BLaw Ch 14
Implied Integration
a doctrine that permits the formation of a contract if several documents are somehow physically attached to each other (Ex- in an envelope, using paper clips, stapling them, etc). The contract that is created consists of the terms of separate documents
Easement
-(given or required) -Right to use someone else's land without owning or leasing it §Easements may be either express or implied. Express easements must be in writing to be enforceable, while implied easements need not be written. Becomes a permanent part of a piece of land
Case 14.1: In the Matter of Pilgrim's Pride Corporation
-706 F.3d 636 (2013) -United States Court of Appeals for the Fifth Circuit •Issue -Do the contracts signed by the growers bar their claims of oral promises made by PPC? PPC had contracts with growers on a flock to flock basis (4-9 weeks), and with a merger clause. PPC terminates contracts and growers sue for oral representation (PPC said they'd be here for the long haul) -Decision: The U.S. court of appeals affirmed the district court's ruling in favor of PPC. Since the merger clause was in place, PPC's representations can NOT be brought against them in court
Case 14.2: Yarde Metals, Inc. v. New England Patriots Limited Partnership
-834 N.E.2d 1233 (2005) -Appeals Court of Massachusetts •Issue -Does Yarde have an implied right to purchase Patriots' season tickets? -Decision: The appeals court held that there was an express written contract between Yarde and the Patriots, and that the parol evidence rule prevented Yarde's alleged implied right to purchase season tickets from becoming part of that contract. The appeals court affirmed the trial court's dismissal of Yarde's case. -the Patriots' written contract with season ticket holders expressly provided the "purchase of season tickets does not entitle purchaser to renewal in a subsequent year."
Equal Dignity Rule
-A Statute of Frauds rule in many states that says that agents' contracts to sell real property covered by the Statute of Frauds must be in writing to be enforceable -IE: for an agent to sell real property (which is covered by the Statute of Frauds anyway), the agents' authority must be in writing as well under the statute of frauds -Example Barney hires Cynthia, a licensed real estate broker, to sell his house. Because a contract to sell real estate must be in writing pursuant to the Statute of Frauds, the equal dignity rule requires that the real estate agent's contract be in writing as well. Some state Statutes of Frauds expressly state that the real estate broker and agents' contracts must be in writing.
Guarantor
-A person who agrees to pay a debt if the primary debtor does not -Guarantor is liable even if the original debt contract was not in writing
(Written) Mortgages or Deed of Trust
-An interest in real property given to a lender as security for the repayment of a loan Example Ida purchases a house for $500,000. She pays $100,000 toward the payment of the house and borrows $400,000 of the purchase price from Country Bank. Country Bank requires that the house be collateral for the loan and takes a mortgage on the house. Here, the mortgage between Ida and Country Bank must be in writing to be enforceable.
Life Estate
-Interest in real property for a person's lifetime which, after death of the person, will be transferred to another party §A life estate is an ownership interest that must be in writing under the Statute of Frauds.
More on the Statute of Frauds
-State law -This statute is intended to ensure that the terms of important contracts are not forgotten, misunderstood, or fabricated. -There are several equity exceptions to this rule -Generally, an executory contract that is not in writing even though the Statute of Frauds requires it to be is unenforceable by either party. The Statute of Frauds is usually raised by one party as a defense to the enforcement of the contract by the other party. -If an oral contract that should have been in writing under the Statute of Frauds is already executed, neither party can seek to rescind the contract on the grounds of noncompliance with the Statute of Frauds. That is, the contract may be voluntarily performed by the parties. -Example Edward enters an oral contract to sell his house to Lana for $400,000, the closing of the transaction to be in 30 days. At the time of closing, Edward signs the deed to the property to Lana and Lana pays Edward the $400,000 purchase price. Under the Statute of Frauds, this contract for the sale of real estate would have had to be in writing to be enforceable. However, since both parties have performed the oral contract, neither party can raise the Statute of Frauds to rescind the contract.
Leases
-Transfer of the right to use real property for a specified period of time §Most Statutes of Frauds require leases for a term of more than one year to be in writing.
Parol Evidence
Any oral or written words outside the four corners of a written contract
UCC Statute of Frauds
Covered by Section 2-201(1) and Section 2A-201(1)
One-Year Rule EX
Frederick, the owner of a store, hires Anna as the store manager for 6 months. Assume that after three months, Frederick and Anna agree to extend the contract for an additional 11 months. At the time of the extension, the contract would be for 14 months (the 3 left on the original contract plus 11 months added by the extension). The modification would have to be in writing because it exceeds the one-year rule.
Guaranty Contract EX
Wei, a recent college graduate, offers to purchase a new automobile on credit from a Mercedes-Benz automobile dealership. Because Wei does not have a credit history, the dealer will agree to sell the car to her only if there is a guarantor. If Wei's father signs a written guaranty contract, he becomes responsible for any payments his daughter fails to make. If Wei's father only orally guaranteed Wei's contract, he would not be bound to the guaranty because it was oral and not in writing.
Prenuptial Agreement
a contract entered by parties prior to marriage that defines their ownership rights in each other's property upon termination of marriage or death of a spouse, must be in writing.
