363
Chapter 15
The Statute of Frauds—
Writing Requirement
and Electronic Records
See Separate Lecture Outline System
INTRODUCTION
This chapter covers two distinct concepts: how the Statute of Frauds affects the enforceability of a contract, and how
the parol evidence rule excludes outside evidence offered to modify a contract.
A contract that is otherwise valid may be unenforceable if it is not in the proper form—certain types of contracts are
required to be in writing. If a contract is required by law to be in writing and it is not, it may not be enforceable.
364 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
ADDITIONAL RESOURCES—
VIDEO SUPPLEMENTS
The following video supplements relate to topics discussed in this chapter—
PowerPoint Slides
To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for
Chapter 15.
Business Law Digital Video Library
individual review. Clips on topics covered in this chapter include the following.
Midnight Run—Liability: Contract Negotiation, Formation, Statute of Frauds; Hiring a Bounty Hunter.
CHAPTER OUTLINE
I. The Origins of the Statute of Frauds
To be enforceable, certain contracts must be in writing (even if both parties acknowledge an oral contract, it may not
be enforced). The primary purpose of this requirement is to provide reliable evidence of these contracts—a writing
signed by the party against whom enforcement is sought. This was the purpose of the Statute of Frauds enacted by the
English parliament in 1677, and is the purpose of the various statutes of frauds in effect in the United States today.
II. Contracts That Fall within the Statute of Frauds
A. CONTRACTS INVOLVING INTERESTS IN LAND
Contracts for the sale of land—including physical objects that are permanently attached to it (buildings, fences,
trees, minerals, timber)—and for the transfer of other interests in land (such as mortgages) must be in writing.
CHAPTER 15: THE STATUTE OF FRAUDS 365
business known as BP Food Mart” at a specific street address. The parties signed the agreement, and the buyers paid a
$25,000 “security deposit” and $2,000 to renew the store’s liquor license. When title problems developed, the buyers
declined to go through with the sale and asked for the return of their deposit and license fee. The seller refused.
Solaiman and Chowdhury filed a suit against Salim in a Georgia state court, which ruled in the plaintiffs’ favor. Salim
appealed.
A state intermediate appellate affirmed that “the parties’ purchase agreement was void for lack of an adequate
property description.” To comply with the Statute of Frauds, a contract for a sale of land “must be in writing and must
property * * * with the same degree of certainty as that required in a deed.” This includes “regard to the quantity and
…………………..……………………………………………………………………………………………………………
Notes and Questions
If a lawyer had drafted the purchase agreement so that it included a sufficient description of the property, would
the buyers likely have been forced to go through with the sale? No, because the agreement would most likely have
contained other provisions that would have allowed the buyers to avoid the sale when title problems developed. For
title problems would have been a breach by the seller. The provision for the “security deposit” would also likely have
been phrased differently, with clear, express terms for its refund or forfeit.
ANSWERS TO QUESTIONS AT THE END OF CASE 15.1
1. Why was Salim arguing that the contract should be deemed enforceable when he was being sued for breach of
contract? If the contract was deemed enforceable, Salim could argue that Soliaman and Chowdhury had breached the
contract by backing out of the agreement. In that situation, Salim could ask for money damages in the amount of the
agreed-on purchase price. (Note: Although Soliaman and Chowdhury initially sued Salim for breach of contract, later
in the trial they argued that the contract was unenforceable, apparently believing that their chances of recovery were
better if the contract was deemed unenforceable and thus void.)
2. What might Salim have done to ensure that the sales contract would be enforceable? After reading this case, the
answer to this question should be clear: Salim would have benefitted by consulting an attorney to review the
contract—or to draft the contract—to make sure that it met the legal requirements for a land sales contract.
B. THE ONE-YEAR RULE
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CHAPTER 15: THE STATUTE OF FRAUDS 367
C. COLLATERAL PROMISES
1. Primary v. Secondary Obligations
2. An Exception—The “Main Purpose” Rule
If the main purpose of the guarantor in accepting secondary liability is to secure a benefit for himself or
herself, the contract need not be in writing to be enforceable.
ADDITIONAL BACKGROUND—
Restatement (Second) of Contracts, Section 116
The following is a section of the Restatement (Second) of Contracts that relates to and is cited in this part of the
text—Restatement (Second) of Contracts, Section 116. Included is a selected Comment.
