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Contracts
University of California, Hastings School of Law
Knapp, Charles Lincoln

CONTRACTS SPRING 2006

THE STATUTE OF FRAUDS

WRITING AS A PREREQUISITE FOR ENFORCEMENT:

Technically, statute of frauds is a defense (not part of plaintiff’s case initially to plead that a contract is made in writing) to enforcement.

§110 – CLASSES OF CONTRACTS COVERED
(1) The following classes of contracts are subject to a statute, commonly called the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception:
(a) a contract of an executor or administrator to answer for a duty of his decedent
(the executor-administrator provision)
(b) a contract to answer for the duty of another (the surety provision)
(c) a contract made upon consideration of marriage (the marriage provision)
(d) a contract for the sale of an interest in land (the land contract provision)
(e) a contract that is not to be performed within one year from the making thereof (the one-year provision)

Questions to ask when the statute of frauds is raised as a defense against the enforcement of an alleged contract:
(1) Is the contract at issue one of the types to which the statute of frauds applies, so that a signed memorandum will be required for its enforcement? (If No, then plaintiff can prove contract by other evidence)
(2) Is the statute of frauds “satisfied”? Is there enough writing to satisfy the statute? (If Yes, then case can proceed)
(3) Is there some other basis upon which the agreement might be enforced? Even if a statute of frauds applies so that the agreement that the plaintiff is trying to enforce can’t be enforced as such, the plaintiff might have some other remedy to recover

§130 – CONTRACT NOT TO BE PERFORMED WITHIN A YEAR
(1) Where any promise in a contract cannot be fully performed within a year from the time the contract is made, all promises in the contract are within the Statute of Frauds until one party to the contract completes his performance.
(2) When one party to a contract has completed his performance, the one-year provision of the Statute does not prevent enforcement of the promise of other parties

-Crabtree v. Elizabeth Arden = Breach of K – plaintiff presented an unsigned office memorandum and two signed payroll cards as evidence of a two year employment contract with payroll increases. All three documents referred on their face to the same transaction and essential terms. K fell under the one-year provision.
Holding à Documents were sufficient under the statute of frauds to establish an employment K

ENFORCEMENT IN THE ABSENCE OF A WRITING:

§129 – ACTION IN RELIANCE; SPECIFIC PERFORMANCE
A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.

-Winternitz v. Summit Hills Joint Venture = Breach of lease and interference with K – a unsigned lease of property between a landlord and a tenant was terminated by the landlord after tenant had transferred interest to a third party.
Holding à K claims were barred by the statute of frauds, part performance doctrine was not available because plaintiff sought monetary damages, not specific performance. Defendant maliciously interfered with K because he did not receive anything more by not renting to plaintiff, breached the lease for the purpose of hurting the plaintiff’s sale of his business.

§ 139 – ENFORCEMENT BY VIRTUE OF ACTION IN RELIANCE
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant:
(a) the availability and adequacy of other remedies, particularly cancellation and restitution;
(b) the definite and substantial character of the action or forbearance in relation to the remedy sought;
(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;
(d) the reasonableness of the action or forbearance;
(e) the extent to which the action or forbearance was foreseeable by the promisor.

-Alaska Democratic Party v. Rice = Rice claimed that a Democratic Party official offered her a two-year position with the Alaska Democratic Party. Job failed to materialize and Rice sued on the alleged oral contract.
Holding à The jury awarded her damages based upon promissory estoppel and misrepresentation because plaintiff had acted in reliance on defendant’s promises

THE SALE OF GOODS STATUTE OF FRAUDS

UCC §2-201 – FORMAL REQUIREMENTS; STATUTE OF FRAUDS
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
(2) “merchants exception” (see below)
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods, admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and accepted

-Buffaloe v. Hart = Tobacco farmer, already in possession of barns under rental agreement, entered into an oral agreement to purchase five barns located on the property owners’ farm. Tobacco farmer gave check as partial payment (check included Buffaloe’s signature and “for five barns”), but Hart returned the check four days later and sold the barns to another buyer.
Holding à Personal check was not sufficient to constitute a writing under the statute of frauds because if was not endorsed by the property owners. However, there was enough part performance in terms of payment and delivery and acceptance of the goods to take the contract out of the statute of frauds à Breach of K

THE “MERCHANTS EXCEPTION”:

UCC §2-201:
(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
-Bazak International Corp. v. Mast Industries, Inc. = Plaintiff (buyer) sent signed annotated purchase order forms to defendant (seller). Defendant retained forms without objection, but forms were not signed. Plaintiff claims that the orders fall under the merchant’s exception of UCC §2-201 (2), satisfying the statutory requirement of a writing even without the seller’s signature.
Holding à Taken as a whole, there was sufficient evidence that the writings rested on a real transaction, and therefore satisfied the Statute of Frauds. Handw

trol both course of dealing and usage of trade (Section 1-205).
(3) Subject to the provisions of the next section on modification and waiver, such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance.

UCC and Restatement – when the meaning of the agreement is an issue, look at:
1) express terms (the words that the parties use)
2) trade usage – standards from the industry, what other people in the trade do
3) course of performance – if the parties have already partly performed this agreement, actual performance might give a clue as to the actual intended meaning of the agreement
4) course of dealing – other transactions that parties have made in the past for clues as to what the agreement at issue means

-Frigaliment Importing Co. v. B.N.S. International Sales Corp. = Two contracts with plaintiff foreign corporation for the sale of “chicken.” Disagreement over what “chicken” meant (young chicken or stewing chicken). Plaintiff brought breach of warranty action after it received stewing chicken, alleging that the goods sold should have corresponded to the description because the chicken was not suitable for broiling and frying.
Holding à Defendant’s subjective intent that it could comply with the contracts by delivering stewing chicken coincided with objective meaning of “chicken,” which had at least some usage in the trade; and plaintiff did not sustain its burden that “chicken” was used in the narrower rather than in the broader sense.

STANDARDIZED CONTRACTS:

-C & J Fertilizer, Inc. v. Allied Mutual Insurance Co. = Plaintiff operated a fertilizer plant, insured against burglary under the policies issued by defendant. After a break in, defendant refused to pay for the loss because the break in did not comport with the definition of “burglary” in the policy, which stated that there had to be “visible marks made by tools…or physical damage to the door.” Plaintiff didn’t get the policy with terms until after it was purchased
Holding à Policy was unconscionable and departed from the reasonable expectation of an ordinary person.

§ 211 – STANDARDIZED AGREEMENTS
(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.
(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.

PAROL EVIDENCE RULE

-Preference for agreement expressed in a formal writing, over various other modes of expression – oral and written –Operates to exclude evidence that would otherwise be admissible as rationally probative of some fact at issue
-If there is a fully integrated contract, then parol evidence will not be allowed into evidence to vary, add to, or contradict the terms of the writing