Statute of Frauds How the form of a contract may affect its enforceability... if K is not in the proper form, it may be denied enforceability... Statute of Frauds – What do you think? Three examples of three different types of Ks which need to be in writing in order to be enforced (not the types, give examples) Statute of Frauds Requirement: – some Ks must be in writing or evidenced by a written memo signed by the party against whom enforcement is sought Purpose: – enforceability (emphasizes importance of certain Ks) – evidentiary What Kinds of Ks? K involving an interest in land K which by its terms can’t be performed w/in one year from formation Collateral or secondary promises Promise made in consideration of marriage UCC, Ks for sale of goods > $500 Interest in land sale lease (>1 year) easements liens mortgages crops, minerals Can’t Be Performed Within One Year From Date of Formation Objective impossibility Test: not whether performance is likely within one year, but rather, is it possible within one year? – if possible, K does not fall within SOF, no writing is required Key language.... “by its terms” Collateral or Secondary Promises Promises to answer for the debt of another Main Purpose Doctrine – who is really benefiting? » if facts are such that promisor/guarantor chief purpose in making the promise is to further own interest, promise does not fall within the statute and no writing is required Collateral or Secondary Promises Statute of Frauds applies (and writing is required) only if the Guarantor’s obligation is contingent upon the principal debtors inability or refusal to pay Important difference between Sureties and Guarantors... Suretyship v. Guaranty Surety Guarantor promise to creditor made promise to creditor made by third party to be by 3P to pay obligation responsible for debtor’s only after principal has obligation defaulted primarily liable secondarily liable... creditor can hit him up at creditor must first pursue any time principal debtor... NEED NOT BE IN principal must first default WRITING MUST BE IN WRITING... Does not “fall within the unless MPD applies Statute of Frauds” Promises Made in Consideration of Marriage Dowry type cases... Antenuptial (Prenuptial) agreements Must be in writing in order to be enforced... – that is, they fall within the statute of frauds UCC Sale of Goods > $500 UCC 2-201 Look to price, not value of goods Requirement: – any writing that states quantity – signed by person to be charged Remember evidentiary purpose of statute!!! Exceptions to UCC SOF Specially manufactured goods: – substantial beginning of performance – commitments for procurement – obviously meant for a particular buyer » e.g., merchandise w/ ND monogram Confirm of an oral agreement between merchants Sufficiency of the Writing Ideally, all terms of K are clearly and unambiguously described in writing.... But what do we know from experience? – few will actually be set forth » UCC requires quantity term and signature only » at minimum, usually need name of parties, subject matter, consideration Only need signature of the party against whom enforcement of the K is sought For discussion... Purpose of Statute of Frauds – ethical ramifications – sword or shield? How to mitigate the harshness? – Effect of Partial Performance – Promissory Estoppel Electronic Signatures Purpose of the Statute To provide reliable evidence – written form is better than recollection of the parties To prevent frauds – because parties to the case could not testify, witnesses were sought... and bought But if it is used as a technical defense, might it do more harm than good? Some mitigation of the harm... Effect of Partial Performance – Land contract.... paid part of purchase price, taken possession, permanent improvements, but no formal writing... seller wants out – Admissions in court... satisfy writing requirement, to extent admitted More mitigation of the harm... Reliance on oral K – in some states, reliance is enough to remove from SOF Promissory Estoppel – Where else did we use this concept? Parol Evidence Rule “If a writing that is determined to constitute a K includes everything the parties intended, no evidence of prior oral or written agreements or contemporaneous oral negotiations may be used to change the terms” A Classic Example Purchasing a used car... questions as to warranty, reliability, etc... Seller and Buyer: “Blah, blah, blah, blah, blah, blah, blah, blah. Blah, blah, blah, blah? Blah. Blah, blah, blah, blah. Blah, blah, blah, blah, blah.” Written K: “This is the deal. This is the whole deal. Includes none of the blah, blah, blah.” What’s the deal? Parol Evidence Refers to that “outside” prior oral or written evidence The rule: – is intended to give effect to the intent of the parties – helps interpretation » provides a single source of proof Parol Evidence Rule Later agreements supersede earlier ones Rule applied only where latest expression of the K is in writing... if later expression is oral, it is not prior or contemporaneous and the jury decides if it supersedes When Will Extrinsic (Parol) Evidence Be Admissible? Subsequent modification – they are not prior or contemporaneous!!! – But what if subsequent modification brings the K under the SOF? Void or Voidable K – Evidence of fraud, deception, misrepresentation will always be admitted » much like with the IRS.... Admitting Parol Evidence... (cont’d): Ambiguous terms – remember, rule refers to a K that is supposed to have been agreed upon, so the court will accept evidence that clears up something ambiguous – Incomplete K... terms are missing – same comment.... we are trying to enforce the K that was agreed upon Prior course of Dealings – customs, trade usage are OK, and may have been part of the K Admitting Parol Evidence... (cont’d): K subject to agreed upon conditions – if whole contract was conditioned upon an oral statement, the oral statement isn’t modifying or changing the terms.... » issue is the enforceability of the contract Typographical errors – remember, we are trying to enforce the agreement the parties intended, not necessarily what the secretary may have typed!!! Problem 15-1 Can k be performed within one year from the date of being entered into? – a: Possible to be performed within one year? Yes – b: When would k be fully performed? Not until May 31 of following year. – c: Possible to be performed within one year? Problem 15-5 Does Agreement fall under the Statute of Frauds? Is it an agreement to pay the debt of another? Was this promise to pay an original undertaking of the son…? Problem 15-6 At what point do/did the obligations of the parties become fixed? What duties or obligations (if any) remain? Problem 15-7 Could the K possibly be performed within one year from formation? Prior to August 1985 One year from date of beginning operation When are obligations under K determinable with certainty?
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