978-1285860381 Chapter 16 Solution Manual Part 1

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Suggested Additional Assignments

Get it in Writing, and Then Read It

A side benefit of the statute of frauds is that the parties end up with a written record of the agreement they

made. However, the value of this memorial is reduced by the fact that many people never look at the

writing, either before or after signing. Most students live in rented accommodations, either dormitories or

apartments, yet many will have never laid eyes on their rental agreement. Ask them to obtain and read

their lease or residency agreement and submit a short summary of (1) one item that surprised them, and

why, (2) two items that seemed unfair, and why; and (3) three items that were incomprehensible, with

their best guess as to what each means.

Research: Written contract

Students are parties to more contracts than they think. Ask students to review their written contracts with

their cell phone service carrier, their credit card company, a software company, or their own school. Have

them pay particular attention to clauses like: forum selection clauses, arbitration clauses, and choice of

law clauses. Did students realize these terms at the time they entered into the contract? Have students

explain what these terms mean and which clauses most surprised them.

Drafting Exercise: Sales Contract

Students should draft a simple, one-page sales contract for either real estate or goods over $500. They

should type their name on the paper. Students whose college ID numbers end with even digits should do

their best to make this agreement complete and enforceable. Students whose college ID numbers end

with odd digits should deliberately leave out an essential term. In class, students can exchange papers and

try to determine whether the agreement is complete or incomplete.

Chapter Overview

Chapter Theme

The parties to every dispute in this chapter could have avoided litigation with a few carefully crafted

sentences. It is worth the time and effort to write them.

Quote of the Day

“A verbal contract isn’t worth the paper it’s written on.” –Samuel Goldwyn (1882-1974), Hollywood

producer.

Landmark Case: The Lessee of Richardson v. Campbell 1

Facts: A tenant had rented land from Richardson. However, Campbell claimed the property was

really his. Unless the tenant could prove that Richardson owned the land, he would have no right to

stay there.

Richardson’s tenant offered a deed (which was then called a patent) to support his claim; Campbell

provided receipts as evidence that he had bought the property.

To prove that the receipts were for the disputed property, Campbell wanted to introduce statements

from an important person—Thomas Penn, whose father, William, had founded the Pennsylvania

colony. Obviously, the tenant did not want that evidence admitted in court.

1 1 U.S. 10, Supreme Court of Pennsylvania, 1764

Issue: Was oral evidence about the ownership of land admissible in court?

Excerpts from Justice Coleman’s Decision: PLAINTIFF supported his Title by a Patent. The

Defendant produced Receipts several Years prior to Plaintiff’s Patent; but the Plaintiff contend[ed]

that the Receipts were only for Money paid on an adjacent Tract; the Defendant produced a

Witness to prove a parol Declaration of Mr. Thomas Penn that the Land in dispute was sold to

Defendant.

This piece of Evidence was opposed by the Plaintiff, and refused BY THE COURT.

Question: Who is the plaintiff?

Question: Who is the Defendant?

Question: What was the court’s ruling?

The statute of frauds: A plaintiff may not enforce any of the following agreements, unless the

agreement, or some memorandum of it, is in writing and signed by the defendant. The agreements

that must be in writing are those:

• For any interest in land

• That cannot be performed within one year

• To pay the debt of another

• Made by an executor of an estate

• Made in consideration of marriage; and

• For the sale of goods worth $500 or more.

Purpose of the Statute of Frauds

Question: What is the purpose of the statute of frauds?

Question: What is the effect of the statute of frauds?

Question: Is unenforceable the same as void?

Question: What is the difference between an unenforceable contract and a void contract?

Answer: The difference is that if the parties do perform the contract, it makes no difference that it was

Question: Is it still true today that the most valuable contracts must be in writing?

Ethics and Oral Agreements

The text poses these questions, based on the hypothetical appearing in the chapter opening:

The law permits Perry to keep all of the lottery money. Is that right? Does Perry have a moral right to

deny Oliver his half-share, when we know the two friends had agreed? Is the statute of frauds serving a

useful purpose here? Remember that Parliament passed the original statute of frauds believing that a

written document would be more reliable than the testimony of alleged witnesses. If we permitted Oliver

to enforce the oral contract, based on his testimony and that of the witnesses, would we simply be inviting

other plaintiffs to conjure up lottery “contracts” that had never been made?

