Contracts - Statute Of Frauds

Front 1

2 Basic Statute of Frauds Requirements

Back 1

Certain contracts require:
1. written
2. signed against party whom enforcement is sought

The person seeking enforcement loses unless the contract falls under an exception.

Front 2

Contracts that fall under SOF
(MYLEGS)

Back 2

M: marriage
Y: not to be performed within 1 year
L: land
E: Executory
G: guarantee or suretyship
S: Sale of goods over $500

Front 3

Contracts not to be performed in 1 year

Back 3

Date begins the date of making the contract--not the date of starting performance.

Frequently Tested Situations
a) Contracts that can be breached or excused within a year of its formation—that is true of any contract and is irrelevant. What matters is not whether a contract can be breached within a year but whether it can be performed in full by its terms within a year
b) A lifetime or permanent contract of employment is not governed by the one year provision because death is possible within one year of formation.

Front 4

Real Estate Brokerage Contracts

Back 4

Although land is involved, these are service contracts and so are not governed by the land provision of the SOF.

Some jurisdictions have resolved this by adding a separate category to their Statute of Frauds specifically for brokerage agreements.

Front 5

Leases of Real Property

Back 5

These are contract that fall within the land provision.

Other jurisdictions exclude short-term leases of a year or less from the Statute of Frauds.
(Florida)

Front 6

Guarantor/Suretyship

Back 6

General rule:
that a promise to answer for the debt of a third party—a suretyship, or guarantor agreement—is subject to the SOF and must be in writing.

Exceptions:
1. When the creditor discharges the original debtor from his obligation on the faith of a guarantee by a third party to pay the debt.

2. The main purpose doctrine
--The main purpose of the guarantor is to protect his own economic interests.

Front 7

Writing Requirement

Back 7

All that is necessary is that the writing be a memorandum of the agreement that can be prepared before, during, or after the contract formation.

Required terms:
a) Identity of the parties to the transaction
b) The nature and subject matter of the contract.
c) The essential terms of the agreement such as price and date of performance.

Front 8

Signature Requirement

Back 8

The actual full signature of the party against whom enforcement is sought is not necessary.

What is needed?
1) Any symbol or marked used with the intention to authenticate the writing.

Examples:
Initials; types, stamped; pre-printed signature; letterhead

Front 9

"Tacking Together " Multiple Documents

Back 9

3 requirements:
1. at least one signed writing that establishes the contract relationship
2. the signed and unsigned documents clearly refer to the same thing.
3. clear and convincing evidence of acquiescence to the unsigned documents by the person against whom enforcement is sought.

Front 10

Performance

Back 10

The SOF may be satisfied with respect to some of the categories of governed contracts via part performance.

1. Land
2. 1 year
3. Sale of goods

Front 11

Performance to satisfy SOF
Land Contracts

Back 11

Part performance requires a showing of any combination, or all three, of the following:
1) Payment of all or part of the purchase price
2) Taking of possession
3) Making substantial improvements to the property

Front 12

Performance to satisfy SOF
1 year Contracts

Back 12

If fully performed:
then an oral contract not to be performed within one year becomes enforceable.

If only partially performed:
then an oral contract not to be performed within one year is not enforceable.

Front 13

Performance to satisfy SOF
Sale of Goods

Back 13

The UCC SOF may also be satisfied by part performance of a sale of goods contract.

Front 14

Recovery for Benefits Conferred
(SOF)

Back 14

Where one party bestows benefits upon another in connection with an oral contract, even if that contract if barred by the SOF, the aggrieved can recover the value of the benefits conferred.

Front 15

Promissory Estoppel
(SOF)

Back 15

May be available for detrimental reliance for losses suffered on the faith of an oral contract that may be unenforceable.

If rely on promise by other party to make a signed writing, then PE applied if other party does not make writing.

If no specific assurance to make the writing, show strong reliance on the underlying contract (slim majority).
(substantial minority says this is preempted by SOF)

Front 16

5 ways to satisfy UCC Statute of Frauds

Back 16

1. signed writing
2. merchant's confirmation
3. in-court admission (judicial estoppel)
4. part performance
5. specially manufactured goods

Front 17

Writing Requirement
(UCC - SOF)

Back 17

1. writing - tangible form, electronic is ok

2. signed by the party against whom enforcement is sought

3. sufficient to show a contract has been made - evidence of transaction

4. required term: quantity - can only enforce up to quantity stated
Except: where other language in writing gives unambiguous basis for quantity & out-put contracts

*this only shows there is a sufficient writing - still does not mean there is a contract

Front 18

Written Offers
(UCC SOF)

Back 18

A written offer does not satisfy the writing requirement because it is insufficient to show that a contract has been made.

But if the requirements of the UCC “Firm Offer” rule are met then this writing will be fully enforceable against the one making the firm offer.

Front 19

Merchant's Confirmation
(Definition)

UCC

Back 19

When two merchants enter an oral agreement and one of them sends the other a written confirmation of the agreement.
1) In such a circumstance, the Statute is satisfied against the recipient merchant if he fails to object to the confirmation in the required time.

Front 20

Merchant's Confirmation
(Requirements)

UCC

Back 20

1. sufficient against sender
a) signed, quantity

2. writing confirms contract

3. time frame for sending has to be in there
a) must be reasonable time

4. recipient's reason to know
a) confirmation is based on a real agreement between parties and is actually received

Front 21

Merchant's Confirmation
(Exceptions)

UCC

Back 21

Exception with the recipient’s objecting response: the recipient must send a written notice of objection within 10 days of receipt.

The “nightmare” of the admitting memorandum: an admitting memorandum satisfies the SOF against the sender.

Front 22

In-Court admission (judicial estoppel)

Back 22

A third means of satisfying the UCC SOF occurs when a party admits in his pleading, testimony, or otherwise in court that a contract for sale was made.

The contract is only enforceable up to the quantity admitted.

Front 23

Partial Performance
(UCC - SOF)

Back 23

Despite the absence of a signed writing, an otherwise valid contract is enforceable with respect to:
1) Goods for which payment has been both made and accepted
2) Goods which have been received and accepted

Thus, the partial performance exception does not apply unless there is action by both parties indicating the contract exists.

Front 24

Divisible Versus Indivisible Goods
(Partial Performance)
(UCC - SOF)

Back 24

1) If the contract in question involves divisible goods the contract is only enforceable up to the quantity of goods actually delivered or paid for.

2) If the contract in question involves an indivisible good then partial payment renders the contract fully enforceable.

Front 25

Specially Manufactured Goods
(UCC - SOF)

Back 25

Elements:
1. specially manufactured for buyer
2. not suitable to sell to other in ordinary course of seller's business
3. seller substantially started to manufacture or made commitments to procure the goods
4. actions undertaken to begin to make or procure occur in a context reasonably showing that the goods are for the buyer
5. the actions undertaken to begin to manufacture or procure occurred before seller received notice of buyer’s revocation.

Boiling those elements down to two critical concerns:
1) Can the manufacturer resale in the ordinary course of business?
2) Was manufacturer’s detrimental reliance completely before notification of buyer’s withdraw?

Front 26

Promissory Estoppel - Construction Contracts
(UCC - SOF)

Back 26

Virtually all courts have protected a general contractor via PE, even if the oral subcontract in question is for goods at a price of $500 or more.

Front 27

When a oral contract may still be valid and enforceable for other purposes

(SOF)

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1. different type of legal claim
2. establish the value of services rendered
3. defense to legal contract