Business Law Final (Chapter 16)

The Statute of Frauds in the International Context

Statute of Frauds depends upon the customs of the other country involved and the language of your contract.

What must be contained in the writing?

The essential terms: quantity, signed by party to be charged, names of parties, subject matter, consideration. Sales of land must state the price and description with sufficient clarity.

State Legislation

Today, although each state has a statute modeled after the English act, the statutes vary slightly from state to state. All states require certain types of contracts to be in writing or evidenced by a written memorandum or an electronic record. In addition, the party or parties against whom enforcement is sought must have signed the contract, unless certain exceptions apply.

Collateral Promises

A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable.

Parol Evidence Rule

A substantive rule of contracts under which a court will not receive into evidence the parties' prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties' written contract.

What constitutes a Writing?

A writing can consist of any order confirmation, invoice, sales slip, check, fax, or e-mail—or such items in combination. The written contract need not consist of a single document in order 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, such as by staple, paper clip, or glue. Several documents may form a single contract even if they are only placed in the same envelope.

Integrated Contract

A written contract that constitutes the final expression of the parties' agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.

Sufficiency of Contract

A written contract will satisfy the 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. The signature need not be placed at the end of the document but can be anywhere in the writing. A signature can consist of a typed name or even just initials.

Origins of the Statute

At early common law, parties to a contract were not allowed to testify if a dispute arose. This led to the practice of hiring third party witnesses. As early as the seventeenth century, the English recognized that this practice created many problems and enacted a statute to help deal with them. The statute, passed by the English Parliament in 1677, was known as "An Act for the Prevention of Frauds and Perjuries." The act established that certain types of contracts, to be enforceable, had to be evidenced by a writing and signed by the party against whom enforcement was sought. The primary purpose of the statute was to ensure that, for certain types of contracts, there was reliable evidence of the contracts and their terms.

Exceptions to theWriting Requirement

- Partial Performance/Promissory Estoppel - Admissions - Specially Manufactured Goods

Contracts that require a Contract

1. Contracts involving interests in 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 or his own pocket. 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.

Parol Evidence Rule Exceptions

1. Contracts subsequently modified. 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 an obvious or gross clerical error.

The primary purpose of the SOF

Is to prevent harm to innocent parties by requiring written evidence of agreements.