§ 116. Main Purpose; Advantage to Surety
A contract that all or part of a duty of a third person to the promisee shall be satisfied 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 promisor mainly for his own economic advantage, rather than in order to benefit the third person. If,
however, the consideration is merely a premium for insurance, the contract is within the Statute.
Comment:
a. Rationale. This Section states what is often called the “main purpose” or “leading object” rule. Where the surety–
promisor’s main purpose is his own pecuniary or business advantage, the gratuitous or sentimental element often
present in suretyship is eliminated, the likelihood of disproportion in the values exchanged between promisor and
promisee is reduced, and the commercial context commonly provides evidentiary safeguards. Thus there is less need
for cautionary or evidentiary formality than in other cases of suretyship.
D. PROMISES MADE IN CONSIDERATION OF MARRIAGE
A unilateral promise to pay money or give property in consideration of a promise to marry must be in writing to
be enforceable. The same rule applies to prenuptial and postnuptial agreements. Most states will not enforce a
prenuptial agreement unless the party against whom enforcement is sought signed it voluntarily after the other
party reasonably disclosed his or her assets.
E. CONTRACTS FOR THE SALE OF GOODS
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ENHANCING YOUR LECTURE—
PRENUPTIAL AGREEMENTS
AND ADVICE OF COUNSEL
The drafting and signing of prenuptial agreements are often at odds with the very concept of marriage. After all,
the parties purport to be in love with each other and desirous of sharing all aspects of their lives. Under these
circumstances, the thought of involving lawyers in the negotiation of a prenuptial agreement seems inappropriate.
Nonetheless, prenuptial agreements are drafted and entered into every day. Cases occasionally come before the
courts in which a party to a prenuptial agreement claims that the agreement should not be enforced because one party
was not advised to consult his or her own attorney before signing the agreement.
SOME JURISDICTIONS REQUIRE INDEPENDENT COUNSEL
In a growing number of jurisdictions, courts regard the advice of independent counsel as a significant factor in
determining whether a party signed a prenuptial agreement voluntarily. In other words, if a prospective spouse did not
have the advice of her or his own attorney before signing the agreement, that could indicate that the agreement was
not signed voluntarily. In one case, for example, a woman challenged the enforceability of a prenuptial agreement on
Many courts have been particularly suspicious of prenuptial agreements involving a waiver by the future wife of all
spousal support in the event of marriage or divorce. The reasoning has been that any prenuptial support waiver might
OTHER JURISDICTIONS DO NOT REQUIRE INDEPENDENT COUNSEL
Other jurisdictions take a different approach. For example, in a highly publicized case involving baseball player
Barry Bonds, the California Supreme Court held that a prenuptial agreement was enforceable even though Bonds’s wife
was not advised to obtain independent counsel before signing it. The wife, who was Swedish and had little knowledge
of English, later stated that she had not understood that by signing the agreement, she would forfeit any right to the
earnings and property acquisitions of the parties during their marriage. The court, however, held that the agreement
was enforceable. The court concluded that the evidence indicated that the wife had consented to the terms of the
agreement.ca
sign a prenuptial agreement as a precondition of their marriage. The agreement provided that each spouse waived his
or her rights to the other spouse’s property. The attorney advised the woman to obtain independent counsel and gave
claimed that the agreement was invalid because she had not signed it voluntarily. She stated that she had been very
CHAPTER 15: THE STATUTE OF FRAUDS 369
In a more recent case, the Connecticut Supreme Court rejected a trial court’s conclusion that the ex-wife had
insufficient time to digest and understand the disclosure on the day she signed the agreement. That court ruled that
FOR CRITICAL ANALYSIS
Some observers argue that enforcing prenuptial agreements when both parties did not have the advice of
independent counsel unduly burdens the financially weaker party to the marriage, customarily the woman. Others
contend that allowing financially successful future spouses to protect their assets encourages more marriages to take
place. Clearly, the courts are divided on the issue of whether prenuptial agreements should be upheld despite the lack
of independent counsel by both parties. Should the advice of independent counsel be a requirement for a valid
prenuptial agreement? What is your position on this issue?
a. Estate of Lutz, 563 N.W.2d 90 (N.Dak. 1997).
b. See Binek v. Binek, 673 N.W.2d 594 (N.Dak. 2004).
c. In re Marriage of Bonds, 24 Cal.4th 1, 5 P.3d 815, 99 Cal.Rptr.2d 252 (2000).
d. In re Estate of Ingmand, 2001 WL 855406 (Iowa.App. 2001).
e. Friezo v. Friezo, 281 Conn. 166, 914 A.2d 533 (2007).
