Chapter 15
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CHAPTER 15. The Form and Meaning of Contracts. Statute of Frauds. Certain contracts require a writing Failure to Comply- Unenforceable. Statute of Frauds. Contracts Covered Executor’s/Administrator’s Agreements to Personally Pay Decedent’s Debts

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CHAPTER 15

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Chapter 15

CHAPTER 15

The Form and

Meaning of Contracts


Statute of frauds

Statute of Frauds

  • Certain contracts require a writing

  • Failure to Comply- Unenforceable


Statute of frauds1

Statute of Frauds

  • Contracts Covered

    • Executor’s/Administrator’s Agreements to Personally Pay Decedent’s Debts

    • Conditional Promise to answer for the debt of Another

      • Collateral/Guaranty Contract

        • Nakamura v. Fujii, p.256

          • The parents of two college students whose tuition was paid by a third party must repay the debt because their promise to repay was an original promise.

          • Only a conditional promise to pay the debts of another must be in writing, and there was no conditional promise here.

          • Question 5 at end of chapter

          • No. The statute of frauds requires contracts which, by their terms, cannot be performed in one year to be in writing to be enforceable. We have long interpreted this provision to encompass only those contracts which have absolutely no possibility of full performance within one year. If the agreement can be interpreted such that it may per performed in a year, the statute will not bar enforcement no matter now unlikely or even improbable it is that such performance will occur within that time frame. There is no time frame stated in the agreement. Nakamura only promised to pay “certain tuition invoices.” The Fujiis agreed to repay “on demand.” Given the absence of any specific times for performance, it cannot be said that the agreement could not be performed within one year, notwithstanding its actual duration. Additionally, there was no guarantee that the daughters would remain at USC for even one year. They could have left USC for any of the reasons that commonly lead many college students either to drop out or to change schools. Nakamura v. Fujii, 67 N.Y.S.2d 113 (N.Y. App. Div. 1998).


Statute of frauds2

Statute of Frauds

  • Contracts Covered

    • Conditional Promise to answer for the debt of Another

      • Collateral/Guaranty Contract

        • Question 6 at end of chapter.

          • No. Under the statute of frauds, a collateral agreement to pay the debt of another must be in writing to be enforceable. However, if the promise is one for primary liability, it is enforceable without a writing. In this case, only the adult son of the Valentines was legally represented by the law firm. It was he who incurred the debt for representation. The parents, who were not charged with a crime, received no material benefit from the firm’s representation of Michael. The oral agreement between the parents and the firm is a separate and collateral undertaking and thus falls within the statute of frauds. The statute was adopted to encourage contracting parties to put their agreements into writing so as to avoid certain pitfalls. It was not done here. Crozier and Gudsnuk, P.C. v. Valentine, 1992 Conn. Super. LEXIS 1179 (Super. Ct. Conn. 1992.


Statute of frauds3

Statute of Frauds

  • Contracts Covered

    • Transfer of Land Interest (Unless part performance in some cases)

      • Question 7 at end of chapter.

        • No. No action may be brought on a contract for the transfer of an interest in land unless there is some written memorandum signed by the party to be charged. In this case there was only an oral promise to convey the property to Temple. However, the promise can still be enforced if there has been sufficient part performance. But part performance will not make an oral contract enforceable unless it is directly referable to that contract. It must be such as would not ordinarily have taken place in the absence of a contract, and therefore can serve as proof of the contract. Rangle promised to convey the property in return for Temple’s resumption of employment and their social relationship. While Temple did these things, her actions are not inconsistent with other explanations for her behavior. The resumption of their relationship is objectively explainable as two divorced persons who are very fond of each other, who have had a disagreement, and who have made up. This is completely consistent with the history of their relationship. Thus, her part performance will not take this case outside the statute of frauds. Unitas v. Temple, 552 A.2d 1285 (Ct. App. Md. 1989).


Statute of frauds4

Statute of Frauds

  • Contracts Covered

    • Bilateral Contracts Not Capable of Being Performed w/i 1 Year

      • Popanz v. Peregrine Corp., p.257

        • The court refuses to enforce an oral promise to an employee that she could retain her current position until she was 65.

        • Many courts take the approach that since the employee could leave at any time, or die, the contract is terminable within a year. This court, however, finds that the express terms make such an interpretation impossible.


