Chapter 16 legal
If there is no signed memorandum, then SOF may be satisfied by:
(1): a "confirmatory memo" (i.e., a fax) between merchants, if signed by the sender and not objected to by the receiver w/in 10 days; (2)(c): partial payment or partial delivery; (b): admission in pleadings or in court; and (a): specially manufactured goods that are not suitable for sale to others.
Contracts for the sale of goods for a price of $500 or more. is covered by the statute of frauds, so in turn must be written. What if the Original contract is for sale of goods for $490 (not within SOF), but is then modified by increasing price to $510?
A signed writing is required to be enforceable.
If its covered under the statute of frauds, but the contract is not in writing, the contract is said to be A) Unenforceable B) voidable C) Void
A) Unenforceable (plaintiff cannot sue the defendant for breach of contract)
a contract in which a person (guarantor) agrees to pay the debt or perform an obligation that another person (principal debtor) owes to a third person (obligee) if the principal debtor fails to perform.
Collateral contract
Under UCC 2-201, if there is no signed memorandum, then the SOF may be satisfied by a "confirmatory memorandum," which: A) requires that the memorandum be signed by the party to be charged. B) requires that the memorandum be sent within ten days after the contract is made. C) applies even though the memorandum does not satisfy the UCC's writing requirement. D) requires that both parties to the contract be merchants.
D) requires that both parties to the contract be merchants.
In order to satisfy the writing requirement of the statute of frauds, both parties must sign the writing.
False. Only the party against whom the contract is being enforced (i.e., usually the defendant) must sign the contract.
In order to be enforceable, all contracts must be in writing.
False. Oral contracts are enforceable unless they are the types of contracts that fall within the scope of the statute of frauds.
Jill orally promised the loan officer of First Bank to pay Jack's debt to First Bank if Jack defaulted on the note. Jack defaulted, therefore Jill must pay Jack's debt.
False. This is a collateral contract and, according to the statute of frauds, it must be in writing to be enforceable. Jill need not pay Jack's debt.
The exception to collateral contracts under the SOF is called the "main purpose" or "leading object" rule. Explain what this means
If the reason why the guarantor makes that promise is because the guarantor is going to receive a direct personal economic Benefit, then even though it looks like a collateral contact and it smells like a collateral contract. It's treated as a primary and we know that a primary contact does not have to be in writing in order to be enforceable.
This rule states when parties enter into a written contract that they intend as a complete integration (a complete and final statement of their entire agreement), a court will not permit the use of evidence of prior or contemporaneous statements to add to, alter, or contradict the terms of the written contract.
Parol Evidence
When a written contract is a complete integration, the parol evidence rule prohibits the parties from introducing prior statements that would add to, alter, or contradict the terms of the written contract. Parol evidence rule also prohibits introduction of prior statements that would contradict a partially integrated contract
True
The statute of frauds applies only to executory contracts.
True.
Mark purchases carpet for his house for $475, but later decides to purchase better quality carpet for $525. As modified, the contract must be in writing to be enforceable.
True. Since more than $500 after modification
Ex.: Jack enters into a contract to provide consulting services for ABC Corp. for 13 months - Must this be in writing?
Yes. One year rule states Bilateral executory contracts that cannot be fully performed by both parties within one year from the date of their formation (one year rule). Exception: if one party has fully performed.
Is the Parole evidence rule a common law rule or a UCC rule
both
To satisfy the statue of Frauds, Most states require only a signed memorandum of the parties' agreement stating the essential terms:
(a) identity of parties, (b) subject matter identified with reasonable certainty, and (c) signed by the party accused of breach (i.e., the Defendant). Memorandum need not be made at the same time the contract is formed and must indicate the quantity of goods to be sold.
Contracts covered by the Statute of Frauds: (6 of them)
1) Collateral contracts in which a person promises to perform the obligations (i.e., pay the debts) of another person. 2) Contracts for the sale of an interest in real estate (or for a lease for more than 1 year). 3) Bilateral contracts that cannot be fully performed by both parties within one year from the date of their formation. 4) Contracts for the sale of goods for a price of $500 or more. 5) Contracts in which an executor or administrator promises to be personally liable for the debt of an estate. 6) Contracts in which marriage is the consideration.
Exceptions to Parol Evidence Rule
1) To prove additional terms in a partially integrated contract (is the contract partial or complete?) 2) To prove that a contract is voidable or void Ex.: to prove misrepresentation, fraud, mistake, duress, undue influence, or lack of capacity 3) To prove the existence of a condition EX: Seller and Buyer enter into contract to buy Seller's house on condition that Buyer obtains financing (mortgage) from bank 4) To prove subsequent (later) agreements that add to, alter or contradict the terms of the written contract.