F. EXCEPTIONS TO THE STATUTE OF FRAUDS
1. Partial Performance
On a contract relating to a transfer of an interest in land, if the buyer has paid part of the price, taken
2. Admissions
In some states, if a party against whom enforcement of an oral contract is sought admits in “pleading,
testimony or otherwise in court that a contract for sale was made,” the contract will be enforceable.
CASE SYNOPSIS—
Case 15.2: School-Link Technologies, Inc. v. Applied Resources, Inc.
The New York City Department of Education (NYCDOE) asked School-Link Technologies, Inc. (SLT), to propose a
cafeteria payment system that included kiosks. SLT promised Applied Resources, Inc. (ARI), that it would be the
exclusive supplier of as many as 1,500 kiosks if NYCDOE awarded the contract to SLT. SLT paid ARI in advance for a
refused to refund SLT’s money. SLT filed a suit in a federal district court against ARI. ARI counterclaimed for breach of
contract, asserting that SLT failed to use ARI as an exclusive supplier as promised. SLT filed a motion for summary
judgment.
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The court denied SLT’s motion. An oral contract for a sale of goods over $500 that would otherwise be
unenforceable for the lack of a writing is enforceable to the extent that the seller delivers the goods and the buyer
accepts them. Thus, the alleged oral contract between SLT and ARI, to the effect that ARI would be the exclusive
supplier of kiosks for SLT’s contract with NYCDOE, was enforceable to the extent that ARI had delivered kiosks and SLT
had accepted them.
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Notes and Questions
Could ARI have successfully asserted a promissory estoppel claim against SLT? Very likely yes. Under the doctrine
of promissory estoppel, performance in reasonable reliance on a promise can create a binding contract. In a case
involving the Statute of Frauds, promissory estoppel is applied only if a refusal to enforce the promise would sanction
exclusive supplier of computer kiosks for SLT’s contract with NYCDOE could be enforceable under this doctrine, even
though the Statute of Frauds would otherwise bar the enforcement of the promise through a breach–of-contract claim,
if the application of the Statute of Frauds would work a fraud or injustice on ARI.
ANSWER TO “THE ETHICAL DIMENSION” QUESTION IN CASE 15.2
On what theories could ARI’s request for relief be based in this case? What common thread underlies these
theories? ARI advanced several legal and equitable theories on its behalf, including promissory estoppel. In denying
SLT’s motion for summary judgment on this claim, the court said, “[I]t appears that SLT used ARI to obtain the contract
with NYCDOE, that SLT could not have fulfilled one of the mandatory requirements of the [kiosks] without ARI’s
assistance, that SLT stole ARI’s confidential information in an effort to design and build its own kiosks so that it could
cut SLT out of the NYCDOE deal, that SLT intended to do so all along, that SLT did not negotiate in good faith to reach a
written contract with ARI, and that SLT reneged on its promise to use ARI as the exclusive supplier for the NYCDOE
project for no apparent reason.”
not available when an enforceable express contract regulates the parties’ relations with respect to the disputed issue.
concerning ARI being the exclusive supplier of kiosks for SLT’s contract with the NYCDOE is unenforceable under the
statute of frauds. Hence, to this extent no enforceable contract exists precluding an unjust enrichment claim. SLT’s
ARI also argued fraud and other theories. The common thread underlying these grounds is that “not enforcing
SLT’s promise to use ARI as the exclusive supplier on the NYCDOE project would essentially sanction the perpetration of
foster or encourage it, and the court should not permit it to be used as a shield to protect fraud or to enable one to
CHAPTER 15: THE STATUTE OF FRAUDS 371
ANSWER TO “THE LEGAL ENVIRONMENT DIMENSION”
QUESTION IN CASE 15.2
Could ARI successfully assert a claim against SLT based on fraudulent misrepresentation? Explain. A contract is
voidable if it is induced by fraud, and ARI did, in fact, assert this claim against SLT. The court had “no difficulty
the exclusive supplier for the NYCDOE project and that ARI’s reliance was reasonable and justifiable at that time.