Statute of frauds5

Statute of Frauds

  • Contracts Covered

    • Bilateral Contracts Not Capable of Being Performed w/i 1 Year

      • Question 8 at end of chapter.

        • No. Kansas law states that agreements that are not to be performed within a year must be in writing and signed by the party to be charged to be enforceable. Stephan argues that this agreement could not be performed within one year because it was designed to be perpetual. This contention is in error. Essentially, the parties agreed never to reveal the terms for the rest of their lives. As grim as it may sound, both Tomson and Stephan could have passed away within that first year, and the contract would have been fully performed. Therefore, the contract is not within the statute of frauds. Tomson v. Stephan, 699 F. Supp. 860 (D. Kan. 1988).


Statute of frauds6

Statute of Frauds

  • Contracts Covered

    • Bilateral Contracts Not Capable of Being Performed w/i 1 Year

      • Example: Washington’s statute of frauds, passed in 1881, requires any contract which cannot by its terms be performed in one year from the making thereof to be reflected in a signed writing to be enforceable. This included contracts for personal services. Even though there was a six-month termination option, the term of the contract itself was five years. Also, the fact that French worked for Sabey for 11 months does not take it out of the statute’s requirement. Part performance may be proof in a real estate case, but not in a personal service contract. Sabey did not sign the contract as required by the statute. It is not enforceable. French v. Sabey Corp., 951 P.2d 260 (Wash. Sup. Ct. 1998).


Statute of frauds7

Statute of Frauds

  • Contracts Covered

    • Sale of Goods $500+(UCC)

      • Question 10 at end of chapter

        • No. Even if there was a contract here (which we do not find), it would not be enforceable under the UCC’s statute of frauds provision. The contract was for the sale of a good worth more than $500. It had to be evidenced by a signed writing. Although Lee sent several letters to Golomb, including a letter summarizing their “agreement,” Golomb never signed any of them. While Voyles did endorse her check, the contract needed Golomb’s signature to be binding. Lee v. Voyles, 898 F.2d 76 (7th Cir 1990).


Statute of frauds8

Statute of Frauds

  • Contracts Covered

    • Sale of Goods $500+(UCC)

      • Wehry v. Daniels, p. 260

        • The court finds that an exception to the statue of frauds applies in the sale of a racing helmet where the purchaser openly admitted to the existence of a contract. The court devotes a good deal of discussion to the policy logic of this exception to the writing requirement, noting that it “makes an open mockery of the statute to permit the defendant to use the statute effectively as a defense, yet in pleadings or in open court admit a contract. Once the existence of the contract is established, the policy behind the statute is fulfilled.” Note also that the court finds that since the policy behind the statute had been fulfilled, the only remaining task is to ascertain the precise terms of the contract. Daniels testified that Wehry agreed to purchase the helmet for $ 2750.00, but Wehry claimed he only offered $1,800. A set of three helmets costs $ 9,000.00. Thus, the court found that it was reasonable to conclude that Wehry agreed to pay $ 2750.00 for one of the helmets.


Statute of frauds9

Statute of Frauds

  • Not Covered Under UCC:

    • Specially Manufactured Goods

    • Admittance of Contract Not

    • Partial Performance

    • Acceptance of Delivery

    • Merchant Failure to Object Within 10 Days


Statute of frauds10

Statute of Frauds

  • Type of Writing Required

    • Memorandum of agreement

      • Conner v. Lavaca hospital Dist., p.258

        • A doctor is not allowed to prove her three-year employment contract with the hospital board’s minutes because they were not sufficiently specific.

        • Court says written employment must contain duration, compensation and duties. The court sees the parties as still negotiating about an essential term.

        • The doctor also argued that part performance made the contract enforceable. She argued that she was not fully compensated for the services rendered while she continued to work without a formal contract. The court found that she continued to work even after the board rescinded the motion. Thus, she cannot reasonable be said to have worked in reliance on the contract. Also, she cannot argue promissory estoppel because she cannot show sufficient detrimental reliance.


Statute of frauds11

Statute of Frauds

  • Type of Writing Required

    • Memorandum of agreement

      • Question 9 at end of chapter.