There are no perfect answers to the questions posed. Clearly the British Parliament is persuaded that the

evil of the statute largely outweighs the good, which is why it has eliminated the writing requirement for

most contracts. In support of eliminating the statute:

Oliver and Perry had many unbiased witnesses who could demonstrate that the parties arrived at a

clear agreement. There is no ethical reason for Perry to get all the money.

Why should a judge or jury be unable to determine the existence vel non of a contract, when we

entrust the factfinder with far more difficult decisions, such as who committed a murder, whether a

corporation has dominated a market, whether two musical pieces are “substantially similar,” and so

forth?

In support of retaining the statute:

A writing forces one to be cautious in making deals. The statute of frauds reminds the parties that

they are engaging in serious business, and forces them to think through details and anticipate

problems and unexpected issues.

Writing an agreement may encourage clarity. When the parties read the first draft of an agreement,

they may realize that certain topics that seemed settled are filled with ambiguity. Far better to resolve

the ambiguities now, rather than in court.

Contracts That Must Be in Writing

Agreements for an Interest in Land

A contract for the sale of any interest in land must be in writing to be enforceable. Notice the phrase

“interest in land.” This means any legal right regarding land including easements, mortgages and the sale

of real property.

Exceptions:

Full performance by the seller

Part performance by the buyer

Promissory Estoppel

Additional Case: Baker v Daves2,

Facts: Tommy and Eleanor Daves gave their daughter Lisa Baker the deed to a two-acre property with a

house on it, keeping for themselves a life interest in the parcel. When they died, the property returned to

their daughter. Two years later Tommy and Eleanor divorced and settled their affairs amicably. In court,

2 83 Ark. App. 145, 119 S.W.3d 53 Court of Appeals of Arkansas, 2003

with Baker watching from the second row, their lawyers informed the court of an agreement that all three

parties had allegedly made to sell the 2 acre property. Baker would be reimbursed for taxes and insurance

paid during her ownership and the three of them would split the remainder of the sale proceeds. After the

agreement was announced in court Baker put the property on the market, but then withdrew it and refused

to sell. Tommy sued Baker and she defended based on the Statute of Frauds. The trial court

acknowledged that Baker had signed nothing, but found that the courtroom statements proved the parties

had formed a binding contract. The judge ordered Baker to sell the house and she appealed.

Issue: Was Lisa obligated to sell the house?

Holding: Judgment for Daves reversed and remanded. The record of the court proceedings, introduced

as an exhibit, showed that there was testimony in open court reciting the details of the purported sales

transaction. Baker contends that she never agreed to sell the property and that “even if some of the parties

thought there was an agreement to sell the land, it cannot be enforced since it was not in writing.” The

record does not reveal any writing signed by Baker, or by any other person properly authorized by her, to

sell the property. The fact that appellant was present in the courtroom when the property-settlement

agreement was read into the record during the Daves’s divorce proceedings is of no benefit to Daves

under these circumstances.

One judge dissented and would have affirmed the trial court’s decision, arguing that Baker was

present in court when the agreement was discussed and that she admitted listing the property for sale

pursuant to the agreement.

Question: What is a life interest?

Question: What evidence does the court rely on in ruling for Baker?

Question: What argument did the Daves make based on the courtroom testimony?

Question: Did they rely on anything else?

Question: What is the significance of Baker listing the property for sale?

Question: What is partial performance?

Answer: Partial performance is an exception to the Statute of Frauds in the sale of land. If makes an

Question: Why didn’t partial performance apply here?

Question: Can’t the court construe listing the land for sale as proof of the oral agreement with her

parents?

Answer: Baker might have been listing the property pursuant to the agreement, or she might have

Question: Isn’t that unethical for Baker to ignore her promise? Shouldn’t the law support ethics?

Answer: The rationale for not enforcing an oral agreement is that this will protect all buyers and

sellers more effectively in the long run. Other buyers and sellers know that no one will be able to go

Agreements That Cannot Be Performed Within One Year

Contracts that cannot be performed within one-year are unenforceable unless they are in writing.

