The Form and

1
CHAPTER 15

• The Form and
• Meaning of Contracts

2
Statute of Frauds

• Certain contracts require a writing
• Failure to Comply- Unenforceable

3
Statute of Frauds

• Contracts Covered
• Executors/Administrators Agreements to
  Personally Pay Decedents Debts
• Conditional Promise to answer for the debt of
  Another
• Collateral/Guaranty Contract
• Nakamura v. Fujii, p.256
• The parents of two college students whose tuition
  was paid by a third party must repay the debt
  because their promise to repay was an original
  promise.
• Only a conditional promise to pay the debts of
  another must be in writing, and there was no
  conditional promise here.
• Question 5 at end of chapter
• No. The statute of frauds requires contracts
  which, by their terms, cannot be performed in one
  year to be in writing to be enforceable. We have
  long interpreted this provision to encompass only
  those contracts which have absolutely no
  possibility of full performance within one year.
  If the agreement can be interpreted such that it
  may per performed in a year, the statute will not
  bar enforcement no matter now unlikely or even
  improbable it is that such performance will occur
  within that time frame. There is no time frame
  stated in the agreement. Nakamura only promised
  to pay certain tuition invoices. The Fujiis
  agreed to repay on demand. Given the absence of
  any specific times for performance, it cannot be
  said that the agreement could not be performed
  within one year, notwithstanding its actual
  duration. Additionally, there was no guarantee
  that the daughters would remain at USC for even
  one year. They could have left USC for any of the
  reasons that commonly lead many college students
  either to drop out or to change schools. Nakamura
  v. Fujii, 67 N.Y.S.2d 113 (N.Y. App. Div. 1998).

4
Statute of Frauds

• Contracts Covered
• Conditional Promise to answer for the debt of
  Another
• Collateral/Guaranty Contract
• Question 6 at end of chapter.
• No. Under the statute of frauds, a collateral
  agreement to pay the debt of another must be in
  writing to be enforceable. However, if the
  promise is one for primary liability, it is
  enforceable without a writing. In this case, only
  the adult son of the Valentines was legally
  represented by the law firm. It was he who
  incurred the debt for representation. The
  parents, who were not charged with a crime,
  received no material benefit from the firms
  representation of Michael. The oral agreement
  between the parents and the firm is a separate
  and collateral undertaking and thus falls within
  the statute of frauds. The statute was adopted to
  encourage contracting parties to put their
  agreements into writing so as to avoid certain
  pitfalls. It was not done here. Crozier and
  Gudsnuk, P.C. v. Valentine, 1992 Conn. Super.
  LEXIS 1179 (Super. Ct. Conn. 1992.

5
Statute of Frauds

• Contracts Covered
• Transfer of Land Interest (Unless part
  performance in some cases)
• Question 7 at end of chapter.
• No. No action may be brought on a contract for
  the transfer of an interest in land unless there
  is some written memorandum signed by the party to
  be charged. In this case there was only an oral
  promise to convey the property to Temple.
  However, the promise can still be enforced if
  there has been sufficient part performance. But
  part performance will not make an oral contract
  enforceable unless it is directly referable to
  that contract. It must be such as would not
  ordinarily have taken place in the absence of a
  contract, and therefore can serve as proof of the
  contract. Rangle promised to convey the property
  in return for Temples resumption of employment
  and their social relationship. While Temple did
  these things, her actions are not inconsistent
  with other explanations for her behavior. The
  resumption of their relationship is objectively
  explainable as two divorced persons who are very
  fond of each other, who have had a disagreement,
  and who have made up. This is completely
  consistent with the history of their
  relationship. Thus, her part performance will not
  take this case outside the statute of frauds.
  Unitas v. Temple, 552 A.2d 1285 (Ct. App. Md.
  1989).

6
Statute of Frauds

• Contracts Covered
• Bilateral Contracts Not Capable of Being
  Performed w/i 1 Year
• Popanz v. Peregrine Corp., p.257
• The court refuses to enforce an oral promise to
  an employee that she could retain her current
  position until she was 65.
• Many courts take the approach that since the
  employee could leave at any time, or die, the
  contract is terminable within a year. This court,
  however, finds that the express terms make such
  an interpretation impossible.

