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Contracts II
Villanova University School of Law
Gordon, Ruth

Contracts II
Spring 2008

Statute of Frauds
v UCC 2-201
v Problems of Statutory Scope
§ A contract MUST be signed by the party that it is trying to be enforced against
Ø The Suretyship Clause
§ Comes up when the creditor goes after the solvent partyà applies to the promise by the surety to the creditor
· 3 Partiesà debtor; creditor; surety
Ø Strong v. Sheffield: Louisa Sheffield was the surety for her husband’s debt
¨ Creditor cannot collect from both parties, so looks to debtor first
Ø Novation: Creditor releases principal debtor, and surety becomes the principal debtorà Can be enforced if oral
¨ Main Purpose Doctrine
Ø Removes and oral agreement to pay the debt of another from the statute of frauds wherever the main purpose and object of the promisor is not to answer for another, but to serve some purpose of his own
§ Power Entertainment v. NFL
Ø The One-Year Clause
§ An agreement by its terms cannot be performed within one year of its making must be put in writing and is subject to the statute of frauds
· If it can be performed within a year, it is not within the statute of frauds and does not need to be in writing
¨ Ex. Employment agreement for 2 year contractà Can’t be performed in one year
Ø Does not apply to oral agreement for lifetime employmentà Could be performed in a year if employee dies within a year
v Requisites for Recording and Signing
Ø § 131: Any writing signed by or on behalf of the party to be charged
§ Identifies subject matter of contract
§ States with reasonable certainty essential terms of unperformed promises of K
· Writing does not need to be made at the same time as the contract
¨ Not for purpose of memorializing contract
¨ No specific form
¨ Need not be delivered to the other party
¨ Can be in multiple documents
Ø Can incorporate and reference other documents that are part of the contract
Ø Do not need to be made at the same time
Ø Need at least one writing that establishes the terms of the party
¨ Unsigned documents must refer to the same transaction as the signed document
Ø Parol evidence can be used to tie documents together

Ø Full Expression
§ When a written agreement providing for arbitration is orally renewed, the parties in effect adopt it as an integral part of the new agreement
· Acadia v. Edlitz
¨ When does a modification of an agreement become a new contract?
Ø A new free standing agreement would not reference back in any way to the old agreement
Ø Signing
§ UCC 2-201
¨ Relaxes the writing requirement
· (1) Sale of goods over $500à Proposed $5000, which makes a lot more oral contracts enforceable
¨ Must be signed by the party that it is trying to be enforced against
¨ Writing must include quantity term
Ø PRICE can be omitted
· (2) Merchants Exceptionà takes away the defense of the statute of frauds if there is no response
Ø Makes contract enforceable against a non-signer
¨ Writing of confirmation within a reasonable time
¨ Party receiving has reason to know of its contents
Ø Unless written objection is written within 10 days
§ Assumption that players in the commercial world would write back if there was a problem
· (3) Contract that does not satisfy section (1) but is valid in other respects is enforceable if
¨ Goods are custom manufacture for the buyer and not suitable for sale to others
¨ Party against whom the contract is trying to be enforced admits in testimony that a contract for sale was made
¨ Goods for which partial payment has been made and accepted, or where some goods have been shipped and accepted
v Ameliorating the Operation of the Statute
Ø Part Performance
§ Any court may compel the specific performance of any agreement for the sale of real property in case of part performance
· Johnson Farms v. McEnroe
¨ What count’s as part performance?
Ø Possession and improvements on the land
§ These actions are evidence of an agreement between the parties and are what courts generally look to
Ø Estoppel/Reliance
§ § 139
· (1) A promise which the promisor reasonably would expect to induce action/forbearance by a promisee or 3rd person and which does induce that action/forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise
· (2) To determine if injustice can be avoided only be enforcement of the promise, the following factors are significant:
¨ Availability/adequacy of other remediesà cancellation; restitution
¨ Definite and substantial character of the action/forbearance in relation to the remedy sought
¨ Evidence of a making of terms established by clear and convincing evidence
¨ Reasonableness of action/forbearance
¨ Foreseeable action/forbearance by the promisor
· The doctrine of estoppel may be used to assert the statute of frauds to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances
¨ Monarco v. Lo Greco
§ 2 Testsà Reliance and Unjust enrichment
· Unconscionable injury due to reliance
· Serious change in position of promisee
¨ Christie in Monarco
Ø Gave up opportunity to get education and gain own property
Ø Devoted life to family in reliance on promise
§ Restitution is not appropriate because it was impossible to measure what Christie gave up over 20 years
Ø Estoppel and UCC 2-201
§ Should estoppel apply to the UCC?
· Only certain types of reliance in 2-201(3)(a)-(c) that removes oral agreement from the Statute of Frauds
· 1-103: Principles of law and equity supplement the code
¨ Estoppel is a principle of law and equity that would supplement 2-201
§ Policy
· Usually reliance
· Should allow injustice to reduce fraud and perjury
· Encourages written contracts
Ø Wrap up: Statute of Frauds
§ Encourages parties to reduce agreements to writing
§ Reduces the risk of fraud and perjury should there be a dispute
· Problemà May end up enforcing an agreement that was not actually intended