Specific Terms EX
if a provision in a contract refers to the subject matter as "corn" but a later provision refers to the subject matter as "feed corn" for cattle, this specific term qualifies the general term
Standards of Interpretation
rules applied by courts in defining ordinary words, technical words, specific terms, and other words used in contracts -Ordinary words are given their usual meaning according to the dictionary -Technical words are given their technical meaning unless a different meaning is clearly intended -Specific terms presumed to qualify/describe general terms -Trade word usage incorporated in contract unless otherwise stated §(If both parties are members of the same trade or profession, words will be given their meaning as used in the trade (i.e., usage of trade)) -Where a preprinted form contract is used: §Typed words prevail over preprinted words §Handwritten words prevail over both preprinted and typed words -Ambiguity resolved (held) against party who drafted the contract
Sutton v Warner
•12 Cal. App.4th 415, 15 Cal. Rptr.2d 632, 1993 Cal. App. Lexis 22 (Court of Appeal of California) •Warners proposed that Sutton and his wife purchase the residence, including a $15,000 down payment toward the purchase price of $185,000. The Suttons were to pay all the mortgage payments and real estate taxes on the property for 5 years and at any time during the 5-year period, they could purchase the house. All this was agreed to orally. •The Suttons paid the down payment and cash payments equal to the monthly mortgage to the Warners. The Suttons paid the annual property taxes on the house. The Suttons also made improvements to the property. Four and one-half years later, the Warners reneged on the oral sales/option agreement. At that time, the house had risen in value to between $250,000 and $320,000. The Suttons sued for specific performance of the sales agreement. The Warners defended, alleging that the oral promise to sell real estate had to be in writing under the Statute of Frauds and was therefore unenforceable. •The trial court applied the equitable doctrine of part performance and ordered the Warners specifically to perform the oral contract for the sale of real estate and transfer ownership of the property to the Suttons. The court of appeal agreed.
Sawyer v Mills
•295 S.W.3d 79, 2009 Ky. Lexis 195 (Supreme Court of Kentucky, 2009) •Sawyer, with Mills and his law firm become engaged in class action lawsuits. Mills orally agreed to pay Sawyer $1,065,000 from said lawsuits as a bonus to be paid in monthly installments over 107 months. Mills later refused to sign a written contract conveying the terms of the oral agreement and after Mills had paid $165,000, he quit making further payments. Sawyer sued Mills to collect the remaining $900,000. Mills defended, arguing that the oral contract exceeded 1 year and was therefore unenforceable because it was not in writing, as required by the Statute of Frauds. •The trial court held that the Statute of Frauds required the bonus agreement between Sawyer and Mills to be in writing to be enforceable. Because the oral agreement exceeded one year, the court held that it did not meet the requirements of the Statute of Frauds and was therefore unenforceable. The court of appeals and the supreme court of Kentucky affirmed the trial court's decision holding that Sawyer would not receive the remainder of the promised bonus because of the Statute of Frauds.
Guaranty Contract
•A promise in which one person agrees to answer for the debts or duties of another person -Guaranty contracts are required to be in writing under the Statute of Frauds.
One-Year Rule
•A rule that states that an executory contract that cannot be performed by its own terms within one year of its formation (when it is signed) must be in writing •Intended to prevent disputes about contract terms that may otherwise occur toward the end of a long-term contract. If the performance of the contract is possible within the one-year period, the contract may be oral. •The extension of an oral contract might cause the contract to violate the Statute of Frauds if the original term and the extension period exceed one year.
Formality of the Writing
•A written contract does not have to be drafted by a lawyer or formally typed to be legally binding •The law only requires a writing containing the essential terms of the parties' agreement •Thus, any writing—including letters, telegrams, invoices, sales receipts, checks, and handwritten agreements written on scraps of paper—can be an enforceable contract under this rule. •Parties SHOULD make every effort to make a good, detailed contract with no ambiguity
Integration of Several Writings
•The combination of several writings to form a single contract -the entire writing does not have to appear in one document to be an enforceable contract.
Part Performance
•An equitable doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice -Done because it may not be possible to return the parties to their status quo •For this performance exception to apply, most courts require that the purchaser either pay part of the purchase price and take possession of the property or make valuable improvements on the property.
Equitable Doctrine: Promissory Estoppel
•An equitable doctrine that permits enforcement of oral contracts that should have been in writing -It is applied to avoid injustice -Also known as Equitable Estoppel -Where this doctrine applies, the promisor is estopped (prevented) from raising the Statute of Frauds as a defense to the enforcement of the oral contract. •The oral promise is enforceable against the promisor if three conditions are met: -The promise induces action or forbearance of action by another -The reliance on the oral promise was foreseeable -Injustice can be avoided only by enforcing the oral promise
The "Main Purpose" Exception
•An exception to the Statute of Frauds that states if the main purpose of a transaction and an oral collateral contract is to provide pecuniary (financial) benefit to the guarantor, the collateral contract does not have to be in writing to be enforced •Also known as the leading object exception •Intended to ensure that the primary benefactor of the original contract (i.e., the guarantor) is answerable for the debt or duty. -Example Ethel is president and sole shareholder of Computer Corporation, Inc. Assume (1) that the corporation borrows $100,000 from CityBank for working capital and (2) that Ethel orally guarantees to repay the loan if the corporation fails to pay it. CityBank can enforce the oral guaranty contract against Ethel if the corporation does not meet its obligation because the main purpose of the loan was to benefit her as the sole shareholder of the corporation.
