of prior negotiations, prior agreements, or oral agreements that contract the terms of a written contract CANNOT be introduced at trial)

"Main purpose rule" Exception

the contract does NOT need to be in writing if the main purpose/leading objective of the secondary promisor/guarantor when making the promise to the creditor is *to protect his own interest or to secure a personal benefit*

if the performance is possible within 1 year under the contract's terms -

the contract does not fall under the Statute of Frauds & needs not to be in writing

Specific performance may be granted to enforce an oral contract to transfer an interest in land:

when the contract has been partially performed and great harm would result if the contract were not enforced. if fully performed - there would be no issue

if written instrument is considered to the complete, integrated agreement, final statement of the parties, the court -

will NOT allow parties to present parole evidence - meaning no evidence allowed of prior negotiations, prior agreement or oral contemporaneous (at the same time signing contract) statements which contradict the writing

even if performance actually takes more than 1 year, is an oral contract enforceable?

yes, as long as performance was possible within 1 year