Contracts 2 - Statute Of Frauds, K Terms

Front 1

What is the statute of frauds, and what are the general considerations?

Back 1

The SOF is a statute requiring that certain types of agreements must be evidence by a writing signed by the party sought to be bound (EXAM: look for ORAL agreement)

(1) When writing is required
(2) Satisfactory writing

Front 2

What are the kinds of Ks in which a writing is required under the Statute of Frauds?

Back 2

Most oral Ks are enforceable, only certain kinds of Ks need a writing to be enforced (“within the SOF”):

(1) Transfer of interest in real proeprty
(2) Performance cannot be theoretically be completed within 1 year
(3) sale of goods for $500 or more (A2)
(4) Lease of goods for $1K or more (A2A NY ONLY)
(5) Suretyship
(6) K modification
(7) Misc. NY Provisions

Front 3

What do transfers of interest in real property fall under SOF?

Back 3

Transfer of ANY interest in real property (i.e. leases, easements, sales)

Equal dignities rule: if underlying transaction falls within SOF, agent's authority does as well

EXCEPTIONS:
i. Leases of One Year or Less (Every state (including NY) – legislative exception to ensure that short term leases are not invalidated by the SOF)
ii. If the seller conveys to the purchaser (i.e. fully performs), the seller can enforce the buyer’s oral promise to pay
iii. “Part Performance” Exception
a) Requires 2 of 3 facts:
1. Buyer is in possession of the property
2. Buyer made some payment
3. Buyer made improvements to the property

Front 4

When do K lasting more than 1 year fall under SOF?

Back 4

Falls under SOF if K performance CANNOT THEORETICALLY be completed within 1 year
(1) does not matter if performance actually takes more than 1 year, only if NOT theoretically possible (i.e. specified more than 1 year in K)
(2) Clock begins when agreement made (NOT when performance begins)
(3) life time contracts:
MBE: NOT SOF
NY DISTINCTION: WITHIN SOF

EXCEPTION: Full performance
i. Can sue after FULL performance – even if the performance could not be completed within one year
ii. CANNOT recover if part performance but CAN recover RESTITUTION for the reasonable value of performance (not the contract price)

Front 5

When do lease of goods fall under SOF?

Back 5

Lease of goods for $1K or more falls under SOF
(1) only applies in NY under A2A
(2) IF monthly payments for a year, must multiply monthly payment x 12 for full K price (i.e. $300/month for 12 months falls under SOF)

Front 6

When do sale of goods fall under SOF?

Back 6

Generally when sale of goods for $500 or more.

EXCEPTIONS:
(1) Goods Accepted or Paid for by Buyer--applies ONLY to goods accepted or paid for, NOT the whole contract (CAN raise SOF defense for the goods not yet paid for)
(2) Deposit for goods that cannot be portioned (i.e. boat, NOT baseball bats) – will take the entire contract out of Article 2 SOF
(3) Custom-Made Goods---Where seller (1) made a substantial start, and (2) not suitable for sale to others in the ordinary course of seller’s business
(4) Judicial Admission--The party against whom enforcement is sought admits to the contract in court - Admission in a deposition, trial, interrogatory, testimony, etc.
(5) Merchant’s Confirmatory Memo---One party can use its own signed writing to satisfy the SOF against the other party if:
1. Both parties are merchants
2. Writing claims agreement has quantity, and
3. There is no written objection within 10 days
(i.e: 2 merchants agree over phone and one send written confirm)

Front 7

What is a suretyship, and when does it fall under SOF?

Back 7

A Suretyship is a promise to “answer for (backup)” the debt of another (“if House doesn’t pay you, I will” (backup—surety pays only if House does not pay)
a) If House has a contract to pay – this is a suretyship
1. House is primarily liable
2. I am secondarily liable
b) If House does NOT have a contract to pay – NOT a suretyship
1. I am the only one liable – don’t need it to be in writing to enforce the promise

EXCEPTION: "main purpose"
a) MBE – if the surety’s main purpose is making the promise was to benefit himself, rather than the creditor, then no writing is required for enforcement
1. Ex) I buy paint on credit from Lowe’s to paint Sandy’s house (main purpose). Sandy orally promises to pay Lowe’s for the paint if I don’t pay (suretyship).
a. Lowe’s can enforce Sandy’s oral promise against him – writing is not required
b) NY DISTINCTION – does NOT recognize the main purpose exception (i.e. Lowe’s would need a writing signed by House to enforce the suretyship

Front 8

What are the rules regarding oral contract modifications?

