1. Chapter 14 Statute of Frauds and Equitable Exceptions

2. Statute of Frauds for Common Contracts
Statute of Frauds: A state statute that requires certain types of contracts to be in writing
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3. Contracts that Must Be in Writing
Contracts involving interests in real property
Contracts that by their own terms cannot possibly be performed within one year
Collateral contracts in which a person promises to answer for the debt or duty of another
Promises made in consideration of marriage
Contracts for the sale of goods for $500 or more
Contracts for the lease of goods with payments of $1,000 or more
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4. Contracts that Must Be in Writing
Real estate agents’ contracts
Agents’ contracts where the underlying contract must be in writing
Promises to write a will
Contracts to pay debts barred by the statute of limitations or discharged in bankruptcy
Contracts to pay compensation for services rendered in negotiating the purchase of a business
Finder’s fee contracts
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5. Contracts Involving Interests in Real Property
Real property: The land itself, as well as buildings, trees, soil, minerals, timber, plants, crops, fixtures and other things permanently affixed to the land or buildings
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6. Contracts Involving Interests in Real Property
Other contracts that transfer an ownership interest in land must be in writing under the Statute of Frauds
Mortgages
Leases
Life Estates
Easements
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One-Year Rule
A rule that states that an executory contract that cannot be performed by its own terms within one year of its formation must be in writing
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8. Exhibit 14.1 Guaranty contract
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9. Case 14.1: Guaranty Contract
Page v. Gulf Coast Motors
903 So.2d 148, Web 2004 Ala. Civ. App. Lexis 982 (2004)
Court of Civil Appeal of Alabama
Issue
Was Mary’s alleged oral promise to guarantee her husband’s debts an enforceable guaranty contract?
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10. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Agents’ Contracts
Many state Statutes of Frauds require that agents’ contracts to sell real property covered by the Statute of Frauds be in writing to be enforceable
The requirement is referred to as the equal dignity rule
Equal dignity rule: A rule that says that agents’ contracts to sell property covered by the Statute of Frauds must be in writing to be enforceable
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11. Promises Made in Consideration of Marriage
Under the Statute of Frauds, a unilateral promise to pay money or property in consideration for a promise to marry must be in writing
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UCC Statutes of Fraud
Section 2-201(1) of the Uniform Commercial Code (UCC): A section of the Uniform Commercial Code (UCC) that states that sales contracts for the sale of goods costing $500 or more must be in writing
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13. Equitable Exception: Part Performance
If an oral contract for the sale of land or transfer of other interests in real property has been partially performed, it may not be possible to return the parties to their status quo
To solve this problem, the courts have developed the equitable doctrine of part performance
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14. Equitable Exception: Part Performance
Part performance: An equitable doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice
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15. Formality of the Writing
A written contract does not have to be drafted by a lawyer or formally typed to be legally binding
The law only requires a writing containing the essential terms of the parties’ agreement
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Required Signature
Statute of Frauds and the UCC require the written contract, whatever its form, to be signed by the party against whom enforcement is sought
If a signature is suspected of being forged, the victim can hire handwriting experts and use modern technology to prove it is not his or her signature
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17. Integration of Several Writings
The combination of several writings to form a single contract
Incorporation by reference: Integration made by express reference in one document that refers to and incorporates another document within it
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18. Interpreting Contract Words and Terms
If the parties have not defined the words and terms of a contract, the courts apply the following standards of interpretation
Ordinary words are given their usual meaning according to the dictionary
Technical words are given their technical meaning unless a different meaning is clearly intended
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19. Interpreting Contract Words and Terms
Specific terms presumed to qualify general terms
Trade usage incorporated in contract unless otherwise stated
Where a preprinted form contract is used:
Typed words prevail over preprinted words
Handwritten words prevail over both preprinted and typed words
Ambiguity resolved against drafter of contract
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Parol Evidence Rule
Parol Evidence – Any oral or written words outside the four corners of a written contract.
Parol Evidence Rule: A rule that says if a written contract is a complete and final statement of the parties’ agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract
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Parol Evidence Rule
Merger clause (integration clause): A clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties’ agreement
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22. Exceptions to Parol Evidence Rule
Parol evidence may be admitted in court if it:
Shows that a contract is void or voidable
Explains ambiguous language
Concerns a prior course of dealing or course of performance between the parties or a usage of trade
Fills in the gaps in a contract
Corrects an obvious clerical or typographical error
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23. Case 14.2: Parol Evidence Rule
Yarde Metals, Inc. v. New England Patriots Limited Partnership
834 N.E.2d 1233, Web 2005 Mass. App. Lexis 904 (2005)
Appeals Court of Massachusetts
Issue
Does Yarde have an implied right to purchase Patriots’ season tickets?
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24. Equitable Exception: Promissory Estoppel
Promissory estoppel (equitable estoppel): An equitable doctrine that permits enforcement of oral contracts that should have been in writing
It is applied to avoid injustice
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25. Equitable Exception: Promissory Estoppel
The oral promise is enforceable against the promisor if three conditions are met
The promise induces action or forbearance of action by another
The reliance on the oral promise was foreseeable
Injustice can be avoided only by enforcing the oral promise
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