Business Law

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Business Law

• Chapter 14
• Written Contracts

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Objectives

• Identify contracts that must be in writing under
  the Statute of Frauds
• Describe what satisfies the writing requirement
  under the Statute of Frauds
• State the parol evidence rule
• List circumstances in which parol evidence is
  admissible

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Written Contracts

• Certain types of contracts are required by law to
  be in writing.
• A contract that is otherwise valid may be
  unenforceable if it is not in the proper form.
• Statute of Frauds (1677)

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Statute of Frauds

• A state statute under which certain types of
  contracts must be in writing to be enforceable.
• Nearly every state has a statute of frauds
• Vary slightly from state to state

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Statute of Frauds

• Contracts involving interests in land
• Contracts that cannot by their terms be performed
  within one year from the date of formation
• Collateral contracts, such as promises to answer
  for the debt or duty of another

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Statute of Frauds

• Promises made in consideration of marriage
• Contracts for the sale of goods priced at 500 or
  more

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Contracts Involving Land

• Real property and includes all physical objects
  that are permanently attached to the land, such
  as buildings, plants, and trees.
• Statute of Frauds is a defense to an oral
  contract
• Fixture personal property so affixed or so used
  as to become a part of the real property
• Sale of land, transfers of mortgages and leases

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The One-Year Rule

• A contract that cannot, by its own terms, be
  performed within one year from the date the
  contract is formed must be in writing to be
  enforceable.
• Contract performance that would be objectively
  impossible to perform within a year

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The One-Year Rule

• If performance within the year is possible,
  Statute of Frauds does not apply
• Begins the day after the contract is made

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Collateral Promises

• Secondary promise
• Made by a third party to assume the debts or
  obligations of a primary party if the primary
  party does not perform
• The Main Purpose rule
• If the secondary promise secures a personal
  benefit for the third party

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Marriage Promises

• Unilateral promises to pay money or give property
  in consideration of marriage must be in writing
• Prenuptial agreements
• Specifies the rights and ownership of the
  parties property
• Uniform Prenuptial Agreements Act (1983)

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Sale of Goods

• Uniform Commercial Code
• Writing or memorandum if goods are 500 or more
• Quantity is the only required term in the writing
• Writing must be signed by the person to be charged

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Exceptions

• Partial performance
• Specific performance if parties cant be
  returned to their original position
• Reliance on an oral contract may remove it from
  the Statute of Frauds
• UCC oral contract enforceable to the extent
  that a seller accepts payment or a buyer accepts
  delivery

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Exceptions

• Admissions if the charged party admits that a
  contract for a sale was made, the contract will
  be enforceable
• Promissory Estoppel (detrimental reliance)
• Promisor must foresee that the promisee will rely
  on the promise
• No way to avoid injustice except to enforce the
  promise

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Special UCC Exceptions

• Customized goods
• Between merchants
• Sale confirmed in writing

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Sufficiency of the Writing

• A written agreement fully specifying the
  performance promised by each party and signed by
  both parties
• Confirmation, invoice, sales slip, check, fax
• Several documents may create a single contract if
  attached or expressly referred to or placed in
  the same envelope
• Signature anywhere or even initials

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Parol Evidence Rule

• Prohibits the introduction at trial of evidence
  of the parties prior negotiations or agreements
  or contemporaneous (occurring during the same
  period of time) oral agreements if that evidence
  contradicts or varies the terms of written
  contracts

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Parol Evidence Rule Exceptions

• Evidence of subsequent modification of a written
  contract
• Oral evidence that shows the contract was
  voidable or void
• When terms are ambiguous
• Evidence to fill in the gaps

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Parol Evidence Rule Exceptions

• To explain or supplement a written contract by
  showing a prior dealing, course of performance,
  or usage of trade
• If the existence of the entire written contract
  is subject to an orally agreed-on condition
• When an obvious or gross clerical error exists
  that clearly would not represent the agreement of
  the parties

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Integrated Contract

• A written contract that constitutes the final
  expression of the parties agreement.
• Evidence extraneous to (outside of) the contract
  that contradicts or alters the meaning of the
  contract in any way in inadmissible.