Back 8

(1) MUST be in writing ONLY IF the contract as modified (NOT the original contract) is within the SOF

(2) Clauses that prohibit oral modification
i. Article 2 - if the original contract prohibited oral modification, then the modification would have to be in writing even it doesn’t fall within SOF (Allows parties to create their own SOF)
ii. Common law- clauses that prohibit oral modification are NOT enforceable (So you can ALWAYS modify a contract orally under common law, even if you have agreed not to)

Front 9

What are the miscellaneous NY provisions for SOF?

Back 9

i. Assignment of an insurance policy
ii. A promise to pay a discharged debt
iii. An agreement to pay a finder’s fee or broker’s commission, EXCEPT to an attorney, auctioneer, or licensed real estate agent

Front 10

What are the categories of K's for satisfactor writings?

Under the SOF, what is a satisfactory writing for a sale of goods K (UCC Article 2)?

Back 10

(1) Sale of goods (A2)
(2) Lease of goods (A2A)
(3) All other contracts

A satisfactory writing for a sale of goods K must contain (1) a quantity term (does not have to be certain #, requirements K is good enough), and
(2) be signed by party to be charged w/ breach of K (Defendant) ("Signed" under A2 is broad, letterheads OK)

Front 11

Under the SOF, what is a satisfactory writing for a lease of goods K in NY (UCC Article 2A)?

Back 11

A satisfactory writing for a lease of goods K in NY must 1) state it’s a lease; and
2) include the quantity, duration, and rental payments; and
3) be signed by D

Note, sometimes, writing that would have been good to satisfy A2 does not meet needs of A2A.

Front 12

Under the SOF, what is a satisfactory writing for any other K that is not for a lease of goods in NY or for a sale of goods?

Back 12

For any other K other than a K for a lease of goods in NY or a sale of goods, a satisfactory writing must
(1) contain all material terms (what/what), and
(2) be signed by D

Note, SOF can be one way street: D has to be the one who signed the writing and it is if irrelevant if P signed. Thus, it has to be a writing sufficient against D.

Front 13

What are the general considerations for construing contract terms?

Back 13

(1) words of parties (parol evidence)
(2) Conduct of parties
(3) Article 2 Gap fillers
(4) Warranties
(5) Risk of loss

Front 14

What is the Parol Evidence Rule?

Back 14

The Parol Evidence Rule (PER) keeps out evidence of a PRIOR or CONTEMPORANEOUS agreement (either oral or written) that contradicts a LATER writing.

The Parol Evidence Rule thus give primacy to a later writing by assuming the later writing is more reliable than anything that came before

Comparison to other rules:
(1) PER vs. SOF: PER problem requires a writing so if the fact pattern involves an oral agreement, it’s SOF problem, not PER problem.
(2) Subsequent developments: The PER has nothing to do with what happens after an agreement is reduced in writing—this is modification. Look to (a) consideration or (b) SOF problem

Front 15

What are the exceptions to the Parol Evidence Rule?

Back 15

1) TO CORRECT A CLERICAL ERROR (e.g., a typo)
2) TO ESTABLISH A DEFENSE AGAINST FORMATION or FLAW in agreement process (i.e. Duress, unconscionability, fraud)
3) TO INTERPRET A VAGUE OR AMBIGUOUS TERM (Note, courts will give words their plain meaning under the plain meaning rule)
(4) To show a condition precedent: something that must occur before K performance is due
5) TO SUPLEMENT/ADD TO PARTIALLY INTEGRATED WRITING
---final statement of the terms included, but not a complete statement of all terms agreed to--cannot contradict final writing
---EXCEPTION: merger clause: K stating "limited to terms herein" = cannot be supplemented (Art II: only merger clause will keep out parol evidence, CL more strict)

Front 16

In descending order of importance, what are the kinds of conduct that can explain terms or fill in gaps?

Back 16

Order of descending importance

1) COURSE OF PERFORMANCE: What the parties did under THIS K. Course of performance is the best evidence of what the parties intended. (most important)
2) COURSE OF DEALING: What they did under PRIOR Ks with each other. Course of dealing is more removed from this K – it’s about prior deals
3) USAGE OF TRADE: What others in the trade do in similar Ks. Usage of trade is furthest removed from this K – it’s about how other people act

Front 17

What are the Article 2 gap fillers?

Back 17

A2 key to forming K is QUANTITY term. A2 will fill below terms via gap filling:

1. Price – reasonable price at the time for delivery
2. Place of delivery – seller’s place of business, otherwise, seller’s home. But if the goods have been identified as the ones to satisfy the contract, and the parties know that they are in some other place, then that place
3. Time for shipment of delivery – reasonable time
4. Time for payment – time and place at which the buyer is to receive the goods
5. Assortment – at the buyer’s option
6. If a quantity term is not specified, a reasonable quantity term will NOT be supplied

Front 18

What are the general considerations for warranties?

