The Statute of Frauds: When a Handshake Isn’t Enough

The Statute of Frauds:

When a Handshake Isn’t Enough

• Writing in traditional sense v. modern recordation.

• Signature in traditional sense v. “authentication.”

• “By the party to be charged.”

• An affirmative defense that can be lost (e.g., failure to plead).

• Writing does not preclude a finding that there was no binding agreement.

The Requirement of a Writing:

What Does It Mean?

Ink no longer required.

• Guarantee to pay another’s debt.

• Contract that cannot be performed w/in 1 year.

• Executor’s promise to pay deceased’s debts.

• Contract made on consideration of marriage.

• Contract for interest in real property.

• Contract for sale of goods for $500.

Contracts Traditionally Within the Statute of

Frauds

• Why would one party assure another’s debt?

• Possibility of ambiguity?

• Setting where ambiguityis most likely?

• Is SOF a solution?

• When might there be less cause for concern?

The Suretyship Clause:

Guaranteeing Another’s Debt

Why might one person vouch for or guarantee another person’s debt?

• Pro Set owned assets, including license to sell NFL player cards.

• Pro Set becomes bankrupt and isliquidated for creditors (NFLP).

• PE alleges agreement with creditors to “purchase Pro Set out of bankruptcy” in return forlicense. NFLP later reneges.

Power Entertainment v. NFLP:

The Underlying Bankruptcy

Player cards: An asset worth fighting for?

• PE admits promise, seeks to enforce NFLP’s promise to transfer license.

• Is NFLP’s oral promise subject to SOF?

• Can a defendant (NFLP) assert SOF based on a plaintiff’s (PE’s) promise?Who was the statute designed to protect?

Power Entertainment v. NFLP:

Suretyship? Or Something Else?

Will the statute of frauds defense hold?

• Suretyship is collateral?No direct benefit to promisor.

• Main purpose: Did promisor make promise mainly for its own purpose or benefit?

• Intent to be primarily liable?

• Consideration?

Power Entertainment v. NFLP:

The Purpose of the Promise?

Defense folds. Oral promise scores!

• Reasons to require writing?

• Test: Might the promise have been performed within one year?

• By strict reading of terms? Or as a matter of reasonable possibility in fact?

• Possible performance within one year v. possible discharge from obligation within one year.

A Promise That Cannot

Be Performed in One Year

• Reconsider Hamer v. Sidway.

• “Work-Study” Program (Problem #2, p. 275).

• Promise of employment for 5 years, “if you live that long.”

• Promise of employment for as long as work is “satisfactory.”

Performance Within One Year: Illustrative

Problems

• Promise by executor to pay debts of the deceased, out of executor’s own pocket.

• An agreement made upon consideration of marriage.

• An agreement for sale of real property or for an interest in real property.

• A contract for sale of goods for $500.

The Other Four Contracts

Within the Statute of Frauds

Some oral promises are not binding.

• A doctor’s warranty of cure.

• Pre-or post-nuptial contractaltering rights and duties of marriage or marital property.

• Promise in consideration of “non-marital conjugal cohabitation.”

• Certain contracts subject to consumer laws.

Some New Types of Contracts Within the

Statute of Frauds

Do some plastic surgeons make a warranty of cure?

• Goal: Physical record corroborating transaction.

• Contains “essential terms.”

• Signature: Authenticating or showing intent to adopt.

• Different requirements canbe satisfied by combining separate but connected documents.

Satisfying the Statute:A “Writing” and a

“Signature”

Remember Lucy v. Zehmer?

Electronic Writings and Signature:

Uniform Electronic Transactions Act

• A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

• An electronic signature includes an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.

Click “Accept” if you agree to these terms and wish to purchase this product.

Accept Decline

ProblemA and B were in a reality show, Marooned, in

which the object was to be the last hold-out on a desert island. A caught a wild chicken. B was starving and promised to pay A $500 “when we get back home” in return for a share of the cooked chicken. They shook hands on the deal. The entire transaction was recorded by a video camera. Would the Statute of Frauds bar enforcement? Does the Uniform Electronic Transactions Act apply to the transaction?

In re Arbitration Between Acadia and Edlitz

Will the Statute bar this oral “modification?”

• N.Y. and federal law: Arbitration agreement must be in writing.

• Original duration of the agreement?

• Later: Separate agreement? Or a “renewal?”

• Are underlying purposes of Statute satisfied?

In re Acadia & Edlitz:Modifying a Written

Contract

Can written agreements be “stretched” by oral renewal or modification?

• If written contract is not within Statute in original or modified form, modification need not be in writing.

• If agreement as modified falls within Statute, there must be a writing (but the original writing might suffice).

• Can parties adopt their own “Statute of Frauds” for oral modification? See UCC §2-209.

Other Oral Modification

Of a Written Contract

• For sale of goods for $500 (See proposed revision ).

• Sufficient to show contract has been made between parties.

• Even if “it omits or incorrectly states a term agreed upon.”

• Limited to stated quantity.

• Signed by party to be charged.

UCC § 2-201: Rewriting

The Statute of Frauds

Contract on Starbucks napkin: Sufficient despite coffee stains?

• Satisfying SOF w/out signature of party to be charged.