3. Promissory Estoppel
Some courts have used the doctrine of promissory estoppel to allow parties to recover under oral contracts
that would otherwise be unenforceable under the Statute of Frauds.
III. Sufficiency of the Writing
The Statute of Frauds requires a writing signed only by the party against whom enforcement is sought. The signature
can be no more than an initial and can be anywhere in the writing.
A. WHAT CONSTITUTES A WRITING?
Any confirmation, invoice, sales slip, check, or telegram can constitute a sufficient writing.
B. WHAT MUST BE CONTAINED IN THE WRITING?
Under the UCC, a writing need only name the quantity. Under statutes of frauds covering transactions other than
sales of goods, the writing must name the parties, the subject matter, the consideration, and the essential terms
ENHANCING YOUR LECTURE—
HOW CAN YOU PREVENT PROBLEMS
WITH ORAL CONTRACTS?
As a general rule, most business contracts should be in writing even when they fall outside the Statute of Frauds.
Businesspersons frequently make oral contracts over the telephone, however, particularly when the parties have done
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business with each other in the past.
CONFIRM THE AGREEMENT IN WRITING
Any time an oral contract is made, it is advisable for one of the parties to send either a written memorandum or a
confirmation of the oral agreement by fax or e-mail to the other party. This accomplishes two purposes: (1) it
demonstrates the party’s clear intention to form a contract, and (2) it provides the terms of the contract as that party
understood them. If the party receiving the memorandum or confirmation then disagrees with the terms as described,
the issue can be addressed before performance begins.
SPECIAL RULES FOR CONTRACTS BETWEEN MERCHANTS
What about the sale of goods between merchants? Under the UCC, written confirmation received by one
merchant removes the Statute of Frauds requirement of a writing unless the merchant receiving the confirmation
objects in writing within ten days of its receipt. This law (discussed in Chapter 15) clearly points out the need for the
merchant receiving the confirmation to review it carefully to ascertain that the confirmation conforms to the oral
contract. If the writing does not so conform, the merchant can object in writing (the Statute of Frauds still applies), and
confirmation can be used as evidence to prove the terms of the oral contract. Note, however, that this ten-day rule
does not apply to contracts for interests in realty or for services, to which the UCC does not apply.
CHECKLIST FOR THE BUSINESSPERSON
1. When feasible, use written contracts.
2. If you enter into an oral contract over the telephone, fax or e-mail a written confirmation outlining your
understanding of the oral contract.
already agreed to in the oral contract, as you understand them.
4. If you have any objections, notify the other party of these objections, in writing, within ten days.
IV. The Parol Evidence Rule
No evidence of prior oral or written negotiations or agreements or contemporaneous oral negotiations may be used to
change the terms of a written contract. Parol evidence is evidence—oral or written—outside the writing and not made
a part of the contract by a reference in the writing.
A. EXCEPTIONS TO THE PAROL EVIDENCE RULE?
1. Contracts Subsequently Modified
2. Voidable or Void Contracts
3. Contracts Containing Ambiguous Terms
5. Prior Dealing, Course of Performance, or Usage of Trade
6. Contracts Subject to Orally Agreed-on Conditions Precedent
7. Contracts with Obvious or Gross Clerical (or Typographic) Errors
Case 15.3: Watkins v. Schexnider
Pamela Watkins bought a “home” from Sandra Schexnider under an agreement that stated Watkins would make
monthly payments on the mortgage until the note was paid in full when “the house” will become hers. The agreement
also stipulated that she would pay for insurance on “the property.” The home was destroyed in Hurricane Rita in 2005,
and the insurance proceeds satisfied the mortgage. Watkins claimed that she owned the land, but Schexnider refused
to transfer title. Schexnider asserted that she had sold only the house. Watkins filed a petition in a Louisiana state court
to obtain the land. The court concluded that the “clear wording of the contract” indicated a sale of the house, not the
land, and refused to admit parol evidence to the contrary. Watkins appealed.
