Transcript Chapter 014 - Writing & E

CHAPTER 8
STATUTE OF FRAUDS
AND EQUITIBLE
EXCEPTIONS
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Statute of Frauds
State statute that requires certain types
of contracts to be in writing.
Intended to ensure that the terms of
important contracts are not forgotten,
misunderstood, or fabricated.
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Contracts that Must Be in Writing
• Contracts involving interests in land
• Contracts that by their own terms cannot
possibly be performed within one year
• Collateral contracts where a person promises to
answer for the debt of another
• Promises made in consideration of marriage
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Contracts that Must Be in Writing
(continued)
• Contracts for the sale of goods for more than
$500
• Real estate agents’ contracts
• Agents’ contracts where the underlying contract
must be in writing
• Promises to write a will
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Contracts that Must Be in Writing
(continued)
• 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
• Finders fee contracts
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Contracts Not in Compliance with
Statute of Frauds
• Unenforceable if executory.
• Contract voluntarily executed by parties
will not be rescinded.
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Contracts Involving Interests in Land
• Any contract that transfers an ownership
interest in real property must be in writing
under the Statute of Frauds to be
enforceable.
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Contracts Involving Interests in Land
(continued)
Real Property
Fixtures
• Land
• Personal property that
• Buildings
is permanently affixed
• Trees, Plants, Crops
to the real property
– e.g., built-in cabinets
• Soil
in a house
• Minerals
• Timber
• Other things that are
permanently affixed to
the land
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Contracts Involving Interests in Land
(continued)
• Other contracts that transfer an ownership
interest in land must be in writing under
the Statute of Frauds.
• E.g.,
– Mortgages
– Leases
– Life Estates
– Easements
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Contracts Involving Interests in Land
(continued)
Part Performance Exception
• Court may order an oral contract to be
specifically performed if it has been partially
performed and performance is necessary to
avoid injustice.
• Applies if purchaser paid part of price and took
possession or made improvements to land, so
that parties cannot be returned to status quo.
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One-Year Rule
• Executory contract that cannot by its own
terms be performed within one year of its
formation must be in writing.
– E.g., six month employment contract.
• Contract may be oral if performance of contract
is possible within the one-year period.
– E.g., lifetime employment contract.
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Collateral Promises
(Guaranty Contracts)
• One person agrees to answer for the
debts or duties of another person.
• Guaranty Contract – contract between
the guarantor and the original creditor.
– Must be in writing unless main purpose is to
provide pecuniary benefit to guarantor.
– E.g., company promises to pay debts of
supplier, to keep supplier in business so that it
can obtain supplies for its own operations.
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Original and Guaranty Contracts
Debtor
Guarantor
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Contract No. 1
Original Contract
Contract No. 2
Creditor
Guarantor agrees to
pay the debt if the
debtor fails to pay
the creditor.
Guaranty Contract
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Contracts for the Sale of Goods
• Section 2-201 of the Uniform Commercial
Code (UCC) is the basic Statute of Frauds
provision for sales contracts.
• Contracts for the sale of goods priced at $500 or
more must be in writing to be enforceable.
• If modification brings sales price above $500,
modification must be in writing.
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Contracts for the Lease of Goods
• Section 2A-201 of the Uniform
Commercial Code (UCC) is the basic
Statute of Frauds provision for contracts
for the leasing of goods.
• Contracts for lease payments of $1,000
or more must be in writing to be
enforceable.
• If modification brings lease payment
to $1,000 or more, modification must be
in writing.
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Agents’ Contracts
Equal Dignity Rule
• Agents’ contracts to sell real property must
be in writing to be enforceable.
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Promises in Consideration of Marriage
• Prenuptial agreements must be in
writing to be enforceable.
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Sufficiency of the Writing
Formality of the
Writing
Required Signature
Integration of
Several Writings
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Formality of the Writing
• A written contract does not have to be
drafted by a lawyer or formally typed to be
legally binding.
• Generally, law only requires a writing
containing the essential terms of the
parties’ agreement.
– E.g., handwritten agreement on scrap paper
may satisfy writing requirement.
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Required Signature
• Statute of Frauds and the UCC require the
written contract, whatever its form, to be
signed by the party against whom
enforcement is sought.
– Anywhere on the writing.
– Stamp or mark (X) suffices if party intended to
sign.
– Signature of person who is enforcing the
contract is not necessary.
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Integration of Several Writings
• Entire writing does not have to appear in
one document to be an enforceable
contract.
– Incorporation by reference
– Implied integration
– E.g., several documents stapled together as
contract.
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Interpreting Contract Words and Terms
If the parties have not defined the words
and terms of a contract, the courts apply
the following standards of interpretation:
• 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.
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Interpreting Contract Words and Terms
(continued)
• Specific terms presumed to qualify general
terms.
• Trade usage incorporated in contract unless
otherwise stated.
• Where a preprinted form contract is used:
– Typed words prevail over preprinted words.
– Handwritten words prevail over both
preprinted and typed words.
• Ambiguity resolved against drafter of contract.
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Parol Evidence Rule
• Parol Evidence – Any oral or written
words outside the four corners of the
written contract.
• Parol Evidence Rule applied under
common law and UCC.
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Parol Evidence Rule (continued)
If a written contract is a complete and final
statement of the parties’ agreement, any
prior or contemporaneous oral or written
statements that alter, contradict, or are in
addition to the terms of the written contract
are inadmissible in court.
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Parol Evidence Rule (continued)
Merger, or Integration Clause
• A clause in a contract that stipulates that it
is a complete integration and the exclusive
expression of the parties’ agreement.
• Parol evidence may not be introduced to
explain, alter, contradict, or add to the
terms of the contract.
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Exceptions to 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.
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Exceptions to Parol Evidence Rule
(continued)
• Concerns a prior course of dealing or
course of performance between the
parties or a usage of trade.
• Fills in the gaps in the contract.
• Corrects an obvious clerical or
typographical error.
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Promissory Estoppel
• Equitable doctrine that permits
enforcement of oral contracts that should
have been in writing.
• 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.
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Promissory Estoppel (continued)
Oral promise is enforceable against promisor if:
• 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.
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