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Contracts II
University of Alabama School of Law
Lee, Grace

Contracts II
Grace Lee
Spring 2012
·         Ways a party can avoid, due to events or conditions at the time of formation, a legal obligation to perform an agreement that otherwise satisfies the conditions of contractual validity
·         Courts distinguish between “void,” “voidable,” and “unenforceable”
o    “Void” – transaction has created no contractual obligations at all
o    “Voidable” – one or both of the parties have the power to dissolve the legal relationship
§  The exercise of that power is termed “rescission,” “disaffirmance,” or “avoidance”
o    “Unenforceable” – contract remains in existence, but under certain circumstances courts will not enforce it
I)       Statute of Frauds
a.        Questions to ask:
                                                               i.      Does the SOF apply?
                                                             ii.      If yes, then is the contract in writing?
                                                           iii.      If no, the contract isn’t enforceable unless there is an exception (part performance, admission in court)
b.       What does the SOF do?
                                                               i.      Requires certain types of agreements to be in writing in order to be enforceable/valid contracts
                                                             ii.      If an agreement falls “within the Statute,” it must be in writing (or else it’s void); if an agreement is not within the statute, then the contract may still be valid even if it’s not in writing
                                                           iii.      Balance of justice:
1.       Requiring writing when stakes are high or when there is potential for confusion or duplicity
2.       Not voiding Ks simply for lack of writing when possible
c.        What type of contracts fall under the SOF?
                                                               i.      MYLEGS—These Ks have to be in writing
                                                             ii.      Marriage
1.       Refers to pre-nuptial agreements (how assets will be divided in a divorce, amount of alimony to be paid, etc.)
2.       HAS TO BE IN WRITING because when the marriage falls apart the parties will not be agreeing on anything
a.        The stakes are too high—too much emotion between the parties
                                                           iii.      Year
1.       Services will be performed over the course of a year or more (i.e., contracts that cannot be completed in a year)
2.       Rationale: talking about a year or longer; likely the parties will forget what the original terms of the contract were
3.       Modern take: trend against requiring it to be in writing
a.        Don’t want to be too rigid or formalistic
4.       RULE: despite the modern trend, they still have to be in writing
Crabtree v. Elizabeth Arden Corp.
Contract between the parties in which π agreed to work for D. Issue about whether Arden’s memos and written acknowledgement of π’s acceptance were sufficient to designate a period of employment (“2 years to make good”). Satisfied the SOF
Court held that the they weren’t going to be so rigid as to require Arden to sign every document and said that it doesn’t have to reference the original document just as long as it’s the same transaction
Court took the approach of looking at multiple documents as long as they reflect the intent of the parties and refer to the same subject matter/transaction
5.       Restatement (2d) § 132 influenced by Crabtree
a.        “The memorandum may consists of several writings if one of the writings is signed and the writings in the circumstances clearly indicates that they relate to the same transaction”
                                                           iv.      Land
1.       Real estate or for the sale of land or a building
2.       Why does this have to be in writing?
a.        High stakes—land is expensive, permanent and unique
                                                             v.      Executor
1.       Estates—dealing with a will or transfer of assets after someone’s death
2.       Why does this have to be in writing?
a.        The person who wrote the will is dead and there can be confusion and the motive to lie amongst the living parties
                                                                                                                                       i.      This eliminates the confusion
                                                           vi.      Goods
1.       Goods worth more than $500 have to be in writing
a.        WHY?
                                                                                                                                       i.      Expensive things require clear terms and the best way is in writing
                                                         vii.      Suretyship
1.       Relates to when one party has agreed to take on the obligation of another [ex: paying all of a person’s debt] 2.       Multiple parties are involved [guarantors, lenders, lessee]  
d.       Policy reasons for the Statute of Frauds
                                                               i.      Reasons for the SOF
1.       Lessens the fraud that the contract was made
2.       We’re skeptical of people telling the truth and lying (no way to know truth unless in writing)
3.       Eliminates jury bias
                                                             ii.      Reasons against the SOF
1.       Don’t want to be too rigid even if there is a contract despite having a piece of paper
2.       Don’t want to be too formalistic
3.       Sometimes a lack of writing is relatively unimportant
e.        EXCEPTIONS to SOF (allows for the contract to not be in writing—specific terms must be present)
                                                               i.      Part Performance
1.       Elements (from Sullivan v. Porter)
a.        Parties entered into a contract (even though not in writing)
b.       Party seeking enforcement partially performed
c.        Performance was induced by the other parties’ misrepresentations
                                                                                                                                       i.      Misrepresentation—can be about existence of a contract or something a little more (jurisdictional debate)
Sullivan v. Porter (Bates & Anna = Sullivan/Andrews vs. Lord/Lady Grantham = Porter)
Contract for the sale of land (SOF apply). Π’s expressed interest in renting D’s barn/fields and the parties agreed to sell/purchase. Π told D that they would have to refinance their house to pay the down payment and then started rehabbing the property; then D brought a real estate agent to the property and said there was another offer on the property
Issue: whether evidence of part performance and reasonable reliance was insufficient to remove the oral contract for the sale of real estate form the SOF
Court said there was a contract, the πs partially performed, and Ds made misrepresentations through their acts and omissions. The partial performance was induced by Porter’s misrepresentation and silent acquiescence
Part performance doctrine is grounded in principle of equitable estoppel which involves “misleading statements, conduct, or silence, t

Necessaries: things that are necessary to the support, use, or comfort of the person of the minor like food, raiment, lodging, medical assistance, and other personal comforts (contracts for them cannot be gotten out of)
·         Determination of whether goods are necessaries is a question of law
·         Cars don’t fall into the exception of a necessary
RULE: when a minor enters into a contract for a necessary, the contract can still be voided but a reasonable amount must be paid for the necessary
·         In the 1960s (when this case decided) cars weren’t necessaries
·         If necessaries are involved, recovery is limited to restitution
                                                             ii.      Mental Incompetence/ Intoxication
1.       High threshold because of the difficulties in determining incapacity
Restatement (2d) § 15
(1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect
(a) he is unable to understand in a reasonable manner the nature and consequences of the transaction,
or (b) he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know his condition
(2) Where the contract is made on fair terms and the other party without knowledge of the mental illness or defect, the power of avoidance under § 1 terminates to the extent that the contract has been performed in whole or part or the circumstances have so changed that avoidance would be unjust. In such a case, a court may grant relief, as justice requires.
3.       Common Rule incompetent should be able to avoid the contract only if he/she can restore the other party to the other party’s pre-contract position
a.        Takes into account whether the other party acted in good faith and was aware of the incapacity
Heights Realty v. E.A. Phillips
Contract terms: if Heights was able to find a buyer for Gholson’s house, she would pay the commission, but she changed the terms and was able to find a new buyer. She wanted to not pay them or sell the house for the amount offered. She just wanted to not pay the commission or to sell the house
4.       Party claiming incapacity has the burden of proving incapacity
5.       Factors of incompetence
a.        Physical condition of the individual
b.       Terms of the contract itself and the fairness/reasonableness of the contract [whether the contract was improvident] c.        Adequacy of consideration
d.       Person’s actions and behavior at time of contract
e.        Relationship of the parties
6.       Test of mental capacity: applied as of the date that attacked instrument is executed, evidence of a person’s prior or subsequent condition is admissible to show the condition at time in issue
7.       Incapacity due to old age is hard to determine
a.        Person’s present state, use inference