Contracts II Outline
STATUTE OF FRAUDS
Original Statute of Frauds 1677 – No action shall be brought, unless the agreement or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith.
Modern Statute of Frauds consists of many statutes requiring agreements to be memorialized and signed
RESTATEMENTS §110 – Classes of Contracts Covered
The following classes of contracts are subject to the Statute of Frauds. In order to enforce, there must be a written memorandum or an applicable exception.
a) Contract of an executor or administrator to answer for a duty of his decedent
b) A contract to answer for the duty of another (suretyship)
c) A contract for marriage
d) Contract for the sale of an interest in land
e) A contract not to be performed within one year of the making thereof
f) Other contracts as required by individual state law
a) A contract for the sale of goods for the price of $500 or more UCC §2-201
b) Contract for the sale of securities UCC §8-319
c) Contract for the sale of personal property not otherwise covered, to the extent of enforcement by way of action or defense beyond $5,000 in amount or value of remedy UCC § 1-206
a) Is the contract one of the types to which the statute of frauds applies?
b) Is the statute satisfied?
c) Are there other factors in the case such as performance or reliance by the plaintiff, which might invoke an exception to the statutory bar?
Crabtree v. Elizabeth Arden
Cosmetic sales employment contract case where Crabtree wanted a three year contract and Elizabeth Arden offered a 2 year contract with graduated pay scale that was memorialized on a telephone order blank
Subsequent writings included a telegraph accepting the job, a payroll change card initialed by the VP, and a second payroll change card initialed by comptroller showing that there would be a salary increase, “per contractual arrangements with Miss Arden”
Arden refused to honor his one year salary increase and he sued
Statute applied because pay increase happened a year after contract was formed
Whether there was contract created by the signed and unsigned writings
The statute of frauds does not require the memorandum to be in one document, It may be pieced together out of separate writings, connected with one another either expressly or by internal evidence of subject matter and occasion RESTATEMENTS § 132
Signed and Unsigned writings may be read together, provided that they clearly refer to the same subject matter or transaction RESTATEMENTS §132
None of the terms of the contract may be supplied by parol evidence, and at least one of the writings, the one setting out the contractual relationship between the parties, must bear the signature of the party to be charged.
Parol evidence may only be admitted to show a connection between the signed and unsigned documents, and that defendant had assented to the unsigned papers
Statute will not apply where it is possible that the contract was possible to perform in less than a year even if it seems unreasonable that this would happen
RESTATEMENT §133 – except under the marriage provision the statute may be satisfied by a signed writing not made as a memorandum of a contract (letter, offer, repudiation of contract, entry into a diary, minutes of a meeting etc.).
RESTATEMENT §134 – What constitutes a signature (for e-documents and electronic signature usually ok under (E-sign act
Alaska Democratic Party v. Rice
§ Case where Rice resigns position working as finance chair for Dem. Party in MD to move to Alaska to take a job per an oral agreement
§ Wakefield (Alaska boss) is informed that he cannot hire her but repeatedly assures her she has a job with him then finally tells her she doesn’t
§ Can promissory estoppel be invoked to enforce a contract that falls within the statute of frauds
§ RESTATEMENT §139
§ Where a plaintiff has rendered partial performance on a contract that is unenforceable because of the statute of frauds, the courts will ordinarily grant plaintiff a remedy in restitution for the reasonable value of partial performance, Unless the relevant statute of frauds prohibits it
PRINCIPLES OF INTERPRETATION
– Traditionally courts applied a subjective approach to contract analysis:
o Where parties to a contract attributed materially different meanings to contractual language no contract was formed
o Peerless case – two ships named Peerless delivering cotton at certain times, court held no contract because no meeting of the minds
– Courts moved to an objective analysis of contractual language:
o Under this theory words and should be interpreted in accordance with the standard of a reasonable person familiar with the circumstances
o Contract could be interpreted as having a meaning the neither of the parties intended
– Modern Contract Law uses a Modified Objective Approach
o Whose meaning controls the interpretation of the contract?
o What was that party’s meaning?
o RESTATEMENT §201
§ If parties agree on meaning of languag
the contract preferred is the one that favors public interest
– Frigaliment Importing v. BNS International
§ Chicken case where the parties disagreed as to whether the term chicken as used in the export contract meant any kind of chicken, or just young chickens
§ In order for a trade usage to apply where one party is not a member of the trade it must be shown that the new party had actual knowledge of the usage or that the usage is so generally known in the community that actual individual knowledge of it may be inferred, meaning, the usage is of so long continuance, so well established, so notorious, so universal, and so reasonable in itself that the presumption is violent that the parties contracted with reference to it
§ The plain meaning of a contract should govern and extrinsic evidence should only be allowed if the court concludes the contract is ambiguous.
· Patent or intrinsic ambiguity
o Appears on the face of the contract when looking at it 4 corners
· Latent or extrinsic ambiguity
o Arises from extraneous or collateral facts which make the meaning of a written agreement uncertain although it appears clear and unambiguous
§ EXTRINSIC EVIDENCE
o Testimony of disinterested third parties, evidence of trade usage, etc.
o Testimony about what the parties believed the contract meant
§ Definitions of terms contained in statutes are not determinative of the meaning of such terms in a contract
§ UCC and USAGE OF TRADE UCC §1-205
· Usage of trade: §1-205(2)
· Course of Dealing §1-205(1)
· Course of Performance §2-208
PAROL EVIDENCE RULE
– Differences between Parol Evidence Rule and traditional evidence rule
o Parol Evidence rule considered substantive law not rule of evidence
o Right to object to inadmissible parol evidence not waived at time when evidence is offered
o Federal courts are bound to apply state versions of the parol evidence rule
o Only operates to exclude evidence