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Chapter 15
CONTRACTS IN WRITING
I. Statute of Frauds
A. Contracts Within the Statute of Frauds
1. Electronic Records
2. Suretyship Provision
a. Original Promise
b. Main Purpose Doctrine
c. Promise Made to Debtor
3. Executor-Administrator Provision
4. Marriage Provision
5. Land Contract Provision
6. One-Year Provision
a. The Possibility Test
b. Computation of Time
c. Full Performance by One Party
7. Sale of Goods
a. Admission
b. Specially Manufactured Goods
c. Delivery or Payment and Acceptance
8. Modification or Rescission of Contracts
Within the Statute of Frauds
B. Compliance with the Statute of Frauds
1. General Contracts Provisions
2. Sale of Goods
C. Effect of Noncompliance
1. Full Performance
2. Restitution
3. Promissory Estoppel
II. Parol Evidence Rule
A. The Rule
B. Situations to Which the Rule Does Not Apply
C. Supplemental Evidence
III. Interpretation of Contracts
Cases in This Chapter
Rosewood Care Center, Inc. v, Caterpillar, Inc.
MacKay v. Four Rivers Packing Company
Kalas v. Cook
Estate of Jackson v. Devenyns
Jenkins v. Eckerd Corporation
Chapter Outcomes
After reading and studying this chapter, the student should be able to:
Identify and explain the five types of contracts covered by the general contract statute of frauds and the
contracts covered by the Uniform Commercial Code (UCC) statute of frauds provision.
Describe the writings that are required to satisfy the general contract and the UCC statute of frauds
provisions.
Identify and describe the other methods of complying with the general contract and the UCC statute of
frauds provisions.
Explain the parol evidence rule and identify the situations to which the rule does not apply.
Discuss the rules that aid in the interpretation of a contract.
TEACHING NOTES
R
I. STATUTE OF FRAUDS
The statute of frauds requires that certain types of contracts be in a particular
form to be enforceable. If a contract is subject to the statute of frauds, it is said
to be “within the statute” and all other types of contracts are said to be “not
within” or “outside” the statute.
*** Chapter Outcomes ***
Identify and explain the five types of contracts covered by the general contract statute of
frauds and
the contracts covered by the UCC statute of frauds provision.
Describe the writings that are required to satisfy the general contract statute of frauds and
the UCC statute of frauds provisions.
A. CONTRACTS WITHIN THE STATUTE OF FRAUDS
The following kinds of contracts are within the statute of frauds in most states.
In these, the statute requires a writing signed by the party to be charged
(against whom the contract is to be enforced).
1. Promises to answer for the duty of another (suretyship provision)
2. Promises of an executor or administrator to answer personally for a duty
of the decedent whose funds he is administering (executor-administrator
provision)
Electronic Records
One significant impediment to e-commerce has been the questionable
enforceability of contracts entered into through electronic means such as the
Internet or e-mail because of the writing requirements under contract and sales
law (statute of frauds). In response, the Uniform Electronic Transactions Act
(“UETA”) was promulgated by the NCCUSL in July 1999 and has been adopted by
more than forty states. It gives full effect to electronic contracts, encouraging
Suretyship Provision
Applies to a contractual promise by a surety (promisor) to a creditor (promisee)
to perform the duties or obligations of a third person (principal debtor) if the
principal debtor does not perform. Must be in writing or have su?cient
electronic record to be enforceable.
Main Purpose Doctrine — The "main purpose doctrine" or "leading object rule"
is an exception to the suretyship provision based on the purpose or object of the
promisor. Where the object of the promisor is to obtain an economic benefit for
himself, the promise is not within the statute and is therefore enforceable
without a writing.
CASE 15-1
ROSEWOOD CARE CENTER, INC., v. CATERPILLAR, INC.