A state intermediate appellate court ruled that parol evidence should have been admitted and ordered title to the
land transferred to Watkins. The parties’ contract referred variously to the “home,” “house,” and “property,” but there
was nothing about “matters pertaining to use of another person’s land”—terms of rent, duration, use limitations, and
so on. ”The fact that Schexnider, the person who wrote the contract, is claiming that the agreement only conveyed the
house, yet failed to put any such provision in the contract, can only be interpreted as ambiguous.” Watkins testified
that Schexnider always indicated the sale included the land, walking around the property, for example, to show the
boundary.
…………………………………………………………..……………………………………………………………………
Notes and Questions
What are the reasons for the parol evidence rule? What are some criticisms of these purposes? The policy behind
the parol evidence rule is to support the contracting parties’ writing against intentionally false testimony and possibly
false memories. It is also purposed to exclude terms that have been superseded by the writing (for example, terms that
the parties discussed in negotiation but that they did not intend to include in the end). The rule is also intended to
force parties put their complete agreement into writing and thereby make transacting business more certain. Criticisms
of these points include that the rule can exclude as much true evidence as perjury and that it has never effectively
forced parties to put all of their contract terms into writing, with business continuing unabated.
CHAPTER 15: THE STATUTE OF FRAUDS 375
ANSWER TO “THE ETHICAL DIMENSION” IN CASE 15.3
The parol evidence rule is an age-old and important rule of contract law. Why should the courts allow exceptions
to this rule? Freedom of contract is one of the most important principles of contract law. Simply stated, the law
assumes that people should be free make whatever bargains they wish, whether they be wise or foolish. The law also
assumes that people should be held to their bargains. Nonetheless, as indicated throughout this unit on contracts, in
the interests of equity and fairness, some contracts will not be enforced by the courts. Similarly, the courts on occasion
make exceptions to the parol evidence rule in the interests of fairness and justice. In this case, the contract itself only
referred to the “house” or the “home,” but it was clear from the evidence that the parties did not intend to sell or buy
only the house. Therefore, it would be unfair to apply the parol evidence rule in this situation and exclude oral
evidence. There are several other situations when exceptions to the parol evidence rule will be allowed to make the
meaning of a contract clear or to prevent injustice. For example, when one party, through deception or fraud, entices
another to enter into a contract, if parol evidence could not be admitted to demonstrate that fraud or deception had
occurred, it bring about an injustice.
ADDITIONAL CASES ADDRESSING THIS ISSUE—
Recent cases in which the parol evidence rule was considered include the following.
• AAR International, Inc. v. Vacances Heliades S.A., 202 F.Supp.2d 788 (N.D.Ill. 2002) (alleged oral promises made by
an aircraft lessor at a demonstration flight, to repair the aircraft’s engines at its own expense, were not enforceable
because the lease contained an integration clause, stating that the lease constituted the entire agreement between the
parties and superseded all prior agreements and understandings).
• True North Composites, LLC v. Trinity Industries, Inc., 191 F.Supp.2d 484 (D.Del. 2002) (testimony by witnesses as
to the intent of the parties in entering into an agreement, as to how modifications to contract specifications were to be
handled, and as to the number of items that were to be produced under the contract, was consistent with the terms of
the parties’ agreement, and thus the parol evidence rule did not require the exclusion of the testimony).
• Garland v. Branstad, 648 N.W.2d 65 (Iowa 2002) (parol evidence establishing that the parties to a $100,000
promissory note, which was secured by a real estate mortgage, entered into an oral agreement after the execution of
the note, according to which they altered the terms of payment, was admissible, under the exception to the parol
evidence rule allowing for the admission of evidence of a subsequent modification of a written contract).
• Mackall v. Fleegle, __ Pa.Super. __, 801 A.2d 577 (2002) (the nature and quantity of an interest in certain land,
which the owner claimed to have been an easement, was to be ascertained from the conveying instrument itself and
could not be orally shown, in a case involving a quiet title action over land through which a railroad track ran).
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B. INTEGRATED CONTRACTS
The key is whether a written contract is intended to a complete and final embodiment of the parties’ agreement.
If the contract is only partially integrated, evidence of consistent additional terms is admissible to supplement the
written agreement
ENHANCING YOUR LECTURE—
WHAT DOES “REGISTRATION” MEAN
IN THE DOMAIN NAME CONTEXT?