You Be The Judge MTV NETWORKS V. CURRY

867 F.Supp. 202

District Court for the Southern District of New York, 1994

Facts: Adam Curry was an MTV video disc jockey (“VJ”) and host of the popular Headbanger’s

Ball and MTV Top 20 Video Countdown. In the early days of the Internet, when VJs had big hair

and many major companies (including MTV) were not yet online, Curry dreamed up the idea of

a website with the address “mtv.com.”

In June, 1993, Curry met with MTV vice president Matthew Farber to discuss his idea

and ask if MTV would become his partner. Farber told Curry that MTV was not interested in

mtv.com, but that Curry was free to register and develop the site at his own expense. And he did.

Many MTV employees, including senior executives, encouraged Curry’s efforts, even giving him

materials to upload to the site. Curry and other VJs advertised mtv.com on air.

In late 1993, MTV began exploring its own online presence. It formally requested that

Curry cease use of the mtv.com address. But Curry continued his site, which had already been

accessed by millions.

MTV sued Curry for trademark infringement, and Curry counterclaimed for breach of

oral contract. MTV moved to dismiss Curry’s contract suit, claiming that the promise between

MTV and Curry required a writing because it could not be fully executed within one

year.</CSTX2>

Issue: Did an agreement for rights to a web address require a writing?

Argument for MTV: According to Curry, his contract with MTV provided that he would promote

MTV programming on his mtv.com site in return for MTV’s promise to give up its web address.

Two problems. One, no executives in their right mind would give away a web address in such a

casual way. Two, there is absolutely no possibility that this “contract” could be performed within

one year. Curry was free to terminate his website at will, but MTV was giving up its rights to

“mtv.com” forever. Curry’s duties could be completed within a year, but MTV’s obligations

continue indefinitely. For this reason, this promise had to be in writing. The verbal assurances of

MTV executives did not form a binding contract.

Argument for Curry: Your honor, we can all see what happened here. In 1993, MTV executives

were blind to the commercial potential of the Internet, so they let Curry test the waters to see if

mtv.com would be successful. And now that they have got with the program, they want mtv.com

back. But they are too late—they have already contracted away mtv.com to Curry. The Statute of

Frauds does not require this agreement to be in writing. Both parties’ performances could have

been completed within one year: Curry could have canceled development of the website at any

time, which also means that MTV’s promise to allow Curry to use mtv.com might have ended

any time, too. The contract was enforceable and MTV has to pay Curry for its breach.

Holding: MTV’s Motion to Dismiss was denied.

Question: What was MTV’s argument for why this contract was required to be in writing?

Question: Why did the court side with Curry in this case?

Additional Case: Bed, Bath & Beyond of La Jolla, Inc. v La Jolla Village

Square Venture Partners3

Facts: From May 1992 through January 1993 plaintiff Bed, Bath & Beyond negotiated with defendant

La Jolla Village Square Venture Partners (“La Jolla”) for a lease of retail space in La Jolla Village Square,

a shopping center La Jolla was then in the process of building. In February 1993 La Jolla’s legal

representative in the negotiations presented plaintiff with four copies of a proposed written lease

agreement and guaranty agreement to be executed by plaintiff and its guarantor, plaintiff’s parent

corporation. The cover letter accompanying these documents requested they be executed by plaintiff and

its guarantor and returned to La Jolla’s legal representative for “execution by the Landlord.” Plaintiff

signed the lease and its parent corporation signed the guaranty. The documents were then returned to

defendant for execution. Defendant never executed the lease. In late March 1993 defendant informed

plaintiff that it intended to lease the subject premises to Linens ‘N Things, plaintiff’s competitor. Prior to

that communication plaintiff was unaware that La Jolla had been negotiating with Linens ‘N Things.

Plaintiff sued defendant for specific performance, breach of contract, and fraud and asked the court to

enjoin defendant from proceeding with the Linens ‘N Things lease. Defendant moved for summary

adjudication on plaintiff’s claims and injunctive relief. The factual predicate to each of the causes of

action is a valid, enforceable lease. The court granted defendant’s motion and plaintiff appealed.

Issue: Was the lease between plaintiff and defendant subject to the statute of frauds?

Holding: Judgment for defendant affirmed. Excerpts from the court’s opinion:

Three different “statutes of fraud” apply to bar enforcement of the alleged lease agreement in this

case.

Civil Code section 1624, subdivision (d) specifies, as a type of contract which is invalid

unless it is in writing and subscribed by the party to be charged, “[a]n agreement . . . to lease real

estate for a longer period than one year . . . .”