Supreme Court of Illinois, 2007
226 Ill.2d 559, 877 N.E.2d 1091, 315 Ill. Dec. 762
http://scholar.google.com/scholar_case?case=1422781429709921037&q=877+N.E.2d+1091&hl=en&as_sclt=2,22
Burke, J.
[On January 3, 2002, Caterpillar contacted HSM Management Services (HSM), the management
agent for Plaintiff, Rosewood Care Center, Inc. (Rosewood), a skilled nursing facility. Caterpillar
requested that Rosewood admit Betty Jo Cook, an employee of Caterpillar, on a “managed care
basis (fixed rate).” HSM advised Caterpillar that Rosewood would not admit Cook on those
terms. Shortly thereafter, on January 10, Dr. Norma Just, Caterpillar's employee in charge of
medical care relating to workers' compensation claims, contacted HSM. Just told HSM that Cook
had sustained a work-related injury and was receiving medical care at Caterpillar's expense under
the workers' compensation laws. Just requested that Cook be admitted to Rosewood for skilled
Caterpillar's authorization for Cook's care and treatment in accordance with the January 10
agreement, except that Sue now advised HSM that Cook was precertified for two weeks of care
instead of the original four weeks. On January 30, Cook was admitted to Rosewood. Upon her
admission, Cook signed a document entitled “Assignment of Insurance Benefits” as required by
law. In this document, Cook assigned any insurance benefits she might receive to Rosewood and
acknowledged her liability for any unpaid services. Caterpillar, through its health care
management company, continued to orally “authorize” care for Cook and did so on February 8,
February 25, March 11, March 21, April 8, April 18, May 16, and June 4. Cook remained at
dismiss the complaint, arguing that the alleged promise to pay for Cook's care was not
enforceable because it was not in writing as required by the statute of frauds. The trial court
granted Caterpillar's motion for summary judgment and Rosewood appealed. The appellate court
reversed and remanded.]
* * *
In general, the statute of frauds provides that a promise to pay the debt of another, i.e., a
suretyship agreement, is unenforceable unless it is in writing. * * *
* * *
II. “Main Purpose” or “Leading Object” Rule
* * * According to Rosewood, Caterpillar’s promise falls outside the statute of frauds pursuant to
the “main purpose” or “leading object” rule. Under this rule, when the “main purpose” or
“leading object” of the promisor/surety is to subserve or advance its own pecuniary or business
interests, the promise does not fall within the statute. [Citation.] As section 11 of the Restatement
(Third) of Suretyship & Guaranty states:
A contract that all or part of the duty of the principal obligor to the obligee shall be satisfied
by the secondary obligor is not within the Statute of Frauds as a promise to answer for the
duty of another if the consideration for the promise is in fact or apparently desired by the
secondary obligor mainly for its own economic benefit, rather than the benefit of the
principal obligor. [Citation.]
The reason for the “main purpose” or “leading object” rule has been explained:
* * *
It is clear * * * that the “main purpose” or “leading object” rule, as set out in the
Restatements, has been a part of Illinois law since 1873. We note that the majority of
jurisdictions have adopted this rule as well. [Citations.]
Whether the “main purpose” or “leading object” of the promisor is to promote a pecuniary or
business advantage to it is generally a question for the trier of fact. [Citation.] * * * Here, a
decision on what was Caterpillar’s “main purpose” or “leading object” in making the promise
cannot be made based on the allegations in the complaint. * * * The determination must be made
by the trier of fact based on evidence to be presented by the parties. * * *
III. Whether a Suretyship Was Created in This Case
* * * Rosewood argues that no suretyship was created by Caterpillar’s promise. According to
Rosewood, Caterpillar contracted directly with Rosewood, became liable for its own
commitment, and received benefits as a result.
A suretyship exists when one person undertakes an obligation of another person who is also
Promise Made to Debtor — The statute does not include promises made to a
debtor, so these promises are enforceable even if made orally.
