Contracts (Themis) - IV. STATUTE OF FRAUDS

B. 2. b. Exceptions

1) Indemnity contracts Indemnity contracts (i.e., a promise to reimburse for monetary loss) do not fall within the Statute of Frauds. 2) Main purpose exception In addition, if the main purpose of the surety in agreeing to pay the debt of the principal is for the surety's own economic advantage, rather than for the principal's benefit, the contract will not fall within the Statute of Frauds, and an oral promise by the surety will be enforceable.

B. 5. b. Exceptions

1) Specially manufactured goods No writing is required if the goods are to be specially manufactured for the buyer, are not suitable for sale to others, and the seller has made "either a substantial beginning of their manufacture or commitments for their procurement." UCC § 2-201. 2) Part payment When part of the purchase price has been paid, the contract is enforced and outside the UCC Statute of Frauds only to the extent of the purchase. 3) Receipt and acceptance The contract is outside the UCC Statute of Frauds to the extent that goods are received and accepted. 4) Judicial admission If the party to be charged admits in pleadings, testimony, or otherwise in court that a contract was made, the contract is enforceable only to the extent of the quantity admitted. 5) Failure to respond to memorandum (where both parties are merchants) If both parties are merchants and a memorandum sufficient against one party is sent to the other party, who has reason to know its contents, and that receiving party does not object in writing within 10 days, the contract is enforceable against the receiving party even though he has not signed it.

B. 3. a. Types

A promise to transfer or buy any interest in land is within the Statute of Frauds. The Statute of Frauds does not apply to the conveyance itself (which is governed by separate statutes everywhere) but rather to a contract providing for the subsequent conveyance of land. The following transfers are excluded from the rule: licenses, leases, and assignments of mortgages. However, the one-year rule does apply to such transfers. Consequently, a lease, license, or easement for more than one year must be in writing.

B. 1. MARRIAGE PROVISION

Any agreement in consideration of marriage is within the Statute of Frauds, except mutual promises by the two to marry each other.

B. 4. ONE-YEAR PROVISION

Contracts that cannot be performed within one year due to the constraints of the terms of the agreement must be in writing. The year starts the day after the contract is made. It is the time that the contract is made that is important, not the length of performance. Note that the fact that a contract is not completed within one year does not mean that it is voidable under the Statute of Frauds. For the Statute of Frauds to apply, the actual terms of the contract must make it impossible for performance to be completed within one year. Full performance will generally take the contract out of the Statute of Frauds. While part performance would not take the contract out of the Statute of Frauds, restitution would be available to the party who performed. EXAM NOTE: The test is whether the contract can be performed within one year, not whether it is likely to be performed within one year.

B. 3. b. Part performance

Even if an oral contract for the transfer of an interest in real property is not enforceable at the time it is made, subsequent acts by either party that show the existence of the contract may make it enforceable, even without a memorandum. Such acts include: i) Payment of all or part of the purchase price; ii) Possession by the purchaser; or iii) Substantial improvement of the property by the purchaser.

A. WRITING REQUIRED

Generally, oral contracts are enforceable. However, contracts that fall within the Statute of Frauds are unenforceable unless they are in writing. The writing must: i) Be signed by the party to be charged (i.e., the person against whom enforcement is sought); and ii) Contain the essential elements of the deal. The writing need not be formal (i.e., receipts or correspondence can serve as memoranda). The essential elements may be in more than one writing only if one of the writings references the other(s). The writing need not be delivered. Even if it is lost or destroyed, it still operates to satisfy the Statute of Frauds, and its prior existence can be proved by oral evidence. EXAM NOTE: Note that a memorandum sufficient to satisfy the Statute of Frauds does not need to be written at the time a promise is made. The memorandum also does not have to be addressed to the promisee to be enforceable by the promisee.

B. TYPES OF CONTRACTS WITHIN THE STATUTE OF FRAUDS

Most states require that these five categories of contracts be in writing: Marriage - A contract made upon consideration of marriage; Suretyship - A contract to answer for the debt or duty of another; Land - A contract for the sale of an interest in land; One year - A contract that cannot be performed within one year from its making; and UCC - Under the UCC, a contract for the sale of goods for a price of $500 or more. EXAM NOTE: You can remember which types of contracts are governed by the Statute of Frauds by using the mnemonic MS. LOU (Marriage, Suretyship, Land, One year, UCC).

B. 2. a. Rule

Suretyship is a three-party contract, wherein one party (surety) promises a second party (obligee) that the surety will be responsible for any debt of a third party (principal) resulting from the principal's failure to pay as agreed. A suretyship induces the second party to extend credit to the third party. A promise to answer for the debt of another must generally be in writing to be enforceable. EXAM NOTE: Remember that the surety must promise the creditor or obligee, not just the principal, that she will pay the debt of the principal.

B. 5. c. Modifications

Under UCC § 2-209(3), the requirements of the UCC Statute of Frauds must be satisfied if the contract as modified is within its provisions. Any of the above exceptions would apply, though, to take a modification out of the Statute of Frauds. The UCC would also enforce a provision in a contract for the sale of goods that required a modification to be in writing. Thus, even if the contract was for a sale of goods valued at less than $500 or involved one of the exceptions discussed above, if the contract specifically provided that any modification be in writing, the UCC would enforce that requirement. (See UCC § 2-902(2).) Note that under a common-law contract, a provision requiring a modification to be in writing even though the modification would not otherwise fall within the Statute of Frauds would not be enforceable.

B. 5. a. Sufficiency of the writing

When the price of goods is at least $500, the UCC requires a memorandum of the sale that must: i) Indicate that a contract has been made; ii) Identify the parties; iii) Contain a quantity term; and iv) Be signed by the party to be charged. The memorandum needs to be signed only by the party being sued; it does not need to be signed by both parties. A mistake in the memorandum or the omission of other terms does not destroy its validity. An omitted term can be proved by parol evidence. Enforcement is limited to the quantity term actually stated in the memorandum. EXAM NOTE: To satisfy the Statute of Frauds, the above terms must be in writing, but that writing need not be an actual contract. It doesn't even need to be contained on one piece of paper—a series of correspondence between the parties may suffice.

B. 2. SURETYSHIP PROVISION

a. Rule b. Exceptions

B. 5. SALE OF GOODS FOR $500 OR MORE

a. Sufficiency of the writing b. Exceptions c. Modifications

B. 3. LAND CONTRACTS

a. Types b. Part performance