BUL Ch 14

promises made in consideration of marriage

-A unilateral promise to pay a sum of money or to give property in consideration of a promise to marry must be in writing.

written memorandum

can consist of any signed confirmation, invoice, check, sales slip, or e-mail.

watch statute of frauds video

video

form

-A contract may be unenforceable if it is not in the proper form. Certain types of contracts are required by law to be in writing. -If there is no written evidence of the contract, it may not be enforceable.

the one year rule

-A contract that cannot, by its own terms, be performed within one year from the day after the contract is formed must be in writing to be enforceable. -The one-year period begins to run the day after the contract is made. -The idea behind the one-year rule is that a witness's memory is not to be trusted for longer than a year.

essential terms

-A memorandum evidencing an oral contract must contain the essential terms of the contract. -Under the UCC, for a sale of goods the writing need only name the quantity term and be signed by the party being charged. -Under most provisions of the Statute of Frauds, the writing must name the parties, subject matter, consideration, and quantity. -Contracts for the sale of land must state the essential terms of the contract (such as location and price) and describe the property with sufficient clarity to allow the terms to be determined from the memo, without reference to any outside sources.

signatures

-A party's signature can be anywhere in the writing and does not need to be placed at the end. -Also, a signature can even be initials rather than the full name.

secondary obligation

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

e-signatures

-An e-signature is "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record," according to the Uniform Electronic Transactions Act (UETA). -A party's name typed at the end of an e-mail note, for instance, meets this signature requirement. -An e-signature is as valid as a signature on paper, and an e-document is as enforceable as a paper one.

partial performance

-An oral contract that should be in writing to be enforceable under the Statute of Frauds may be enforceable if it has been partially performed. -When a contract has been partially performed, and the parties cannot be returned to their positions before the contract was made, a court may grant specific performance. -Specific performance is an equitable remedy (court-ordered relief that does not usually involve money) that requires performance of the contract according to its precise terms. -The parties must prove that an oral contract existed, of course. -In cases involving oral contracts for the transfer of interests in land, for instance, courts usually look at whether justice is better served by enforcing the oral contract when partial performance has taken place.

the main purpose rule

-An oral promise to answer for the debt of another need not be in writing if the guarantor's main purpose in accepting secondary liability is to secure a personal benefit. -This exception is known as the "main purpose" rule. -The assumption is that a court can infer from the circumstances whether the promisor's "leading objective" was to secure a personal benefit. -Another typical application of the so-called main purpose rule occurs when one creditor guarantees a debtor's debt to another creditor to prevent litigation. -This allows the debtor to remain in business long enough to generate profits sufficient to pay both creditors.

memorandums

-As mentioned earlier, a written memorandum can consist of any confirmation, invoice, sales slip, check, or e-mail. -Any one of these items may constitute a writing that satisfies the Statute of Frauds. -In addition, a written contract need not consist of a single document to constitute an enforceable contract. -One document may incorporate another document by expressly referring to it. -Several documents may form a single contract if they are physically attached by staple, paper clip, or glue, or even if they are only placed in the same envelope.

exeptions to the parol evidence rule

-Because of the rigidity of the parol evidence rule, courts make several exceptions.

pre nup example

-Before they marry, Helen and Charlie enter into a prenuptial agreement. -Helen, an international supermodel, agrees that if they divorce, she will pay Charlie $100,000 for every year of the marriage, unless he uses drugs. -In that event, Charlie will receive nothing from Helen. -This agreement must be in writing.

the sufficiency of writing

-Either a written contract or a written memorandum signed by the party against whom enforcement is sought will satisfy the Statute of Frauds.

incomplete contracts

-Evidence is admissible when the written contract is incomplete in that it lacks one or more of the essential terms. -The courts allow evidence to "fill in the gaps."

contracts subsequently modified

-Evidence of a subsequent modification of a written contract can be introduced into court. -Keep in mind that an oral modification may not be enforceable if it comes under the Statute of Frauds. -This could occur, for instance, if the oral modification increased the price of the goods in a sales contract to $500 or more. -Also, oral modifications will not be enforceable if the original contract provides that any modification must be in writing.

example of the main purpose rule

-Fiona contracts with Cartwright Manufacturing Company to have some machines made to detailed specifications for her factory. -She promises Allrite Supply Company, Cartwright's supplier, that if Allrite continues to deliver materials to Cartwright, Fiona will guarantee payment. Under the Statute of Frauds, does Fiona's promise need to be in writing to be enforceable? -No. Fiona's promise need not be in writing, because her main purpose is to secure a benefit for herself.