Executor-Administrator Provision
Applies to the promises to answer personally for a duty of the deceased person
made by the executor of the will, or by the administrator of the estate if there is
no will. If an executor or administrator promises to pay personally a debt of the
decedent, the promise must be in writing—or in proper electronic form—to be
enforceable.
Marriage Provision
The Possibility Test — To determine if it falls within the one-year provision, the
courts ask if it is possible — not if it is likely — for the performance of the
contract to be completed within a year.
CASE 15-2
MACKAY v. FOUR RIVERS PACKING CO.
Supreme Court of Idaho, 2008
179 P.3D 1064
<B4URL>http://scholar.google.com/scholar_case?case=3479455732652915832&q=179+P.
+3d+1064+&hl=en&as_sdt=2,34
Jones, J.
Four Rivers operates an onion packing plant near Weiser, Idaho. Randy Smith, the general
manager of Four Rivers, hired Stuart Mackay as a field man during the summer of 1999 to secure
onion contracts from growers in the area. Four Rivers began experiencing financial difficulties in
late 1999. All employees, including Mackay, were laid off at this time because one of the owners
of Four Rivers filed suit to prevent the company from conducting business. When the lawsuit
was resolved, Smith rehired Mackay as a field man. According to Mackay, Four Rivers offered
him a long-term employment contract in March of 2000 to continue working as a field man up to
the time of his retirement. Mackay claims he accepted the long-term offer of employment and
* * *
On March 7, 2003, Smith terminated Mackay's employment relationship without notice *
* * [claiming that] Mackay's performance was not satisfactory because he was not meeting with
growers with the frequency or regularity necessary to obtain the quantity of onions necessary to
keep Four Rivers' packing plant operational on a full-time basis, resulting in the closure of the
packing plant in February 2003. Four Rivers claims its employees, including Mackay, were laid
off at this time as a result of the early closure. Mackay claims Four Rivers closed due to the price
of onions at the time. Mackay applied for unemployment benefits in 2003, stating in his
could not be performed within one year of its making. Four Rivers moved for summary judgment
in October 2006, and the district court granted its motion. The court concluded the alleged
contract could not be performed by its terms within one year and would therefore be invalid in
the state of Idaho. Thus, it granted summary judgment with regard to Mackay's breach of
contract claim. * * * Plaintiff subsequently filed a motion for reconsideration, which the district
court denied, resulting in this appeal.
* * *
Idaho's Statute of Frauds provision * * * provides that "an agreement that by its terms is not
to be performed within a year from the making thereof" is invalid, unless the same or some note
or memorandum thereof, be in writing and subscribed by the party charged, or by his agent.
[Citation.] * * * Under the prevailing interpretation, the enforceability of a contract under the
one-year provision does not turn on the actual course of subsequent events, nor on the
expectations of the parties as to the probabilities. [Citation.] Contracts of uncertain duration are
simply excluded, and the provision covers only those contracts whose performance cannot
possibly be completed within a year. [Citation.]
Leading treatises follow this general rule. It is well settled that the oral contracts invalidated
by the Statute because they are not to be performed within a year include only those which
cannot be performed within that period. [Citation.] A promise which is not likely to be performed
within a year, and which in fact is not performed within a year, is not within the Statute, if at the
was an implied contract, which guaranteed her employment until she reached retirement, at age
65. * * * This case differs. In this case, Mackay alleges the term of the contract is until
retirement. * * * Unlike the contract in Burton, which specified "until age 65," the alleged
contract term in this case is indefinite. Thus, the district court erred when it held Burton applied
to preclude enforcement of the contract alleged in this case.
Rather, this case falls under the general rule cited in numerous Idaho cases and in the
Restatement (Second) of Contracts. For the purposes of summary judgment, we must take as true
Computation of Time — The one-year runs from the time the agreement is
made, not from the time when the performance is to begin.
Full Performance by One Party — Where a contract has been fully performed
by one party, most courts hold that the promise of the other party is enforceable
even though its performance was not possible within the period of a year.