• A written confirmation, sent in reasonable time, and “sufficient against sender.”

• Other party received it and had reason to know contents.

• Unless recipient gives written objection w/in 10 days of receipt.

“Confirmations” Between

Merchants for Sale of Goods

Another aspect of the battle of the forms.

Problem(page 284)

Seller: (Identical letters to A & B): “This acknowledges your telephone order for 3000 tons of rails, and our acceptance.”

Buyer A: “The quantity we agreed to buy was 2000 tons, not 3000 tons.”

Buyer B: “Don’t ship the rails we ordered; we have decided to look elsewhere.”

• Seller has begun specially manufactured goods before buyer’s repudiation. Sec. 2-202(3)(a).

• Admission in pleading, testimony or otherwise, insofar as admitted quantity. Sec. 2-202(3)(b). Contra common law!

• Payment made and accepted, or goods received and accepted. Sec. 2-202(3)(c).

• CISG art. 11: “A contract of sale need not be concluded in or evidenced by writing….”

Avoidance of the Statute

Of Frauds Under the UCC

• Specially manufactured means designed particularly for plaintiff.

• Goods likely have no resale value (compounding loss).

• Manufacturing is probative of agreement.

• Defendant can still deny K.

Avoidance of the Statute:Specially

Manufactured Goods

A fifty foot mechanical gorilla?

• Defendant must assert SOF at early stage to avoid waiver.

• Common law: Once asserted, SOF bars enforcement despite admission in deposition or testimony.

• UCC is to the contrary.

Avoidance of the Statute:

Defendant’s Admission?

Would Perry Mason extract an admission?

Problem Plaintiff filed a Complaint alleging that Defendant promised to sell a collection of jewels. Defendant’s Answer asserted the SOF as an affirmative defense. Defendant then moved for summary judgment based on the SOF, attaching a sworn statement stating that there is no writing corroborating the agreement. Plaintiff is unable to produce a writing, but wants the opportunity to depose or cross-examine the defendant. Should the court dismiss the complaint, or allow discovery or a trial to go forward?

• Acceptance of goods or payment corroborates the making of the agreement.

• Plaintiff’s “delivery,” standing alone insufficient.

• Defendant’s acceptance might be revocable up to a point.

• Defendant can still deny K.

Avoidance of the Statute: Payment

Or Goods Received & Accepted

Counting your receipts and confirming the contract?

• Application: Sales of goods between parties with “places of business” in different signatory nations.

• Parties can adopt differentchoice of law, or override particular provisions.

• CISG art. 11: “A contract of sale need not be concluded in or evidenced by writing….”

The Statute and the Convention

On International Sale of Goods

Johnson Farms v. McEnroe

What is part performance substituting for a writing?

• Payment and acceptance of all or part of the contract price.

• Taking possession of the property.

• Making improvements on the property.

• First Caveat: Was conduct ambiguous? Is the alleged oral agreement the only explanation?

• Second Caveat: To what extent does alleged part performance evidence both parties’ intent?

Partial Performance Of Contract

For the Sale of Real Property

Example

Employer made an oral promise to employee: “I’ll employ you for two years, and I’ll pay you $1,000 per week.” After eighteen months of employment, the employer discharged the employee without just cause. Is the employer’s promise subject to the statute of frauds? If so, what argument might the employee have for avoiding the statute?

• What was the alleged oral agreement?

• Why might parties have failed to put the agreement in writing?

• What was the alleged part performance by the buyers?

• Did such conduct tend to corroborate seller’s oral agreement?

Johnson Farms v. McEnroe:

Part Performance or Preparation?

Monarco

v. Lo Greco

The Statute’s Grapes Of Wrath

Christie measures his inheritance.

• Promise: Stay at home, work the farm, and survivor will leave entire farm to you by will.

• How was it corroborated?

• Breach: Stepfather secretly terminates joint tenancy, rewrites will to leave his share to his grandson.

The Promised Inheritance

In Monarco v. Lo Greco

Will Christie reap what he sowed?

• Promise that contract is in writing (“it’s in the mail”).

• Promise that promisor will put it in writing.

• Promise that writing is not really required.

• The underlying promise (the one that should be in writing, but isn’t), because it induces reliance?

Promissory Estoppel And the Statute: Four

Scenarios

Will little exceptions swallow the whole Statute?

• Circumstances corroborating the promise equally clearly as a writing?

• Unconscionable injury?

• Inadequacy of the part performance rule?

• Inadequacy of restitution?

Monarco: Special Features

Requiring a Remedy?

California real estate: Why is the farm so valuable?

• Restates elements of promissory estoppel; asks what justice requires?

• Strength of elements of estoppel?

• Do reliance and other facts corroborate promise?

• Availability of other remedies (cancellation or restitution)?

• Caveat: Not all states (Texas) agree.

Restatement of Contracts §139The Statute &

Promissory Estoppel

• Does § 2-201 answer the promissory estoppel question?

• Section 1-103: Common law supplements Code unless displaced by specific provision.

• Does § 2-201 displace promissory estoppel? Split in the courts.

• Result under CISG?

P.E. and the Sale of Goods:

Does UCC Displace Common Law?