978-0134004006 Chapter 14 Lecture Note

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110

Samuel Goldwyn

I. Teacher to Teacher Dialogue

1. First, which categories of contracts are covered by the Statute of Frauds, including the

contracts covered by the statute.

3. Finally, because the bottom line is to make sure that equity is done, explain both the

public policy and practical necessity of having exceptions to the parol evidence rule.

The second set of defenses to the enforcement of contracts revolves around writing

requirements associated with certain contracts. The genesis of the writing requirement for certain

contracts is found in two roots: one historical and one practical. The historical root goes back to

early English common law as developed under William the Conqueror and his successors. Status

do with knights in shining armor and more with practicality. A writing is considered the best and

most neutral evidence of the parties’ intent at the time the agreement was entered into. The

The English version of the Statute of Frauds has been carried over to our legal system

virtually intact. All U.S. states have adopted their own versions of the statute, and they are

STATUTE OF FRAUDS AND

EQUITABLE EXCEPTIONS

Statute of Frauds and Equitable Exceptions

Once you have decided the contract is covered, what are the effects of having failed to reduce

it to writing? Several possibilities may occur at this juncture. The parties may proceed to

voluntarily perform the contract. But if one or both decide to assert the statute, its teeth are found

Once the contract is finally reduced to writing, the next element of the Statute of Frauds takes

hold: the parol evidence rule and the exceptions to it. Think of the parol evidence rule as being

similar to Janus, the figure from Roman mythology, who was the guardian of portals and patron

of beginnings and endings. He faced both ways at once, symbolizing his power to let in or keep

The converse is found in the exceptions to the parol evidence rule. Long ago, an anonymous

legal scholar first said: “The Statute of Frauds should not be used to perpetuate frauds.” The

exceptions to the parol evidence rule are designed to let in additional information not shown on

the original writing in certain limited circumstances. These special circumstances are grounded in

The second area of exception to the parol evidence rule is explaining ambiguities. If the

contract, as written, contains ambiguous language, parol evidence is allowable to clear the

ambiguity as long as it is consistent with the original terms. The nature of the evidence allowable

II. Chapter Objectives

1. List the contracts that must be in writing under the Statute of Frauds.

2. Explain the effect of noncompliance with the Statute of Frauds.

III. Key Question Checklist

 Does the contract in question come under the writing requirements of the Statute of Frauds?

 Is there an exception to the writing requirement?

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IV. Text Materials

Statute of Frauds for Common Contracts

Each state has enacted a Statute of Frauds requiring that certain types of contracts to be in

Writing Requirement – Most states require that any contracts involving real estate or the

purchase of a business, contracts for a term greater than one year, promises to stand for the debt

of another, contracts for the sale of goods over $500, and contracts to pay compensation for

Critical Legal Thinking – The Statute of Frauds allows for consistency in handling written vs.

Contracts Involving Interests in Real Property – All contracts that transfer interests in

One-Year Rule – This rule requires that contracts that cannot be performed within one year be in

writing.

Ethics: Bonus Lost Because of the Statute of Frauds

Sawyer worked as a paralegal for Melbourne Mills, Jr. an attorney at a law firm. Sawyer

proposed that Mills and the law firm become engaged in class action lawsuits. She was promised

an unspecified bonus when “the ship comes in.” After some fairly large settlements, Mills agreed

As per ethics, Mills should honor his oral agreement with Sawyer. The Statute of Frauds

Guaranty Contract – When one person agrees to answer for the debt of another, they enter into

writing.

Case 14.1 Guaranty Contract: Page v. Gulf Coast Motors

903 So.2d 148, 2004 Ala. Civ. App. Lexis 982 (2004), Court of Civil Appeal of Alabama

Statute of Frauds and Equitable Exceptions

therefore unenforceable.

Ethics Questions: A guaranty contract occurs when one person agrees to stand for the debt of

another. The Statute of Frauds requires this to be in writing.

be enforced.

Agent’s Contracts – The equal dignity rule requires an agent’s contract to be in writing if they

are to be enforced.

