Chapter 16- Writing and Requirement and Electronic Records

origins of statute of frauds

- "an act for the prevention of frauds and perjuries" established that certain types of contracts to be enforceable had to be evidenced by writing and signed by the party against whom enforcement was sought - purpose of statute was to ensure that for certain types of contracts there was reliable evidence of the contracts and their terms

The statute of frauds in the international context

- Convention of contracts for the international sale of goods (CISG) governs international sales contracts between citizens of countries that have ratified the convention - some countries such as france have never required certain types of contracts to be in writing

CASE: Salim v. Solaiman

- Mohammad Salim bought convenience store and gas station and made some improvements to the property and offered it for sale - Solaiman approached him about buying it and after negotiating, parties signed handwritten document memorializing terms of agreement, and signed for more formal type written " purchase and sale agreement" prepared by solaiman TYPED AGREEMENT DESCRIBED: where the property was and at what price... including security deposit of 25,000 - agreement didn't specify what would happen to security deposit in the event the sale failed to close - solaiman conducted investigation --- visiting stores, speaking to clerks, vendors, and customers, paid 2000 to renew stores alcoholic beverage license in their name 1. closing didnt happen when they said it would, and after receiving title report solaiman decided no longer wanted to buy the property 2. notified salim of their decision and asked for reimbursement of security deposit and alcohol license renewal fee 3. salim refused to pay the funds and solaiman filed action for breach of contract 4. trial court issued judgment in favor of solaiman after finding parties' purchase agreement to be unenforceable bc it doesn't sufficiently describe real property to be purchased (requirement that a contract to purchase real property include adequate property description arises under statute of frauds; to comply with the statute, an agreement for sale of land must be in writing and provide a sufficiently definite description of the property to be sold. specifically, such a contract must describe the property with same degree of certainty) 5. purchase agreement was required either to describe the particular tract / provide a key by which it may be located with the aid of extrinsic (outside) evidence. 6. to suffice as a key, the description must open the door to extrinsic evidence which leads to the land in question 6. if the words of the agreement, when aided by extrinsic evidence, fail to locate and identify certain tract of land, the description fails and instrument is void 7. property description fails to identify the land at issue with requisite certainty as it merely provides a street address 8. affirm trial court holding that the parties' purchase agreement was void for lack of an adequate property description

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

- NYKCool A.B. based in sweden, provides maritime transportation for hire - its a subsidiary of NYKReefers Limited, which operates as a subsidiary of Nippon Yusen Kabushiki Kaisha, one of worlds largest shipping companies - has a fleet of more than 50 ships and offices in argentina brazil, us etc. - focuses on transporting perishables, especially furit - to reduce number of empty containers, they disperse its large fleet around the globe in cost efficient patterns and carries other cargoes on its vessles return trips

CASE: NYKCool A.B. v. Pacific Fruit, Inc. Background and facts

- Pacific Fruit Inc exports cargo from Ecuador -NYKCool agreed to transport weekly shipments of bananas from ecuador to CA and Japan - @ end of the period, the parties agreed to extend the deal - due to disagreement over one of the terms, a new contract was never signed , but parties' trade continued - after 4 years of performance , a dispute arose over unused cargo capacity and unpaid freight charges - arbitratioin panel of the society of maritime arbitrators found that pacific fruit was liable to NYKCOOl for 8 million for breach of contract - NYKcool filed petition in fed court to confirm award, pacific appealed judgement in NYKCools favor, saying that: " the arbitration panel manifestly disregarded the law when it concluded that the parties had an enforceable contract"

contracts for the sale of goods

- UCC includes statutes of frauds provisions that require written electronic evidence or an electronic record of a contract for the sale of good prices at five hundred dollars or more - writing needs to only state the quantity term

Primary obligations

- a third party's promise to pay another persons debt or other obligation that is not conditioned on the persons failure to pay or perform - does not need to be in writing to be enforceable ex. nigel tells leanne, an ortho, that will pay for the services provided for nigels niece = primary obligation because has assumed financial responsibility for his niece debt

prenuptial agreements

- agreements made before marriage that define each partners ownership rights in the other partners property - must be in writing to be enforceable