if performance is possible

-If the contract, by its terms, makes performance within the year possible (even if not probable), the contract does not fall within the Statute of Frauds and need not be in writing

promissory estoppel

-In some states, an oral contract that would otherwise be unenforceable under the Statute of Frauds may be enforced under the doctrine of promissory estoppel. -If a promisor makes a promise on which the promisee justifiably relies to his or her detriment, a court may estop (prevent) the promisor from denying that a contract exists. -In these circumstances, an oral promise can be enforceable if two requirements are met: 1. The person making the promise must foresee that the promisee will rely on it. 2. There must be no way to avoid injustice except to enforce the promise.

admissions

-In some states, 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. -If a party admits to a contract subject to the UCC, the contract is enforceable, but only to the extent of the quantity admitted.

example of the one year rule

-Isabella enters into a contract with Diamond Auto Body & Paint in August. -She states that she will provide accounting services to Diamond during the firm's coming fiscal year, which begins October 1 and continues until September 30. -Because the contract is formed in August, it must be in writing to be enforceable—because it cannot be performed within one year.

example of a contract involving interest in land

-Lewis is a party to an oral contract with Maria involving a vineyard. -Neither Lewis nor Maria can force the other to buy or sell the land that is the subject of their contract. -The Statute of Frauds is a defense to the enforcement of this contract.

example of partial performance

-Liza orally agrees to buy a small piece of vacant land from James for $8,000. -Liza gives James a $4,000 down payment and begins making monthly payments on the remaining balance. -During this time, she improves the land for a community garden. -Liza has several truckloads of fertile soil delivered, and she constructs several raised planting beds on the land. -After four months, James claims their agreement is not enforceable and wants his land back. Is the oral contract enforceable because of partial performance? -Yes. Liza has paid more than half the purchase price for the land and has made substantial improvements. -It would be impossible to return James and Liza to their original positions before the oral contract was formed. -A court will most likely grant specific performance, allowing Liza to finish paying for the land and creating her community garden.

if performance is objectively impossible

-Note that for a particular contract to fall under the one-year rule, contract performance must be objectively impossible to complete within a year. -For instance, a contract to provide five crops of tomatoes to be grown on a specific farm in Illinois would be impossible to perform within a year. -It is impossible to grow five crops of tomatoes on the same farmland in a single year in Illinois.

enforcement of a signature

-Only the party against whom enforcement is sought must have signed the writing. -Therefore, a contract may be enforceable by one of its parties but not by the other.

voidable or void contracts

-Oral evidence can be introduced to show that the contract was voidable or void (for example, induced by mistake or fraudulent misrepresentation). -If deception led one of the parties to agree to the terms of a written contract, oral evidence attesting to fraud should not be excluded. -Courts frown on bad faith and are quick to allow such evidence when it establishes fraud.

example of collateral promises

-Pablo contracts with Dr. Joanne Leong to have his daughter's wisdom teeth pulled the following week. -Pablo promises to pay for the dental work when he receives the bill from Leong's dental office. -On the same day, Pablo's daughter borrows $10,000 from the Medford Bank to remodel her kitchen. -Pablo promises the bank that he will pay the $10,000 if his daughter does not repay the loan on time. Which of these promises must be in writing to be enforceable under the Statute of Frauds? -In contracting for the dental work, Pablo incurs a primary obligation. -Under the Statute of Frauds, this contract does not have to be in writing to be enforceable. -If Pablo fails to pay Leong and she sues him for payment, Pablo cannot claim that the contract is unenforceable because it was not in writing. -Pablo's promise to repay his daughter's debt to Medford Bank, however, is a secondary obligation. -This promise must be in writing to be enforceable. -Pablo, in this situation, becomes a guarantor of the loan—meaning that he guarantees that he will pay back the loan if his daughter fails to do so

example of admissions

-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.

example of promises made in consideration of marriage

-Ralph promises to pay Stewart $10,000 if he agrees to marry Ralph's daughter, Taylor. This promise must be in writing.

example of essential terms

-Russell and Sally Kiker owned a house in Newton County, Arkansas. -Mona Sloop agreed to buy it for $850,000. -The parties signed a contract that identified the property by its street address and stipulated a $350,000 down payment. -The down payment was nonrefundable if closing did not occur by August 31. -When the closing did not occur, the Kikers filed a suit in an Arkansas state court against Sloop, seeking a declaration that they were entitled to keep the down payment. -Sloop filed a claim for the return of the $350,000. -She argued that their contract violated the Statute of Frauds because it lacked a sufficient property description. -The court issued a summary judgment in the Kikers' favor. Sloop appealed. Did the contract satisfy the Statute of Frauds? -Yes. In Sloop v. Kiker, a state intermediate appellate court affirmed the judgment of the lower court. -The street address of the property in the contract's terms satisfied the Statute of Frauds.

