Statute of Frauds
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Transcript Statute of Frauds
Commercial Law
(Mgmt 348)
Professor Charles H. Smith
The Statute of Frauds-Writing
Requirement (Chapter 15)
Spring 2009
“Putting It In Writing”
Always a good idea – this
chapter deals with two issues
that pertain to doing just that
−Statute of frauds (Civil Code
§ 1624) – requires certain
contracts to be in writing.
−Parol evidence rule (C.C.P. §
1856) – written contract is
final statement of parties’
agreement.
Introduction to the Statute
of Frauds
Actually not a statute but an old
common law rule though California
and other states have codified it.
Statute of frauds requires certain
contracts to be in writing; examples
include agreement that cannot be
performed within a year, promise to
answer for debt of another, and real
estate contract.
Statute of frauds simply reflects
policy decision that some contracts
need to be in writing.
Statute of Frauds – Contract Cannot
be Performed Within One Year
This means that, by its terms, it is
impossible to perform the contract
within a year (Civil Code §
1624(a)(1)).
Therefore, contract not covered by
statute of frauds if performance
within a year is merely improbable
or not desired.
Case study – Sawyer v. Mills (pages
305-06).
Statute of Frauds – Promise to
Pay Another’s Debt
“Promise to answer for the debt of
another” (Civil Code § 1624(a)(2)).
Examples include
− Co-signing loan.
− Personal guarantee for company
obligation.
Case study – Case Problem 15-10
(pages 319-20).
Statute of Frauds – Transactions
Involving Real Estate
Civil Code § 1624(a)(3) provides
these situations
− Lease for more than one year.
− Sale of real estate; can be any
interest, not just 100%.
Case study – Case Problem 15-6
(pages 318-19).
Exceptions to Application of
Statute of Frauds
Part performance; case study –
School-Link Technologies, Inc. v.
Applied Resources, Inc. (pages 30910).
Admission – must occur in court
proceedings; e.g., during deposition
or trial testimony, or in papers filed
with court.
Promissory estoppel – detrimental
reliance on oral contract; however,
must be reasonable; case study –
Case Problem 15-4 (page 318).
What is a “Writing” for
Purposes of Statute of Frauds?
Evidence Code § 240 provides broad
definition of “writing.”
Civil Code § 1624(a) requires the
writing to be “subscribed [signed] by
the party to be charged” – how to
“subscribe” (or sign) electronic
contract?
Introduction to the Parol
Evidence Rule
Old common law rule – writing intended as
final expression of parties’ agreement
cannot be contradicted by evidence of prior
agreement or contemporaneous oral
agreement; therefore, writing should
correctly and fully reflect parties’
agreement.
Policy is to uphold written contract that is
intended to be final statement of parties’
agreement; this intent can be shown by
testimony or “integration” clause.
Many exceptions to parol evidence rule
which will be described in subsequent slides.
Parol Evidence Rule – Case
Studies
Yocca v. Pittsburgh Steelers Sports,
Inc. (pages 313-15).
Case Problem 15-8 (page 319).
Exception - Course of Dealing
or Usage of Trade
Words often have special meaning
different from ordinary meaning in
certain industries or settings; thus,
evidence can be admitted to provide
definitions/context.
Example – “baker’s dozen” means
13, not 12; general phrase like “time
is of the essence” may have specific
meaning given history of parties’
history.
Student examples.
Exception – Validity of Contract
in Dispute
Is mutual assent being questioned?
Can include situations where
someone alleges the contract is
voidable such as duress or undue
influence.
Also can include situations where
someone alleges the contract is void
due to an illegal purpose.
Exception – Ambiguity
Parol evidence rule exception about
“ambiguity” of contract terms can be very
wide-ranging since “[t]he test of admissibility
of extrinsic evidence to explain the meaning of
a written instrument is not whether it appears
to the court to be plain and unambiguous on
its face, but whether the offered evidence is
relevant to prove a meaning to which the
language of the instrument is reasonably
susceptible . . . A rule that would limit the
determination of the meaning of a written
instrument to its four-corners merely because
it seems to the court to be clear and
unambiguous, would either deny the relevance
of the intention of the parties or presuppose a
degree of verbal precision and stability our
language has not attained” (Pacific Gas &
Electric Co. v. G.W. Thomas Drayage, 69
Cal.2d 33, 38 (1968)).
Caveat – do not depend on being able to
testify as to any “ambiguities.”
Cutting Edge Legal Issue
Case study – “Prenuptial
Agreements and Advice of Counsel”
(pages 312-13).
Discuss with small groups – where
do you stand (and why)?