7
Statute of Frauds

• Contracts Covered
• Bilateral Contracts Not Capable of Being
  Performed w/i 1 Year
• Question 8 at end of chapter.
• No. Kansas law states that agreements that are
  not to be performed within a year must be in
  writing and signed by the party to be charged to
  be enforceable. Stephan argues that this
  agreement could not be performed within one year
  because it was designed to be perpetual. This
  contention is in error. Essentially, the parties
  agreed never to reveal the terms for the rest of
  their lives. As grim as it may sound, both Tomson
  and Stephan could have passed away within that
  first year, and the contract would have been
  fully performed. Therefore, the contract is not
  within the statute of frauds. Tomson v. Stephan,
  699 F. Supp. 860 (D. Kan. 1988).

8
Statute of Frauds

• Contracts Covered
• Bilateral Contracts Not Capable of Being
  Performed w/i 1 Year
• Example Washingtons statute of frauds, passed
  in 1881, requires any contract which cannot by
  its terms be performed in one year from the
  making thereof to be reflected in a signed
  writing to be enforceable. This included
  contracts for personal services. Even though
  there was a six-month termination option, the
  term of the contract itself was five years. Also,
  the fact that French worked for Sabey for 11
  months does not take it out of the statutes
  requirement. Part performance may be proof in a
  real estate case, but not in a personal service
  contract. Sabey did not sign the contract as
  required by the statute. It is not enforceable.
  French v. Sabey Corp., 951 P.2d 260 (Wash. Sup.
  Ct. 1998).

9
Statute of Frauds

• Contracts Covered
• Sale of Goods 500(UCC)
• Question 10 at end of chapter
• No. Even if there was a contract here (which we
  do not find), it would not be enforceable under
  the UCCs statute of frauds provision. The
  contract was for the sale of a good worth more
  than 500. It had to be evidenced by a signed
  writing. Although Lee sent several letters to
  Golomb, including a letter summarizing their
  agreement, Golomb never signed any of them.
  While Voyles did endorse her check, the contract
  needed Golombs signature to be binding. Lee v.
  Voyles, 898 F.2d 76 (7th Cir 1990).

10
Statute of Frauds

• Contracts Covered
• Sale of Goods 500(UCC)
• Wehry v. Daniels, p. 260
• The court finds that an exception to the statue
  of frauds applies in the sale of a racing helmet
  where the purchaser openly admitted to the
  existence of a contract. The court devotes a good
  deal of discussion to the policy logic of this
  exception to the writing requirement, noting that
  it makes an open mockery of the statute to
  permit the defendant to use the statute
  effectively as a defense, yet in pleadings or in
  open court admit a contract. Once the existence
  of the contract is established, the policy behind
  the statute is fulfilled. Note also that the
  court finds that since the policy behind the
  statute had been fulfilled, the only remaining
  task is to ascertain the precise terms of the
  contract. Daniels testified that Wehry agreed to
  purchase the helmet for 2750.00, but Wehry
  claimed he only offered 1,800. A set of three
  helmets costs 9,000.00. Thus, the court found
  that it was reasonable to conclude that Wehry
  agreed to pay 2750.00 for one of the helmets.

11
Statute of Frauds

• Not Covered Under UCC
• Specially Manufactured Goods
• Admittance of Contract Not
• Partial Performance
• Acceptance of Delivery
• Merchant Failure to Object Within 10 Days

12
Statute of Frauds

• Type of Writing Required
• Memorandum of agreement
• Conner v. Lavaca hospital Dist., p.258
• A doctor is not allowed to prove her three-year
  employment contract with the hospital boards
  minutes because they were not sufficiently
  specific.
• Court says written employment must contain
  duration, compensation and duties. The court
  sees the parties as still negotiating about an
  essential term.
• The doctor also argued that part performance made
  the contract enforceable. She argued that she was
  not fully compensated for the services rendered
  while she continued to work without a formal
  contract. The court found that she continued to
  work even after the board rescinded the motion.
  Thus, she cannot reasonable be said to have
  worked in reliance on the contract. Also, she
  cannot argue promissory estoppel because she
  cannot show sufficient detrimental reliance.