Exceptions to the SOF (i.e., an oral contract is enforceable) for the sale (or mortgage) of an interest in real estate (or a lease for more than 1 year) are:
1. Full performance by the Seller 2. Partial Performance by the Buyer (If the Buyer has reasonably relied on the oral contract) Enforcement of the oral contract (specific performance) is the only way to prevent injustice, then the Buyer can enforce the oral contract.
Which of the following is covered by the statute of frauds? A) Mark and Susan exchange mutual promises to marry each other. B) A real estate mortgage. C) A contract for services that can be performed within a week. D) A mechanic charging $200 to repair a vehicle.
B) A real estate mortgage.
Bank is a creditor of Best Buy. Sony sells goods to Best Buy, but requires a guarantee of payment. To help keep Best Buy in business and ensure that Bank will be repaid, Bank orally promises Sony that it will guarantee Best Buy's payment to Sony. Is this enforceable under the Statue of Frauds?
Bank's oral promise is considered to be an original obligation because the bank would receive a direct, personal benefit through best buys success. This is then outside the SOF and is enforceable.
Under UCC 2-201, if there is no signed memorandum, then the SOF may be satisfied by: A) part payment or part delivery. B) an oral admission in court made by the party suing the "party to be charged." C) specially manufactured goods that are not suitable for sale to others. D) A and C, but not B.
D) A and C, but not B.
If a contract is "within the SOF" (i.e., covered by the SOF) but does not satisfy the requirements of the statute of frauds, the contract is enforcable
False: However, a person injured by the unenforceable contract may pursue an action based on quasi-contract or promissory estoppel
St. Jude asked Schaadt to sign non-solicitation contract (St. Jude offered a guaranteed 1 year term of employment, in return for Schaadt agreeing not to solicit St. Jude's employees for 1 year after her employment ended). Neither party signed contract. St. Jude fired Schaadt. Schaadt sued for breach of contract. St. Jude claimed unenforceable due to SOF
Issue: Whether both parties can fully perform (w/o breaching) their obligations under the contract within one year. Schaadt's 1-year non-solicitation obligation began after St. Jude's 1-year employment of Schaadt. (i.e., St. Jude needs at least 1 year to perform it's obligation, and then Schaadt needs 1 year to perform her obligation.) Since obligations of both parties cannot be fully performed within one year, Statute of Frauds requires a signed writing. St. Jude (party charged with breach) did not sign the contract, thus the contract cannot be enforced against St. Jude.
-No direct personal economic benefit= Collateral = writing required -Direct personal economic benefit = Orig. = no writing required Does stock ownership = direct personal economic benefit?
No
The____ ____ ______ was enacted in 1677 to prevent fraud and perjury by requiring signed, written evidence in order to enforce certain types of contracts. Only applies to executory contracts
The Statute of Frauds
This Statute Only applies to executory contracts
The Statute of Frauds
Ralph is the executor of his mother's estate and makes an oral promise to pay his mother's debts from his personal assets. This oral promise is not enforceable.
True. If the executor promises to pay the debts personally, out of his own assets rather than the assets of the estate, then the promise falls within the SOF and would have to be in writing to be enforceable.
Best Buy owes Creditor money and the repayment date is quickly approaching, so Best Buy contracts with Shady Loan Co. for a short-term loan. Creditor orally gave its personal guaranty to Shady Loan Co. that Best Buy would repay the loan. Best Buy defaulted, therefore Creditor must repay Best Buy's loan.
True. This is an example of a situation in which the main purpose or leading object rule applies: no writing is required where the guarantor makes a collateral promise for the main purpose of obtaining a direct personal economic advantage. Since Best Buy took out the loan to repay Creditor, Creditor made the collateral promise for direct personal economic advantage. Even though the contract was oral, Creditor must repay the loan for Best Buy.
Contracts for more than one year are covered by the Statue of Frauds
True: Collateral contracts Contracts for the sale of real estate Contracts for more than one year Contracts for sale of goods of $500 or more Executor's promise Marriage as consideration
Parol evidence
any prior statements, promises, proposals, etc., either written or oral, that are not contained in the final written contract. Parol evidence literally means written or spoken statements not contained in the written contract
Why does the statue of frauds apply for executory contracts, but not executed contracts?
both parties have fully performed so therefore no one needs to be sued for breach. . It only pertains to executory contract where one party has not performed and now the plaintiff wants to sue that person for breach. An executed contract is where both parties have fully performed so therefore no need for anyone to be sued for breach. .
Memorandum need not be made at the same time the contract is formed and must indicate the quantity of goods to be sold.
memorandum must indicate that a contract for a sale has been made between the parties, signed by the party accused of breach, and must indicate the quantity of goods to be sold. Several documents, taken together, can satisfy the memorandum requirement.
