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18. Presti claims that he reached an oral agreement with Wilson by telephone in October
2013 to buy a horse for $60,000. Presti asserts that he sent Wilson a bill of sale and a
postdated check, which Wilson retained. Presti also claims that Wilson told him that he
wished not to consummate the transaction until January 1, 2014, for tax reasons. The
check was neither deposited nor negotiated. Wilson denies that he ever agreed to sell the
horse or that he received the check and bill of sale from Presti. Presti’s claim is
supported by a copy of his check stub and by the affidavit of his executive assistant, who
says that he monitored the telephone call and prepared and mailed both the bill of sale
and the check. Wilson argues that the statute of frauds governs this transaction and that
because there was no writing, the contract claim is barred. Is Wilson correct? Explain.
Answer: UCC Statute of Frauds/Writing Requirement. Yes, Wilson is correct. The sale of
a horse is governed by the Uniform Commercial Code covering sales of goods. Presti
19. Louie E. Brown worked for the Phelps Dodge Corporation under an oral contract
for approximately twenty-three years. In 2013, he was suspended from work for
unauthorized possession of company property. In 2014, Phelps Dodge fired Brown after
discovering that he was using company property without permission and building a
trailer on company time. Brown sued Phelps Dodge for benefits under an unemployment
benefit plan. According to the plan, “in order to be eligible for unemployment benefits, a
laid-off employee must: (1) Have completed two or more years of continuous service with
the company, and (2) Have been laid off from work because the company had determined
that work was not available for him.” The trial court held that the wording of the second
condition was ambiguous and should be construed against Phelps Dodge, the party who
chose the wording. A reading of the entire contract, however, indicates that the plan was
not intended to apply to someone who was fired for cause. What is the correct
interpretation of this contract?
20. Katz offered to purchase land from Joiner, and, after negotiating the terms, Joiner
accepted. On October 13, over the telephone, both parties agreed to extend the time
period for completing and mailing the written contract until October 20. Although the
original paperwork deadline in the offer was October 14, Katz stated he had inserted
that provision “for my purpose only.” All other provisions of the contract remained
unchanged. Accordingly, Joiner completed the contract and mailed it on October 20.
Immediately after, however, Joiner sent Katz an overnight letterstating that “I have
signed and returned contract, but have changed my mind. Do not wish to sell property.”
Joiner now claims an oral modification of a contract within the statute of frauds is
unenforceable. Katz counters that the modification is not material, and therefore does not
affect the underlying contract. Explain who is correct.
Answer: Modification or Recission of Contracts. Judgment for Katz. This problem
emphasizes the difficulty of determining fixed limits of the statute of frauds. Look to the
21. When Mr. McClam died, he left the family farm, heavily mortgaged, to his wife and
children. In order to save the farm from foreclosure, Mrs. McClam planned to use
insurance proceeds and her savings to pay off the debts. She was unwilling to do so,
however, unless she had full ownership of the property. Mrs. McClam wrote her daughter,
stating that the daughter should deed over her interest in the family farm to her mother.
Mrs. McClam promised that upon her death all the children would inherit the farm from
their mother equally. The letter further explained that if foreclosure occurred, each child
would receive very little, but if they complied with their mother’s plan, each would
eventually receive a valuable property interest upon her death. Finally, the letter stated
that all the other children had agreed to this plan. The daughter also agreed. Years later,
Mrs. McClam tried to convey the farm to her son Donald. The daughter challenged,
arguing that the mother was contractually bound to convey the land equally to all
children. Donald says this was an oral agreement to sell land, and is unenforceable. The
daughter says the letter satisfies the statute of frauds, making the contract enforceable.
Who gets the farm? Explain.
Answer: Methods of Compliance (Statute of Frauds). Judgment for the daughter, so all
22. Butler Brothers Building Company sublet all of the work in a highway construction
contract to Ganley Brothers, Inc. Soon thereafter, Ganley brought this action against
Butler for fraud in the inducement of the contract. The contract, however, provided: “The
contractor [Ganley] has examined the said contracts . . . , knows all the requirements,
and is not relying upon any statement made by the company in respect thereto.” Can
Ganley introduce into evidence the oral representations made by Butler?
Answer: Parol Evidence Rule/Evidence of Fraud in the Inducement. Yes, decision for
Ganley. Parol evidence is admissible to show that the making of the contract was
23. Shane Quadri contacted Don Hoffman, an employee of Al J. Hoffman & Co.
(Hoffman Agency), to procure car insurance. Later, Quadri’s car was stolen on October
25 or 26. Quadri contacted Hoffman, who arranged with Budget Rent-a-Car for a rental
car for Quadri until his car was recovered. Hoffman authorized Budget Rent-a-Car to
bill the Hoffman Agency. Later, when the stolen car was recovered, Hoffman telephoned
Goodyear and arranged to have four new tires put on Quadri’s car to replace those
damaged during the theft. Budget and Goodyear sued Hoffman for payment of the car
rental and tires. Is Hoffman liable on his oral promise to pay for the car rental and the
four new tires?
Answer: Original Promises. Judgment for Budget and Goodyear against Hoffman.