What are the types of Article 2 warranties?

Back 18

(1) Article 2 warranties
(2) A2A warranties
(3) warranty limits

Article 2 warranties:
(1) Express
(2) Implied warranty of merchantability
(3) Implied warranty of fitness for particular purpose

Front 19

What is the rule regarding Article 2 express warranties?

Back 19

EXPRESS WARRANTIES: A seller is liable for breach of an express warranty, IF "basis of bargain"--buyer could have relied on express warranty (not need for actual reliance)

Includes:
(1) statements of fact, promises
(2) descriptions of the goods, and
(3) the use of sample or model. NOT opinions (i.e. "top quality")

Front 20

What are the rules regarding A2 implied warranties of Merchantability?

Back 20

Implied warranty that (1) the goods are fit for their ordinary purpose, (2) so long as the seller is a merchant who deals in goods of the kind

Seller:
a. A Dealer who has specialized knowledge about the particular goods involved in the transaction
b. Generally, “merchant” under Article 2 is broad, but 2 provisions that require particular merchant – this is one of them
c. Ex) Foot Locker selling shoes, but NOT when Foot Locker is selling one of its delivery vans
i. Foot Locker doesn’t have specialized knowledge about vans – only about shoes

Front 21

What is the rule regarding implied warranties of fitness for a particular purpose under A2?

Back 21

Implied warranty that The goods are fit for buyer’s particular purpose

REQUIRES Seller must know that:
1. Buyer has a special use for the goods, AND
2. Is relying on seller to pick out goods suitable for that use
(3 ANY seller can make an implied warranty of fitness – merchant or not

Front 22

What are the lessor's warranties in a lease of goods under (UCC Article 2A)?

Back 22

The general rule is that the you use the same warranties under A2A as you used under A2.

EXCEPTION is a Finance Lease (bank buying goods and leasing it): implied warranty ONLY on original producer, NOT on the bank

Front 23

What are the limitations on warranty liability in sales and leases of goods?

What is the rule regarding disclaimers as limiting warranty liability?

Back 23

(1) Disclaimers
(2) Limitation of buyer's remedies

DISCLAIMERS: A seller CAN disclaim Implied, but NOT express warranties
(1) Seller can disclaim implied warranty if:
a. words “as is” “with all faults”
b. disclaimer specifically mentions “merchantability", AND
c. Disclaimer MUST be conspicuous (Likely to draw attention of a reasonable buyer - Large print)
(2) Seller CANNOT disclaim express warranty (i.e.: “all parts are guaranteed for 2 years,” and then say “all warranties are disclaimed” )

Front 24

What is teh hierarchy for determining who bears the risk of loss in a sale of goods?

Back 24

1) AGREEMENT: The agreement of the parties controls
2) BREACH: Breaching party bears ROL, even if loss is unrelated to breach (i.e. If seller ships late, seller will be liable for UPS’s electrical short causing the beer to spoil – even though the loss is unrelated to seller’s breach)
(3) delivery by common carrier
(4) non-carrier cases (buyer pick-up or seller delivers)

Front 25

What are the rules for ROL when there is delivery by common carrier?

Back 25

Generally: ROL shifts to buyer when seller completes delivery obligations

-SHIPMENT K: Seller must (1) get the goods to a common carrier, (2) make delivery arrangements, and (3) notify buyer; once seller has done this, ROL then shifts to buyer
-DESTINATION K: Seller must get the goods to a specific destination (usually where the buyer is located); ROL remains on seller until goods get to their destination

How to distinguish: look for FOB
1. Ex) FOB NYC
2. ROL passes to buyer at the named location:
----Shipment contract – if the named location is where seller is located
----Destination contract – if the named location is anywhere else

Front 26

What is the rule for ROL in non-carrier cases?

Back 26

Non-carrier cases = when buyer picks up or seller delivers

ROL Depends on whether seller is merchant:
(1) Merchant seller: seller bears ROL until buyer takes physical possession of goods
(2) Non-merchant seller: ROL passes to buyer when seller tenders good s(makes good available to buyer)
---Tender of delivery requires that seller must:
i. put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession
ii. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods
iii. The tender must be at a reasonable hour

Front 27

Who bears the risk of loss in a lease of goods under A2A?

Back 27

NY ONLY:

a. General Rule – ROL is on the lessor, EVEN IF the goods is the buyer’s possession (i.e. after using computer for 1 day, destroyed by hurricane)
b. Exception for “Finance Lease” – ROL is on the lessee