An exception- the main purpose rule

- an oral promise to answer for the debt of another is covered by statute of frauds UNLESS the guarantors main purpose in incurring the obligation is to secure a personal benefit - doesnt need to be in writing - assumption is that court can infer from circumstances of a particular case whether the leading objective was to secure a personal benefit example) carlie contracts with custom manufacturing co. to have machines custom made for factory, she promises their supplier that if they continue to deliver the materials, she will guarentee payment - this promise doesnt need to be in writing because carlies main purpose in forming the contract is to secure a benefit for herself -

statute of fraud

- applies not to fraud, rather denies enforceability to certain contracts that don't comply with its writing requirements - purpose= to prevent harm to innocent parties by requiring written evidence of agreements concerning important transactions

CASE: Beneficial Homeowner Service Corporation v. Steele Background

- beneficial homeowner corporation filed a suit in NY state court against steeles to foreclose on a mortgage - beneficial (lender) claimed that the loan was secured by real property in east hampton - beneficial sought 91,000 in unpaid principal, plus interest - lender, based on its assertion that both the steeles had signed the loan agreement, filed a motion for summary judgement - among the docs that beneficial filed with the court was a copy of the loan agreement - there were two problems 1. the agreement identified stephen steele as the sole obligor (party owing the obligation) 2. and it had not been signed

In the language of the court:

- causes court to question plaintiffs good faith in commencing the action - in order for mortgage to be valid, there must be an underlying obligation that is to be secured by an interest in the real property - the loan agreement here that has been presented facially appears to run counter to NY statute of frauds - since there has been presented to this court no valid underlying obligation and no further explanation, the mortgage appears to fail as a matter of law -the sworn statements falsely assert that the defendant, Susan steele executed the loan agreement - the party will be completely without recourse in court of equity no matter what legal rights may be if comes b4 the court and is shown to have obvious misstatements of fact

Contracts involving interests in land

- contract calling for sale of land isn't enforceable unless it is in writing or evidenced by written memorandum - Land = real property and includes all physical objects that are permanently attached to the soil, such as buildings, fences, trees, soil itself - statute of frauds operates as defense to the enforcement of an oral contract for the sale of land

Admissions

- contract is enforceable if party admits under oath that contract for sale was made - can occur at any stage of the court proceedings - if party admits a contract subject to UCC, it is enforceable, but only to extent of the quantity admitted ex) rachel= president of company, admits under oath that an oral a agreement was made with commercial kitchens to buy certain equipment for 10,000 - court will enforce the agreement only to extent admitted (10,000) even if commercial kitchens claimed that the agreement involved 10,000 more of the equipment

sale contract to be enforceable under statute of frauds

- contract must describe the property being transferred with sufficient certainty for it to be identified

The One- Year Rule

- contracts that cannot be performed within one year from the day after the contract is formed must be in writing to be enforceable. bc party's memory is not reliable after one year

CASE: NYKCool AB v . Pacific Fruit Inc

- court considered whether by accepting that performance, the other party indicated that it also understood that a contract was in effect

decision and remedy

- court denied beneficial's motion for summary judgement - because mortgage involves transfer of real property, and its underlying obligation must be in writing to satisfy the state of frauds, to be enforceable it must bee signed by the party against whom enforcement is sought - court ordered hearing to determine whether , in presenting the unsigned document, beneficial had acted in good faith

specific performance

- equitable remedy that requires performance of the contract according to its precise terms - partial performance can occur when * purchaser has paid part of the price * taken possession of the property * and made permanent improvements to it - Whether a court will enforce an oral contract is determined by degree of harm that would be suffered if the court chose not to enforce the oral contract - parties still must prove than an oral contract existed though

statute of frauds

- every state has this statute that stipulates what types of contracts must be in writing

partially integrated

- if it contains only some of the terms that the parties agreed on and not others - evidence of consistent additional terms is admissible to supplement the written agreement

completely integrated

- if the contract contains all of the terms of the parties' agreement

integrated contracts

- in determining whether to allow parol evidence, courts consider whether the written contract is intended to be the complete and final statement of the terms of agreement - if it is, the contract is referred to as INTEGRATED CONTRACT = extraneous evidence is excluded - can be either completely or partially integrated

Contract that is oral when is required to be written

- is normally voidable by a party who later does not wish to follow through with the agreement

what must be contained in the writing?