Merger Clause (Integration Clause)
•An express clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties' agreement -and that parol evidence may not be introduced to explain, alter, contradict, or add to the terms of the contract.
Parol Evidence Rule
•If a written contract is a complete and final statement of the parties' agreement, (ie: a complete integration), any prior or contemporaneous (during the writing/with the writing) oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract -In other words, a completely integrated contract is viewed as the best evidence of the terms of the parties' agreement.
Guaranty Situation
•In a guaranty situation: 3 Parties and 2 contracts -The first contract, which is known as the original contract, or primary contract, is between the debtor and the creditor. It does not have to be in writing (unless another provision of the Statute of Frauds requires it to be). The second contract, called the guaranty contract, is between the person who agrees to pay the debt if the primary debtor does not (i.e., the guarantor) and the original creditor. The guarantor's liability is secondary because it does not arise unless the party primarily liable fails to perform. -Google doc pic 1
Incorporation by Reference
•Integration made by express reference in one document that refers to and incorporates another document within it -Thus, what may often look like a simple one-page contract may actually be hundreds of pages long when the documents that are incorporated by reference are included. -Example Credit card contracts often incorporate by express reference such documents as the master agreement between the issuer and cardholders, subsequent amendments to the agreement, and such.
Exceptions to the Parol Evidence Rule
•Parol evidence may be admitted in court if it: -Shows that a contract is void or voidable §(e.g., evidence that the contract was induced by fraud, misrepresentation, duress, undue influence, or mistake). -Explains ambiguous language -Concerns a prior course of dealing or course of performance between the parties or a usage of trade -Fills in the gaps in a contract §(e.g., if a price term or time of performance term is omitted from a written contract, the court can hear parol evidence to imply the reasonable price or time of performance under the contract). -Corrects an obvious clerical or typographical error § The court can reform the contract to reflect the correction.
Statute of Frauds for Common Contracts
•Requires certain types of contracts to be in writing -Contracts involving interests in real property -Contracts that by their own terms cannot possibly be performed within one year -Collateral contracts in which a person promises to answer for the debt or duty of another -Promises made in consideration of marriage -Contracts for the sale of goods for $500 or more -Contracts for the lease of goods with payments of $1,000 or more -Real estate agents' contracts -Agents' contracts where the underlying contract must be in writing -Promises to write a will -Contracts to pay debts barred by the statute of limitations or discharged in bankruptcy -Contracts to pay compensation for services rendered in negotiating the purchase of a business -Finder's fee contracts
Required Signature
•Statute of Frauds and the UCC require a written contract, whatever its form, to be signed by the party against whom enforcement is sought -The signature of the person who is enforcing the contract is not necessary. Thus, a written contract may be enforceable against one party but not the other party. •If a signature is suspected of being forged, the victim can hire handwriting experts and use modern technology to prove it is not his or her signature -Generally, the signature may appear anywhere on the writing. In addition, it does not have to be a person's full legal name. The person's last name, first name, nickname, initials, seal, stamp, engraving, or other symbol or mark (e.g., an X) that indicates the person's intent can be binding as a signature. The signature may be affixed by an authorized agent.
Real Property
•The land itself, as well as buildings, trees, soil, minerals, timber, plants, crops, fixtures and other things/personal property permanently affixed to the land or buildings -Example Built-in cabinets in a house are fixtures that become part of the real property. -Under the Statute of Frauds, any contract that transfers an ownership interest in real property (land) must be in writing to be enforceable.
Promises Made in Consideration of Marriage
•Under the Statute of Frauds, a unilateral promise to pay money or property in consideration for a promise to marry must be in writing Example: A prenuptial agreement
Glossary
•a section in many contracts that defines many of the words and terms used in the contract -if words/terms are not defined by the parties, courts use standards of interpretation
Section 2A-201(1) of the Uniform Commercial Code (UCC)
•states that lease contracts requiring payments of total $1,000 or more must be in writing -If a lease payment of an original lease contract is less than $1,000, it does not have to be in writing -However, if a modification of the lease contract increases the lease payment to $1,000 or more, the modification must be in writing to be enforceable.
Section 2-201(1) of the Uniform Commercial Code (UCC)
•states that sales contracts for the sale of goods priced at $500 or more must be in writing -If the contract price of an original sales contract is below $500, it does not have to be in writing -However, if a modification of the sales contract increases the sales price to $500 or more, the modification must be in writing to be enforceable. -EX: Echo enters an oral contract to sell James her used car for $10,000, with the delivery date to be May 1. When May 1 comes and James tenders $10,000 to Echo, Echo refuses to sell her car to James. The contract will not be enforced against Echo because it was an oral contract for the sale of goods costing $500 or more, and it should have been in writing.