v Policing the Bargain
Ø Most Rules are subject to legislationà Foundations
§ Substanceà Courts don’t usually touch the actual content of a bargain
§ Behavior
§ Status
· § 14: Minors
¨ Minors are responsible for crimes and torts, but can disaffirm contracts made as a minor
Ø Protects them from making bad decisions and from being exploited

· §15: Mentally infirm
· Inebriated personsà Lucy v. Zehmer

¨ § 89
Ø Modification is binding if…
§ Modification is fair and equitable in view of circumstances not anticipated by parties when contract was made
§ To the extent provided by statute, OR
§ To the extent that justice requires in view of material change of position in reliance on the promise
¨ A modification made to meet the reasonable needs of standard and ethical practices of men in their business dealings with each other operates as a partial rescission of a prior contract and is thus enforceable since supported by consideration
Ø Watkins & Son v. Carrig
¨ Avoiding the Pre-Existing Duty Rule
Ø Foakes v. Beer
§ Creditor can forgo interest payments on a principal amount
· Can still seek the interest owed, since there was no consideration for putting aside interest
Ø Payment in different medium than what was required
§ Property or labor
Ø Payment in Full checks
§ Creditor accepts payment by debtor as settlement of the account
§ Creditor accepts and settles account if he chooses to cash the check
· Duress in Business
¨ A contract modification is voidable on the ground of duress when
Ø The party claiming duress establishes that its agreement to the modification
Ø Was obtained by means of a wrongful threat from the other party
Ø Which precluded the first party’s exercise of free will
§ Austin Instrument v. Loral Corp
· Loral was deprived of free will because had to choose to pay liquidated damages to the Navy or more money to Austin
· Risk of losing future contracts with the government
· Could not accept breach a sue for damages because of other contracts linked to the shipment
· Undue Influence
Ø Something shady about the bargain that indicates it was not made freely
¨ Disparity between parties prevents bargaining at arm’s length
¨ Subjective factors to consider whether there was coercion
Ø Excessive pressure on vulnerable party
Ø Will of servient party subject to dominant person
Ø Often an authoritative relationship between the parties
Ø Lessened capacity of the servient to make free contracts
Ø Servient party’s judgment is thwarted
¨ Objective factors considered when determining coercion
Ø Unusual time or place of bargain
Ø Multiple persuaders
Ø Absence of advisors for servient party
Ø Status of dominant side
§ Odorizzi v. Bloomfield Sch. Dist.
§ Concealment and Misrepresentation
¨ Where both parties to a contract of sale are dealing at arm’s length, mere nondisclosure of latent defect in the goods will not render one party liable to the other party