- memorandum./ note of evidencing the oral contract need only contain the essential terms of the contract, not every term - must be some indication that the parties volunatarily agreed to the terms - under UCC, writing evidencing a contract for sale of goods only need state the quantity and be signed by party -under some state laws, the writing must also name the parties and identify the subject matter, consideration, and essential terms with reasonable certainty -contracts for sale of land required to state the price and describe the property with sufficient clarity to allow them to be determined without reference to outside sources - bc only the party against whom enforcement is sought must have signed the writing, a contract may be enforceable by one of its parties but not by the other

CASE: NYKCool AB v. Pacific Fruit, Inc In language of the court

- on appeal, pacific fruit contends that the arbitration panel manifestly disregarded NY contract law by concluding that pacific fruit enter into oral contract with NYKCool under which NYKCool agreed to transport weekly shipments from ecuador to CA and japan for 3 years - in order to claim this, a court must conclude that the arbitrator knew of the relevant legal principle, appreciated that the principle controlled the outcome of the dispute, and willfully insulted the governing law by refusing to apply it - awards are vacated on grounds of manifest disregard only in those exceedingly rare instances where some shocking failure to observe standards on the part of the arbitrator is apparent - standard essentially bars review of whether an arbitrator misconstructed a contract - court doesn't detect manifest disregard of the law in arbitration panels conclusion that the parties had entered into a binding oral contract for that period - they agree with panels conclusion that parties partial performance on the contract weighs strongly in favor of contract formation - the parties behavior suggests that they believed themselves subject to a binding agreement

Special exceptions under the UCC

- oral contracts for customized goods may be enforced in certain circumstances - oral contracts between merchants that have been confirmed in a written memorandum

oral contract is unenforceable if

- performance of a contract is objectively impossible during the one year period example) a contract to provide five crops of tomatoes to be grown on a specific farm in Illinois = objectively impossible to perform within one year

Secondary obligations

- promise to pay anothers debt only if that party fails to pay - example, kareems mother borrows money from trust company on promissory note payable in six months. kareem promises bank that he will pay if his mother does not pay the loan on time, kareem = becomes what is known as guarantor on the loan,,, guarenteeing to the bank that he will pay the loan if his mother fails to do so - must be in writing to be enforceable

Both promissory estoppel and partial performance

- require reasonable reliance and operate to estop a party from claiming that no contract exists

statute of frauds for land

- requires written evidence of contracts for the transfer of other interests in land, such as mortgage agreements and leases - agreement that includes an option to purchase real property must be in writing for the option to be enforced

Collateral Promise

- secondary promise - one that is subsidiary to a principal transaction or primary contractual relationship - one made by a third party to assume the debts or obligations of a primary party to a contract if that party does not perform - ANY COLLATERAL PROMISE OF THIS NATURE FALLS UNDER STATUTE OF FRAUDS and therefore must be in writing to be enforceable -

The parol evidence rule

- sometimes written contract doesnt include or contradicts an oral understanding reached by the parties before or at the time of contracting ex) a landlord might tell a person who agrees to rent an apartment that the cats are allowed, whereas the lease contract clearly states that no pets are permitted - under the rule, if a court finds that a written contract represents the complete and final statement of the parties' agreement, it will not allow either party to present parol evidence

state legislation

- statutes for every state modeled after the English act vary from state to state - in context of electronic communications, party's name typed at the bottom of email can qualify as a signature

if the performance is possible within one year under the contracts terms,

- the contract doesnt fall under or within the statute of frauds and need not be in writing ex) oral contract for lifetime employment doesnt fall within the statute because an employee can die within a year, so the contract can be performed within a year or janine enters contract to provide security services for a warehouse for as long as warehouse needs them= can be fully performed within a year bc the warehouse could go out of business within 12 months

for both completely and partially

- the courts exclude any evidence that contradicts the writing and allow parol evidence only to add to the terms of a partially integrated contract

CASE: Beneficial Homeowner Service Corporation v. Steele

- the plaintiff sought to enforce a written contract that was missing the signatures of the parties against whom enforcement was being sought

Decision and Remedy for NYKCool vs. Pacific Fruit Inc.