parol evidence rule

-Sometimes, a written contract does not include—or contradicts—an oral understanding. -When a dispute arises in such situations, the courts look to a common law rule governing the admissibility of oral evidence in court, or parol evidence in court. -Parol evidence is testimony or other evidence of communications between the parties not contained in the written contract. -Under the parol evidence rule, if a court finds that the parties intended their written contract to be a complete and final statement of their agreement, then it will not allow either party to present parol evidence. -As a result, evidence of the parties' prior negotiation or oral agreements cannot be introduced to a court if that evidence contradicts the terms of the written contract.

contracts for the sale of goods

-The Uniform Commercial Code (UCC) is a body of law that governs commercial transactions within the United States. -Commercial transactions occur in the business environment between merchants and involve contracts for the sale (and lease) of goods. -UCC has its own Statute of Frauds provisions that require written evidence or an electronic record of a contract. Under these provisions, sales contracts for goods priced at $500 or more must be in writing to be enforceable. -To satisfy the UCC requirement, a writing—including e-mail or another type of electronic record—need only state the quantity term. -Other terms need not be stated "accurately" in the writing, as long as they adequately reflect both parties' intentions. -The contract will not be enforceable for any quantity greater than that set forth in the writing. -In addition, the writing must have been signed by the person who refuses to perform or the one being sued.

orally agreed on condition

-The parol evidence rule does not apply if the existence of the entire written contract is subject to an orally agreed-on condition. -Proof of the condition does not alter or modify the written terms but involves the enforceability of the written contract.

pre nuptial agreements

-These agreements are made before marriage and define each partner's ownership rights in the other partner's property. -Prenuptial arrangements made in consideration of marriage must be in writing to be enforceable.

integrated contracts

-To be considered an integrated contract, a contract must be completely integrated. -That is, it must contain all of the terms of the parties' agreement. -If, instead, the contract contains only some of the agreed-on terms, it is partially integrated. -If the contract is only partially integrated, evidence of consistent additional terms is admissible to supplement the written agreement.

example of enforcement of a signature

-Troy and Wilma make an oral agreement. -Troy writes and signs a memo setting out the essential terms of the agreement. -Wilma can now hold him to these terms. -He cannot enforce the contract against Wilma, however, because she has signed nothing.

contracts involving interest in land

-Under the Statute of Frauds, a contract involving an interest in land must be in writing. -Land is also called real property. -A contract for the sale of land ordinarily involves the entire interest in the real property, including buildings, growing crops, vegetation, timber, and fixtures. -A fixture is personal property attached to real property in such a way that it is part of that real property. Examples include carpeting, water faucets, and ceiling fans. -A contract calling for the sale of land is not enforceable unless it is in writing or evidenced by a written memorandum.

obvious errors

-When an obvious clerical error exists that clearly would not represent the agreement of the parties, parol evidence is admissible to correct the error. -For instance, a written lease provides for monthly rent of $300 rather than the $3,000 orally agreed to by the parties. -Parol evidence will be admissible to correct the obvious mistake.

customary practices

-When buyers and sellers deal with each other over extended periods of time, certain customary practices develop. -The parties often overlook these practices when writing a contract. -So courts allow the introduction of evidence to show how the parties have acted in the past. -Under the UCC, evidence can be introduced to explain or supplement a written contract by showing a prior dealing, course of performance, or usage of trade.

ambiguous terms

-When the terms of a written contract are ambiguous or not clear, evidence is admissible to show the meaning of the terms.

collateral promises

-a collateral promise is secondary to a principal transaction or primary contractual relationship. -Basically, a collateral promise is made by a third party to assume the debts—that is, the obligations to pay money—of a primary party to a contract if that party does not perform. -Any collateral promise of this nature falls under the Statute of Frauds and must be in writing to be enforceable.

The Statute of Frauds varies from state to state, but all states require the following contracts to be in writing (or evidenced by a written memorandum):

1. Contracts involving interests in land. 2, Contracts that cannot by their terms be performed within one year from the day after the contract's formation. 3. Collateral contracts, such as promises to answer for the debt or duty of another. 4. Promises made in consideration of marriage. 5. Under the Uniform Commercial Code, contracts for the sale of goods priced at $500 or more.

example of the one year rule stuff

Jason agrees to provide office-cleaning services for Omar's Imports for as long as the company needs his services. This means the contract could be fully performed within a year because Omar's could go out of business within twelve months. Thus, the contract need not be in writing to be enforceable.

primary obligation

-An unconditional promise to pay another person's debt is a primary obligation

statute of frauds

-a statute that specifies what types of contracts must be in writing -does not apply to fraud. -Rather, it denies enforceability to certain contracts that do not comply with its requirements. -The primary purpose of the statute is to prevent harm to innocent parties by requiring written evidence of agreements concerning important transactions. -Essentially, the Statute of Frauds requires certain contracts to be in writing or be evidenced by a written memorandum

exceptions to the writing requirement

1. partial performance 2. admissions 3. promissory estoppel.