Although the statute of frauds makes unenforceable oral contracts to pay the debts of a
24. Thomson Printing Company is a buyer and seller of used machinery. On April 10,
the president of the company, James Thomson, went to the surplus machinery department
of B.F. Goodrich Company in Akron, Ohio, to examine some used equipment that was for
sale. Thomson discussed the sale, including a price of $9,000, with Ingram Meyers, a
Goodrich employee and agent. Four days later, on April 14, Thomson sent a purchase
order to confirm the oral contract for purchase of the machinery and a partial payment
of $1,000 to Goodrich in Akron. The purchase order contained Thomson Printing’s name,
address, and telephone number, as well as certain information about the purchase, but
did not specifically mention Meyers or the surplus equipment department. Goodrich sent
copies of the documents to a number of its divisions, but Meyers never learned of the
confirmation until weeks later, by which time the equipment had been sold to another
party. Thomson Printing brought suit against Goodrich for breach of contract. Goodrich
claimed that no contract had existed and that at any rate the alleged oral contract could
not be enforced because of the statute of frauds. Is the contract enforceable? Why?
Answer: Written Confirmation. Yes, the contract is enforceable; thus judgment for
Thomson Printing. The merchants’ confirmation exception to the statute of frauds
provides that an oral contract between merchants may be enforced by the sender of a
25. On July 5, 2003, Richard Price signed a written employment contract as a new
salesman with the Mercury Supply Company. The contract was of indefinite duration and
could be terminated by either party for any reason upon fifteen days’ notice. Between
2003 and 2011, Price was promoted several times. In 2008, Price was made vice
president of sales. In September 2011, however, Price was told that his performance was
not satisfactory and that if he did not improve he would be fired. In February 2014, Price
received notice of termination. Price claims that in 2008 he entered into a valid oral
employment contract with Mercury Supply Company wherein he was made vice president
of sales for life or until he should retire. Is the alleged oral contract barred by the
one-year provision of the statute of frauds?
Answer: Statute of Frauds. Judgment for Mercury Supply Co. The statute of frauds
requires that all contracts that cannot possibly be completed within a year must be in
26. Plaintiffs leased commercial space from the defendant to open a florist shop. After
the lease was executed, the plaintiffs learned that they could not place a freestanding
sign along the highway to advertise their business because the Deschutes County Code
allowed only one freestanding sign on the property, and the defendant already had one in
place. The plaintiffs filed this action, alleging that defendant had breached the lease by
failing to provide them with space in which they could erect a freestanding sign.
Paragraph 16 of the lease provides as follows: “Tenant shall not erect or install any
signs . . . visible from outside the leased premises with out [sic] the previous written
consent of the Landlord.” Explain whether this evidence is admissible.
Answer: Parol Evidence. Yes, the evidence is admissible. The parol evidence rule is a rule
of integration. It prohibits oral evidence of those aspects of the bargain that the parties
27. Jesse Carter and Jesse Thomas had an auto accident with a driver insured by
Allstate. Carter and Thomas hired attorney Joseph Onwuteaka to represent them. Mr.
Onwuteaka sent a demand letter for settlement of plaintiffs’ claims to Allstate’s adjustor,
Ms. Gracie Weatherly. Mr. Onwuteaka claims Ms. Weatherly made, and he orally
accepted, settlement terms on behalf of the plaintiffs. When Allstate did not honor the
agreements, Carter and Thomas filed a suit for breach of contract. Discuss the
enforceability of the oral agreement.
Answer: Statute of Frauds. The appellants contend the alleged oral agreement is not
governed by the Statute of Frauds. Allstate claims the Statute of Frauds is applicable to
28. Mary Iacono and Carolyn Lyons had been friends for almost thirty-five years. Mary
suffers from advanced rheumatoid arthritis and is in a wheelchair. Carolyn invited Mary
to join her on a trip to Las Vegas, Nevada, for which Carolyn paid. Mary contended she
was invited to Las Vegas by Carolyn because Carolyn thought Mary was lucky. Sometime
before the trip, Mary had a dream about winning on a Las Vegas slot machine. Mary’s
dream convinced her to go to Las Vegas, and she accepted Carolyn’s offer to split
“50–50” any gambling winnings. Carolyn provided Mary with money for gambling.
Mary and Carolyn started to gamble but after losing $47, Carolyn wanted to leave to see
a show. Mary begged Carolyn to stay, and Carolyn agreed on the condition that Carolyn
put the coins into the machines because doing so took Mary too long. Mary agreed and
led Carolyn to a dollar slot machine that looked like the machine in her dream. The
machine did not pay on the first try. Mary then said, “Just one more time,” and Carolyn
looked at Mary and said, “This one’s for you, Puddin.” They hit the jackpot, winning
$1,908,064 to be paid over a period of twenty years. Carolyn refused to share the
winnings with Mary. Is Mary entitled to one-half of the proceeds? Explain.
Answer: Statute of Frauds. The defendantCarolyn asserted that the agreement, if any, was
unenforceable under the statute of frauds because it could not be performed within one
92.
ANSWERS TO “TAKING SIDES” PROBLEMS
Stuart Studio, an art studio, prepared a new catalog for the National School of Heavy
Equipment, a school run by Gilbert and Donald Shaw. When the artwork was virtually
finished, Gilbert Shaw requested Stuart Studio to purchase and supervise the printing of
twenty-five thousand catalogs. Shaw told the art studio that payment of the printing
costs would be made within ten days after billing and that if the “National School would
not pay the full total that he would stand good for the entire bill.” Shaw was chairman
of the board of directors of the school, and he owned 100 percent of its voting stock and
49 percent of its nonvoting stock. The school became bankrupt, and Stuart Studio was
unable to recover the sum from the school. Stuart Studio then brought an action against
Shaw on the basis of his promise to pay the bill.
(a)What are the arguments that Shaw is not liable on his promise?
(b)What are the arguments that Shaw is liable on his promise?
(c) Is Shaw obligated to pay the debt in question? Explain.
ANSWER:
(a)Shaw would argue that his promise is that of a surety and thus it
must be in writing to be enforceable. Because Shaw is promising to