- the us court of appeals for the 2nd circuit affirmed the judgment of the lower court - the appellate court reasoned that the parties substantial partial performance on the contract weighs strongly in favor of contract formation

Promises made in consideration of marriage

- unilateral promise to make monetary payment or to give property in consideration of a promise to marry must be in writing ex. if a mother promises to pay a man if he marries her daughter, the promise must be in writing to be enforceable - same rule applies to prenuptial agreements

Partial performance (exceptions to writing requirement)

- when a contract has been partially performed and parties cannot be returned to positions prior to the contract, a court may grant specific performance

CASE: Salim v. Solaiman

- whether a contract for the sale of land met this requirement was at issue (property being transferred)

What constitutes a writing?

- writing can consist of any order confirmation, invoice, sales slip, check, fax, or email, or such items in combination - written contract doesn't have to consist of a single document in order to constitute enforceable - one document may incorporate other documents by expressly referring to it - several docs may form a single contract if they are physically attached by staple, paper clip, glue - several docs may from single contract even if they are only placed in the same envelope

Sufficiency of the writing

- written contract will satisfy writing requirement as will a written memorandum or an electronic record that evidences the agreement and is signed by the party against whom enforcement is sought - signature can be placed anywhere in the document

Promissory Estoppel

-oral contract that would otherwise be unenforceable under statute of frauds may be enforced in some states under doctrine of promissory estoppel -for the promise to be enforceable, the promisee must have justifiably relied on it to her/ his detriment, and the reliance must have been foreseeable to the person making the promise - there must be no way to avoid injustice except to enforce the promise

Contracts that require a writing/ evidenced by a written memorandum or electronic record

1. contracts involving interest to land 2. contracts that cannot by their terms be performed within one year from the day after the date of formation 3. collateral, or SECONDARY CONTRACTS such as promises to answer for the debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate personally--- that is, out of her/his own pocket 4. promises made in consideration of marriage 5. under UCC--- contracts for the sale of goods priced at $500 or more

parol evidence

= a testimony or other evidence of communications between the parties that is not contained in the contract itself - a party normally cannot present evidence of the parties' prior negotations, prior agreements, or contemporaneous (happening at the same time) oral agreements if that evidence contradicts / varies the terms of the written contract

written memorandum

= series of communications evidencing a contract will suffice - provides that the writing is signed by the party against whom enforcement is sought -writing needs not designate the buyer or seller, the terms of payment, or price

exceptions to the parol evidence rule

bc of the rigidity of the parol evidenc rule, the courst have created the following exceptions: 1. contracts subsequently modified; evidence of any subsequent modification (oral/written) of a written contract can be introduced in court. -oral modifications may not be enforceeable under the statute of frauds - oral modifications will not be enforceable if the original contract provides that any modification must be in writing 2. voidable or void contracts; oral evidence can be introduced in all cases to show that the contract was voidable or void - bc if deception led one of the parties to agree to the terms of a written contract, oral evidence attesting to the fraud should not be excluded - contracts containing ambiguous terms, when the terms of written contract are ambiguous and require interpretation, evidence is admissible to show the meaning of the terms 3. incomplete contracts; when the written contract is incomplete in that it lacks one or more of the essential terms, the courts allow additional evidence to fill in the gaps 4. prior dealing, course of performance, or usage of trade; under UCC, evidence can be introduced to explain/supplement a written contract by showing a prior dealing, course of performance, or usage of trade - bc when buyers and sellers deal with each other over extended periods of time, certain customary practices develop, these practices are often overlooked in writing the contract, so courts allow the intro of evidence to show show the parties have acted in the past - usage of trade- practices and customs generally followed in a particular industry- can also shed light on the meaning of certain contract provisions---- evidence of trade usage may be admissable 5. Contracts subject to an orally agreed on condition precedent; - sometimes parties agree that condition must be fulfilled before party is required to perform the contract = condition precedent - if parties have orally agreed on condition precedent that does not conflict with terms of writing, a court may allow parol evidence to prove the oral condition - parol evidence rule doesnt apply here because the existence of the entire written contract is subject to an orally agreed on condition - proof of the condition doesn't alter / modify the written terms but affects the enforceability of the written contract 6. contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties. - parol evidence is admissible to correct an obvious typographic error

parol evidence rule

court follows when determining whether evidence that is extraneous, or external, to written contracts may be admissible at trial

Contract that is otherwise valid

may still be unenforceable if it is not in the proper form - certain types are required to be in writing or evidenced by a memorandum/ electronic record