        • Yes. The memorandum required by the statute does not have to be in one document. It can be pieced together out of separate writings, as long as those writings are connected in some way. At least one writing, which establishes a contractual relationship, must be signed by the party to be bound. The signed contracts here show a contractual relationship. There is no signed document stating the exact number of volumes to be included in the anthology. However, the unsigned announcement and interoffice memo, as well as the letters, clearly indicate a contract for an eight-volume anthology. Biggle v. Harper & Row Publishing, Inc., 675 F.2d 107 (6th Cir. 1982).

    • Electronic Signatures O.K.


Interpreting contracts

Interpreting Contracts

  • Rules of Construction

    • Determine Principal Objective of the Parties

    • Written Terms Control over Printed Terms

      • Question 11 at end of chapter

        • Curtis O. Griess & Sons, Inc. v. Farm Bureau Ins. Co. of Nebraska

          • An insurance term covering livestock loss due to wind damage is interpreted to cover swine killed by a virus carried to the swine herd by a tornado.

          • This is a good example of the court construing a contract in favor of the insured and against the maker of the form contract.

          • For insurance contracts and other form contracts between businesses and lay people, this is a common rule of construction.


Interpreting contracts1

Interpreting Contracts

  • Rules of Construction

    • Evergreen v. Tan-It-All, p. 261

      • The court finds that an insurance term covering equipment loss clearly and specifically covers a 100 foot area outside of Suite C-5 and declines to expand coverage to encompass a greater area. Note that courts aim at construing a contract in favor of the insured and against the maker of the form contract; that the court did not here may speak to the stark lack of ambiguity or the very plain and apparent meaning of the words of the contract. In insurance contracts and other form contracts between businesses and lay people, this is a common rule of construction.


Interpreting contracts2

Interpreting Contracts

  • Rules of Construction

    • Example: Faced with two equally fair constructions of the policy language, we rely on the one favoring the insured. Coverage is activated by the impact of a vehicle, but is not conditioned on physical contact between the vehicle and the insured’s body. One of the definitions of the term “impact” is, “an impelling or compelling effect”. Once the coverage is activated by a vehicle, it is immaterial whether the injury-causing blow is delivered by the vehicle, or the object which the vehicle set in motion. There is no rational distinction between a blow struck by an object propelled by a moving car, and a blow struck by an object propelled by the spinning wheels of a car. Both blows result from the “impact” of the car. Davis’ injuries are covered by the policy. Davis v. Preferred Risk Mutual Insurance Co., 372 S. E. 2d 150 (Sup. Ct. Va. 1988).


Parole evidence rule

Parole Evidence Rule

  • Purpose- Cannot Vary Terms in Writing by Prior Evidence

    • Burke v. Manfroni, p. 263

      • A written lease assignment incorporates all terms and cannot be varied by oral agreement. Incorporation clauses and requiring alterations to be in writing are good ways to prevent later attempts to orally alter a contract. Burke, et al. were attempting to assert a separate contract, but the court found that the assignment incorporated all terms. Claims of fraud and misrepresentation would not be barred by the parole evidence rule.


Parole evidence rule1

Parole Evidence Rule

  • Purpose- Cannot Vary Terms in Writing by Prior Evidence

    • Question 12 at end of chapter

      • Boginis v. Marriott Ownership Resorts, Inc.

        • A written employment contract which states it incorporates all terms and cannot be varied except by a writing cannot be altered by oral testimony.

        • Incorporation clauses and requiring alterations to be in writing are good ways to prevent later attempts to orally alter a contract. The fact that this was an individually negotiated contract carried weight with the court.


Parole evidence rule2

Parole Evidence Rule

  • MCC-Marble Ceramic Center v. Ceramica Nuova D’Agostino, S.P.A., p. 264

    • The CISG is interpreted as allowing parole evidence so that a party to a written contract can testify to the subjective intent of the parties when the contract was signed. Note that a few major U.S. trading partners such as Japan and Great Britain have not signed the Convention. Parties should settle this issue in advance by putting an arbitration clause in their contract and/or a choice of law clause.


Parole evidence rule3

Parole Evidence Rule

  • Exceptions

    • Evidence of Lack of Voluntary Consent

    • Ambiguous Contracts

    • Incomplete Writings

    • Subsequent Oral Contracts

    • Conditions Precedent


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