Civil Code section 1091 provides: “An estate in real property, other than an estate at will

or for a term not exceeding one year, can be transferred only by operation of law, or by an

3 60 Cal. Rptr. 2d 830, 52 Cal. App. 4th 867 Court of Appeal of California, Fourth Appellate District,

Division One, 1997

instrument in writing, subscribed by the party disposing of the same, or by his agent thereunto

authorized by writing.”

Similarly, Code of Civil Procedure section 1971 provides, in pertinent part: “No estate or

interest in real property, other than for leases for a term not exceeding one year, . . . can be

created, granted, assigned, surrendered, or declared, otherwise than by operation of law, or a

conveyance or other instrument in writing, subscribed by the party creating, granting, assigning,

surrendering, or declaring the same, or by the party’s lawful agent thereunto authorized by

writing.”

Plaintiff contends the lease agreement is not subject to the statute of frauds because it possibly could

have been performed within one year from the date of its making. Plaintiff’s argument rests on two

provisions in the unexecuted written lease. The first provided the tenant could terminate the lease

before the rental term commenced if the landlord failed to begin certain preparatory work on the

leased premises by June 1, 1993, or substantially complete that work by December 31, 1993. The

second gave the landlord the right to terminate the lease before commencement of the rental term if

the landlord was unable to obtain the various governmental permits and approvals required for

construction of the premises despite exercising diligence and good faith in attempting to do so.

The provisions of Civil Code section 1624, subdivision (d), along with Civil Code section 1091

and Code of Civil Procedure section 1971, render the alleged lease unenforceable despite its

pre-commencement termination provisions because the actual term of the lease exceeds one year. We

hold that an agreement to lease real property for a term exceeding one year is within the statute of

frauds of Civil Code section 1624, subdivision (d) regardless whether such agreement provides that it

may be canceled or terminated within one year of the date of its making and prior to commencement

of the lease term.

Question: What did the court look at to determine the one-year period?

What the Writing Must Contain

The writing may consist of more than one document, written at different times, with each document

making a piece of the puzzle. But there are some general requirements: the writing

•Must be signed by the defendant, and

•Must state with reasonable certainty the name of each party, the subject matter of the

agreement, and all of the essential terms and promises.

Incompleteness

Additional Case: Ahrens v. Dodd4

Mr. and Ms. Ahrens wanted to buy a trailer court owned by Charles Dodd. The Ahrenses drafted and

signed a contract to buy “Blue Bell Trailer Court” for $305,000. The contract stated that the trailer court

included 31 acres. Dodd held the deed to a 33.72-acre tract of land; the land included the 31 acres of Blue

Bell Court and two more acres on which Dodd lived. The Ahrenses wrote a check to Dodd for $65,000,

noting “trailer park” on the check. Dodd cashed the check. Later, Dodd refused to sell the trailer park to

the Ahrenses, who sued.

Question: This case raises two issues under the statute of frauds. What are they?

Question: The court held that the contract, together with the check, satisfied the writing requirement.

Was the writing clear and complete?

4 863 S.W.2d 611, 1992 Mo. App. LEXIS 1587 Court of Appeals of Missouri, 1992

Answer. No, it was not. It was unclear exactly where the land’s boundaries lay. “Blue Bell Court”

indicated the existing trailer park, but it was clear from the contract that the Ahrenses did not expect

Electronic Contracts and Signatures

What happens to the writing requirement, when there is no paper? The statute of frauds requires some

sort of “signature.” Today, an “electronic signature” could mean a name typed (or automatically

included) at the bottom of an email message, a retinal or vocal scan, or a name signed by electronic

pen on a writing tablet, among others.

E-signatures are valid in all 50 states. Almost all states have adopted the Uniform Electronic

Transactions Act (UETA), which declares that electronic contracts and signatures are as enforceable

as those on paper. In other words, the normal rules of contract law apply, and neither party can avoid

such a deal merely because it originated in cyberspace. A federal statute, The Electronic Signatures

in Global and National Commerce Act (E-SIGN), extends UETA’s principles to interstate and

foreign commerce.

In many states, certain documents still require a traditional (non-electronic) signature. Wills,

adoptions, court orders, and notice of foreclosure are common exceptions.