UCC Statutes of Fraud

UCC: Contract for the Sale of Goods – Section 2-201(1) of the UCC requires that the sale of

goods costing over $500 must be in writing. If a modification to a contract increases the sales

did not have to be.

UCC: Contract for the Lease of Goods – Section 2A-201(1) of the UCC is the Statute of Frauds

provision that applies to the lease of goods. It states that lease contracts involving payments of

$1,000 or more must be in writing.

Equitable Exception: Part Performance

Ethics: Equity Saves an Oral Agreement for the Purchase of Real Estate

The Warners obtained a loan on an inherited piece of property, and convinced the Suttons to

purchase the property. It was orally agreed that the Suttons would make all mortgage payments

and pay the taxes on the property and they would be able to complete the purchase anytime over

partially performed, and it is impossible to return the parties to status quo, specific performance

can be applied by the court. The Warners did not act ethically in this case.

Formality of the Writing

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Required Signature – The contract must be signed by the party against whom enforcement is

Interpreting Contract Words and Terms – If terms in a contract are not defined, and no

glossary section is attached, the courts will apply standards of interpretation. Ordinary words are

given the definitions stated in dictionaries and technical words are given their technical meaning,

unless something else is clearly intended. Specific terms qualify general terms. Usage of trade

Parol Evidence Rule

Written contracts are considered to be a complete and final integration of the statements of the

parties, and any prior or contemporaneous oral evidence that will alter, contradict, or amend the

written contract is inadmissible.

Exceptions to the Parol Evidence Rule – Parol evidence may be admitted in court to show that

Partnership

834 N.E.2d 1233, 2005 Mass. App. Lexis 904 (2005), Appeals Court of Massachusetts

Facts: Yarde Metals, Inc. (Yarde) was a season ticket holder to New England Patriots

professional home football games. Yarde permitted a business associate to attend a Patriots game

Issue: Does Yarde have an implied right to purchase Patriots’ season tickets?

Decision: The appeals court affirmed the trial court’s dismissal of Yarde’s case. The ticket

specifically stated that “purchase of season tickets does not entitle purchaser to renewal in a

subsequent year.” Parol evidence is not generally admissible to vary the unambiguous terms of

Statute of Frauds and Equitable Exceptions

over the contract.

Ethics: Since the Patriots’ written contract with season ticket holders expressly provided that the

Equitable Exception: Promissory Estoppel

V. Key Terms and Concepts

 Agent’s contract—A contract related to the selling of real property that needs to be in writing.

owning or leasing it.

 Equal dignity rule—A rule that says that agent’s contracts to sell property covered by the

Statute of Frauds must be in writing to be enforceable.

 Executory contract—A contract that is not in writing.

 Glossary—It defines many of the words and terms used in the contract.

container.

 Incorporation by reference—When integration is made by express reference in one document

that refers to and incorporates another document within it.

 Integration of several writings—The combination of several writings to form a single

contract.

and lease contracts.

 Life estate—An interest in the land for a person’s lifetime; upon that person’s death, the

interest will be transferred to another party.

 Main purpose or leading object exception—If the main purpose of a transaction and an oral

collateral contract is to provide pecuniary benefit to the guarantor, the collateral contract does

 One-year rule—An executory contract that cannot be performed by its own terms within one

year of its formation must be in writing.

 Original contract—It is the first contract between the debtor and the creditor.

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regarding a dispute over the contract.

 Parol evidence—Any oral or written words outside the four corners of the written contract.

 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.

reliance on the offer.

 Real property—The land itself as well as buildings, trees, soil, minerals, timber, plants, crops,

and other things permanently affixed to the land.

 Rescind—Revoking a contract

 Sales contracts—Contracts for the sale of goods.

 Statute of Frauds—State statute that requires certain types of contracts to be in writing.

 UCC Statute of Frauds—A rule that requires all contracts for the sale of goods costing $500

or more and lease contracts involving payments of $1,000 or more to be in writing.

sales and lease of goods.