13
Statute of Frauds

• Type of Writing Required
• Memorandum of agreement
• Question 9 at end of chapter.
• Yes. The memorandum required by the statute does
  not have to be in one document. It can be pieced
  together out of separate writings, as long as
  those writings are connected in some way. At
  least one writing, which establishes a
  contractual relationship, must be signed by the
  party to be bound. The signed contracts here show
  a contractual relationship. There is no signed
  document stating the exact number of volumes to
  be included in the anthology. However, the
  unsigned announcement and interoffice memo, as
  well as the letters, clearly indicate a contract
  for an eight-volume anthology. Biggle v. Harper
  Row Publishing, Inc., 675 F.2d 107 (6th Cir.
  1982).
• Electronic Signatures O.K.

14
Interpreting Contracts

• Rules of Construction
• Determine Principal Objective of the Parties
• Written Terms Control over Printed Terms
• Question 11 at end of chapter
• Curtis O. Griess Sons, Inc. v. Farm Bureau Ins.
  Co. of Nebraska
• An insurance term covering livestock loss due to
  wind damage is interpreted to cover swine killed
  by a virus carried to the swine herd by a
  tornado.
• This is a good example of the court construing a
  contract in favor of the insured and against the
  maker of the form contract.
• For insurance contracts and other form contracts
  between businesses and lay people, this is a
  common rule of construction.

15
Interpreting Contracts

• Rules of Construction
• Evergreen v. Tan-It-All, p. 261
• The court finds that an insurance term covering
  equipment loss clearly and specifically covers a
  100 foot area outside of Suite C-5 and declines
  to expand coverage to encompass a greater area.
  Note that courts aim at construing a contract in
  favor of the insured and against the maker of the
  form contract that the court did not here may
  speak to the stark lack of ambiguity or the very
  plain and apparent meaning of the words of the
  contract. In insurance contracts and other form
  contracts between businesses and lay people, this
  is a common rule of construction.

16
Interpreting Contracts

• Rules of Construction
• Example Faced with two equally fair
  constructions of the policy language, we rely on
  the one favoring the insured. Coverage is
  activated by the impact of a vehicle, but is not
  conditioned on physical contact between the
  vehicle and the insureds body. One of the
  definitions of the term impact is, an
  impelling or compelling effect. Once the
  coverage is activated by a vehicle, it is
  immaterial whether the injury-causing blow is
  delivered by the vehicle, or the object which the
  vehicle set in motion. There is no rational
  distinction between a blow struck by an object
  propelled by a moving car, and a blow struck by
  an object propelled by the spinning wheels of a
  car. Both blows result from the impact of the
  car. Davis injuries are covered by the policy.
  Davis v. Preferred Risk Mutual Insurance Co., 372
  S. E. 2d 150 (Sup. Ct. Va. 1988).

17
Parole Evidence Rule

• Purpose- Cannot Vary Terms in Writing by Prior
  Evidence
• Burke v. Manfroni, p. 263
• A written lease assignment incorporates all terms
  and cannot be varied by oral agreement.
  Incorporation clauses and requiring alterations
  to be in writing are good ways to prevent later
  attempts to orally alter a contract. Burke, et
  al. were attempting to assert a separate
  contract, but the court found that the assignment
  incorporated all terms. Claims of fraud and
  misrepresentation would not be barred by the
  parole evidence rule.

18
Parole Evidence Rule

• Purpose- Cannot Vary Terms in Writing by Prior
  Evidence
• Question 12 at end of chapter
• Boginis v. Marriott Ownership Resorts, Inc.
• A written employment contract which states it
  incorporates all terms and cannot be varied
  except by a writing cannot be altered by oral
  testimony.
• Incorporation clauses and requiring alterations
  to be in writing are good ways to prevent later
  attempts to orally alter a contract. The fact
  that this was an individually negotiated contract
  carried weight with the court.

19
Parole Evidence Rule

• MCC-Marble Ceramic Center v. Ceramica Nuova
  DAgostino, S.P.A., p. 264
• The CISG is interpreted as allowing parole
  evidence so that a party to a written contract
  can testify to the subjective intent of the
  parties when the contract was signed. Note that a
  few major U.S. trading partners such as Japan and
  Great Britain have not signed the Convention.
  Parties should settle this issue in advance by
  putting an arbitration clause in their contract
  and/or a choice of law clause.

20
Parole Evidence Rule

• Exceptions
• Evidence of Lack of Voluntary Consent
• Ambiguous Contracts
• Incomplete Writings
• Subsequent Oral Contracts
• Conditions Precedent