Article 2 of the Uniform Commercial Code (UCC) specifically allows evidence of trade usage to be introduced in
court to explain or supplement the written terms of a contract. As mentioned elsewhere, this is one of the exceptions
to the parol evidence rule. Article 2, however, applies to sales of goods. Does this mean that trade usage cannot be
admitted to explain the meaning of terms in contracts governed by the common law—that is, contracts that do not
involve sales of “goods”? Specifically, can a court consider usage of trade in determining what the term registration
means in a contract to register a domain name?
THE QUESTION OF “EXCLUSIVE USE”
Typically, when a person or business entity registers an Internet domain name as the address for a Web site, the
that person or entity expects to have the exclusive right to use that name. Certainly, this was Michael Zurakov’s
expectation when he registered the domain name “Laborzionist.org” with Register.Com, Inc., a business that provides
Internet services, including the registration of domain names. Register.Com established a “Coming Soon” page for
Zurakov’s Web site. The page, which would be accessed by anyone keying in Zurakov’s domain name, contained
banner ads for Register.Com and other organizations, as well as a list of “Additional Services.” It appeared that the ads
were in some way endorsed by Zurakov and that he was the provider of the additional services.
Zurakov sued Register.Com, alleging that by registering the domain name, he had obtained the exclusive right to
use the name and the corresponding Web page. He claimed that Register.Com’s use of the page interfered with this
right. Register.Com asked the court to dismiss the case because, among other things, nothing in the contract stated
that Zurakov would have the exclusive use of the domain name. The trial court dismissed the case after concluding
that Zurakov had received “everything he bargained for” in the contract—because Register.Com had indeed
“registered” the domain name. Zurakov appealed.
THE MEANING OF “REGISTRATION”
In arriving at its decision, the trial court had looked at the ordinary meaning of the term register, which is “to make
a record of.” The appellate court, however, stated that “the custom and usage of ‘registration’ of a domain name in
the Internet context is certainly more relevant than the literal definition of ‘registration’ found in the dictionary.”
According to custom and usage, the registration of a domain name conferred on the person registering the name the
exclusive right to use that name. The court also stated that the exclusiveness of the use of a registered domain name
“is already a familiar concept in the law” and cited a number of cases that illustrated this concept. In sum, concluded
the appellate court, Zurakov had stated a valid claim against Register.Com, and the case should go to trial.a
CHAPTER 15: THE STATUTE OF FRAUDS 377
FOR CRITICAL ANALYSIS
The court also noted that if Zurakov could not have the exclusive use of the domain name, the registration contract
would be “rendered illusory.” What did the court mean by this statement?
a. Zurakov v. Register.Com, Inc., 304 A.D.2d 176, 760 N.Y.S.2d 13 (1 Dept. 2003).
1. For a manager, the most important of the contracts that must be in writing to be enforceable under the Statute of
Frauds are land-related contracts, promises to pay another’s debt, contracts for the sale of goods priced at $500 or
2. The parol evidence rule excludes evidence that conflicts with a clear, complete, and unambiguous written contract.
Nevertheless, many people enter into written contracts believing that oral representations made during the
negotiation process but not included in the writing are part of the bargain. They find it hard to accept that these oral
representations are meaningless. Ask students whether they think all merchants should be required to advise buyers of
the parol evidence rule before written contracts are made. Would buyers then be more inclined to have everything in–
cluded in the writing? If some students believe that this would impose too much of a burden, ask whether they would
purchase contracts, real estate contracts, and others that have given rise to a number of parol evidence problems.
3. Contracts subject to the Statute of Frauds can be remembered in mnemonic shorthand as “MY LEG”—Marriage,
Year, Land, Executor’s promise, and Goods:
4. Exceptions to the applicability of the Statute of Frauds can be abbreviated “CAPPS”:
378 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
• Confirmation of an oral contract between merchants.
• Admissions.
• Part performance of an oral contract for the transfer of an interest in land or for a sale of goods.
• Promissory estoppel.
• Goods made Specially to order.
Cyberlaw Link
Does the Statute of Frauds apply to contracts entered into on the Web? In what ways?
1. What is the Statute of Frauds? All states require that certain contracts be in writing. The statutes mandating these
2. Why do certain contracts have to be written to be enforceable? The primary purpose of requiring a writing is to
3. Explain the one-year rule. A contract that cannot, by its own terms, be performed within one year from the date it was
formed must be in writing to be enforceable. The one-year period begins the day after the contract is made. A contract for a
4. What is a collateral promise? A collateral promise is a secondary promise, a promise that is ancillary to a principal
5. What is the “main purpose” rule? Promises made by one person to pay the debts or discharge the duties of another if
6. What effect does part performance have on the enforcement of an oral contract? In cases involving contracts relating
7. What happens if the party against whom enforcement of an oral contract is sought admits in court that a contract was
made? In some states, if a party against whom enforcement of an oral contract is sought admits in “pleading, testimony or
1. Under the Statute of Frauds, contracts for the sale of goods priced at $500 or more must be in writing to be
2. Obtain a blank, standard-form apartment lease. Fill in the blanks, leaving ambiguities. Possible ambiguities include
retaining language that stipulates “no pets” and adding a clause that allows a tenant to keep his dog, writing in different
amounts for monthly rent, and failing to indicate which of clearly alternative language is intended to apply. Distribute copies of
the filled-in lease and have students discuss how the ambiguities might be resolved by a court.
EXPLANATION OF SELECTED FOOTNOTES IN THE TEXT
Footnotes 4 and 11: Coca-Cola Co. (Coke USA) licenses the rights to make Coca-Cola soft drinks to bottling
companies, including Coca-Cola Enterprises, Inc. (CCE). Babyback’s International, Inc., made ready–to-eat barbeque products.
After Babyback’s and CCE began to co–market their products in grocery stores in. CCE’s markets, Coke USA told CCE to stop the
association or Coke USA would cancel its license. Babyback’s filed a suit in an Indiana state court against Coke USA, CCE, and
others, alleging breach of contract. CCE filed a motion for summary judgment, which was denied. CCE appealed, claiming that
there was no written contract between the parties. In Coca-Cola Co. v. Babyback’s International, Inc., a state intermediate
appellate affirmed and remanded for trial. A fax on Coca Cola letterhead “from CCE to Babyback’s summarizing a meeting
between the two * * * contained the essential terms of the contract and satisfied the statute of frauds.” The fax noted what
Babyback’s would do, how it would be paid, “that the program would be in effect for more than one year,” and other terms.
Could a party successfully testify to terms that differ from the terms contained in a “recap,” a fax, or some other
memorandum, to show that the Statute of Frauds is not satisfied because the parties dispute the terms of any agreement?
Probably not. CCE attempted unsuccessfully to do that in this case. The court refused to consider such testimony “because it is
parol evidence” and because Babyback’s based its claims on the terms in the fax. “[D]iscrepancies raise questions as to whether
there was a meeting of the minds and as to the precise terms of the contract, not as to whether the statute of frauds is satisfied.
To satisfy the statute of frauds the fax need not specifically address all of the terms that the parties now claim are disputed. It
need only demonstrate, with reasonable certainty, the promises made, including by whom and to whom.”
Why did this contract fall within or under the Statute of Frauds? This contract fell under the Statute of Frauds’ one-year
rule provision. As the appellate court acknowledged, “the statute of frauds prohibits a person from bringing an action involving
any agreement that is not to be performed within one year from the making of the agreement unless the agreement on which
the action is based, or a memorandum or note describing the promise, contract, or agreement on which the action is based, is in
writing and signed by the party against whom the action is brought.”
380 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
How could a party argue successfully that a written “recap” of contract negotiations does not satisfy the Statute of
Frauds? A party would have to show that the writing did not demonstrate, with reasonable certainty, the essential terms and
conditions of any promises. What would likely not succeed is, as CCE attempted to show, that many of the contract terms were
disputed. The court stated that “whether the statute of frauds is satisfied is a different question than whether there was a
meeting of the minds so as to create an enforceable contract. Thus, to the extent that CCE argues that there was no meeting of
the minds or that the terms of the contract are disputed, such analysis is not relevant to our determination of whether the
statute of frauds is satisfied.”
Footnote 13: Pittsburgh Steelers Sports, Inc., and others sent Ronald Yocca a brochure to publicize the opportunity
to buy stadium builder licenses (SBLs) in a new football stadium with the right to buy annual season tickets. Small diagrams
indicated the seats’ locations. Yocca applied for an SBL. The Steelers notified him of his seat’s location, but the diagram showed
the section differently from the brochure’s diagrams. The Steelers also sent Yocca a document that read, “This Agreement
contains the entire agreement of the parties.” When Yocca discovered that his seat was not where he expected it to be, he and
other SBL buyers filed a suit in a Pennsylvania state court against the Steelers, alleging, among other things, breach of contract.
The court ordered a dismissal. The plaintiffs appealed to a state intermediate appellate court, which reversed. The defendants
appealed. In Yocca v. Pittsburgh Steelers Sports, Inc., the Pennsylvania Supreme Court reversed. The SBL documents constituted
the parties’ entire contract and under the parol evidence rule could not be supplemented by previous negotiations or
agreements. Because the plaintiffs based their complaint on the brochure, and the brochure was not part of the contract, the
complaint was properly dismissed. “[T]he SBL Brochure did not represent a promise by the Steelers to sell SBLs to Appellees.
Rather, the Brochure was merely an offer by the Steelers to sell Appellees the right to be assigned an unspecified seat in an
unspecified section of the new stadium and the right to receive a contract to buy an SBL for that later-assigned seat. . . . [T]he
SBL Agreement clearly represented the parties’ contract concerning the sale of SBLs. Unlike the SBL Brochure, the SBL
Agreement reflected a promise by the Steelers to actually sell Appellees a specific number of SBL seats in a specified section.
Furthermore, the SBL Agreement . . . explicitly stated that it represented the parties’ entire contract regarding the sale of
SBLs.”
Because the documents sent to Yocca referred only to the section where he was assigned his seat, rather than to the
specific seat, could it be successfully argued that the contract was ambiguous, and thus the brochure could be admitted as
evidence to explain this term? The plaintiffs made this argument on appeal. The state supreme court concluded, “Contrary to
Appellees’ claims, however, the Agreement was not the least bit ambiguous with regard to the location of Appellees’ section
assignments as the Agreement specifically referenced the attached [letter] Diagrams, which depicted all of the section locations.
As a result, there was no need to look outside of the SBL [documents] to ascertain where a section was located in the stadium.”
Suppose that the Steelers had not sent Yocca a diagram with the letter notifying him of his seat’s section and that the
SBL documents had not included an integration clause. Would the result have been different? If there had been no integration
clause in the SBL documents and no diagram had been sent with the letter, the documents might not have been held to be the
parties’ entire agreement, and the diagrams in the brochure might have been considered part of the contract. In that case, the
court might have ruled in the plaintiffs’ favor, because the brochure’s diagrams might have been admissible to explain the terms
of the agreement.
Could Yocca and the other plaintiffs have plausibly argued that the terms of the SBL brochure must have been
integrated within the SBL agreement because those terms were needed to define and describe the section assignments to
which the agreement referred? Explain. In fact, the plaintiffs made this argument. According to the state supreme court,
1. What is required to satisfy the writing requirement of the Statute of Frauds? The Statute of Frauds requires a writing
2. What is not admissible under the parol evidence rule? Under the parol evidence rule, if a court finds that the parties
with Charter. He also promised Odin would not be fired unless he was dishonest. Odin turned down the competitor’s
1. Would a court likely decide that Odin’s employment contract falls within the Statute of Frauds? Why or why not?
2. Assume that the court does find that the contract falls within the Statute of Frauds and that the state in which the
court sits recognizes every exception to the Statute of Frauds discussed in the chapter. What exception provides Odin
with the best chance of enforcing the oral contract in this situation? Unless Montieth admits that the parties had a
3. Now suppose that Montieth had taken out a pencil, written “10 percent for life” on the back of a register receipt,
and handed it to Odin. Would this satisfy the requirements of the Statute of Frauds? Why or why not? A
memorandum evidencing an oral contract needs some form of signature to satisfy the Statute of Frauds. The signature
4. Assume that Odin had signed a written employment contract at the time he was hired to work for Charter but it
was not completely integrated. Would a court allow Odin to present parol evidence of Montieth’s subsequent
promises? The rule of parol evidence specifies that only evidence of consistent additional terms can be admitted to