Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1
Chapter 16
The Writing Requirement
in Our Digital World
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.
2 UNIT THREE: CONTRACTS AND E-CONTRACTS
CHAPTER OUTLINE
I. 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).
A. ORIGINS OF THE STATUTE
The primary purpose of this requirement is to provide reliable evidence of these contracts—a writing
B. STATE LEGISLATION
II. Contracts That Require a Writing
The contracts are—
• Contracts involving interests in land.
• Contracts that cannot by their terms be performed within one year from the day after the date of
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.
CASE SYNOPSIS—
Case 16.1: Sloop v. Kiker
Russell and Sally Kiker agreed to sell their house to Mona Sloop. The parties signed a contract that
identified the property by its street address and stipulated a down payment, which was nonrefundable if
closing did not occur by August 31. On the same day, they executed a deed containing a formal, legal
description of the property. When the closing had not occurred by September 6, the Kikers filed a suit in an
Arkansas state court against Sloop, seeking a declaration that they were entitled to keep the down payment.
Sloop filed a counterclaim for its return. She argued that their contract violated the Statute of Frauds. The
court issued a summary judgment in the favor of the Kikers. Sloop appealed.
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 3
Statute of Frauds is satisfied.” The designation in the contract of the premises by its street address met the
requirement.
..................................................................................................................................................
Notes and Questions
If this contract had involved rental of the property rather than its sale, would the result have been
B. 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.
1. Time Period Starts the Day after the Contract Is Formed
2. Must Be Objectively Impossible to Perform within One Year
C. COLLATERAL PROMISES
1. Primary Obligations
Generally, a contract in which a party assumes a primary obligation doe not need to be in writing to
be enforceable.
2. Secondary Obligations
3. An Exception—The “Main Purpose” Rule
ADDITIONAL BACKGROUND—
The “Main Purpose” Rule
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.
4 UNIT THREE: CONTRACTS AND E-CONTRACTS
§ 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
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
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.
E. CONTRACTS FOR THE SALE OF GOODS
The UCC requires a writing for a sale of goods priced at $500 or more [UCC 2–201]. The writing need
only state the quantity term and be signed by the party to be charged. There are exceptions (see
Chapter 20).
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
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
6 UNIT THREE: CONTRACTS AND E-CONTRACTS
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
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?
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 7
III. Exceptions to the Writing Requirement
A. PARTIAL PERFORMANCE
• On a contract for a transfer of an interest in land, if the buyer has paid part of the price, taken
CASE SYNOPSIS—
Case 16.2: NYKCool A.B. v. Pacific Fruit, Inc.
NYKCool A.B. is one of the world’s largest operators of maritime transportation for hire with a fleet of
more than fifty ships. Pacific Fruit, Inc., exports cargo from Ecuador. NYKCool and Pacific entered into an oral
..................................................................................................................................................
Notes and Questions
Why did the parties’ trade continue despite their disagreement over the terms of their contract and
B. ADMISSIONS
In some states, if a party against whom enforcement of an oral contract is sought admits under oath that
C. PROMISSORY ESTOPPEL
Some courts have used the doctrine of promissory estoppel to allow parties to recover under oral
8 UNIT THREE: CONTRACTS AND E-CONTRACTS
D. SPECIAL EXCEPTIONS UNDER THE UCC
IV. 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.
B. WHAT MUST BE CONTAINED IN THE WRITING?
• Under the UCC, a writing need only name the quantity.
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 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
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
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 9
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.
V. 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
Parol evidence is admissible in cases involving the following.
1. Contracts Subsequently Modified
2. Voidable or Void Contracts
CASE SYNOPSIS—
Case 16.3: Frewil, LLC v. Price
Madison Price and Carter Smith were prospective students planning to attend the College of Charleston
in South Carolina. They contacted Frewil LLC about renting an apartment at the beginning of the fall
semester. They asked if the apartment had a washer/dryer and dishwasher, and were told yes. The lease
stated that the unit did not contain those appliances, but it also stated that any overflow from washing
machines or dishwashers was the responsibility of the tenant and that the dishwasher had to be clean for a
refund of the security deposit. When Price and Smith arrived to move in, the apartment had no washer/dryer
or dishwasher and no connection for them. They found housing elsewhere. Frewll filed a suit in a South
10 UNIT THREE: CONTRACTS AND E-CONTRACTS
..................................................................................................................................................
Notes and Questions
How might the lease at the center of this case have been phrased to avoid the dispute between
What does the decision in this case suggest to landlords and their representatives? The decision in
3. Contracts Containing Ambiguous Terms
4. Incomplete Contracts
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
These must clearly not represent the agreement of the parties.
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—
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 11
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
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
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?
12 UNIT THREE: CONTRACTS AND E-CONTRACTS
VI. The Statute of Frauds in the International Context
The 1980 United Nations Convention on Contracts for the International Sale of Goods (CISG) governs
meet certain formal or writing requirements to be enforceable.
TEACHING SUGGESTIONS
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 more, and contracts that by their terms cannot be completed within one year of the date of
contracting. The last is the most difficult; even courts sometimes misapply it. Students should be told to con-
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 ac-
cept 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
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”:
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 13
• Goods made Specially to order.
Cyberlaw Link
Does the Statute of Frauds apply to contracts entered into on the Web? In what ways?
DISCUSSION QUESTIONS
2. Why do certain contracts have to be written to be enforceable? The primary purpose of requiring a
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
4. What is a collateral promise? A collateral promise is a secondary promise, a promise that is ancillary to a
5. What is the “main purpose” rule? Promises made by one person to pay the debts or discharge the duties
of another if the other fails to perform must be in writing to be enforceable. If the main purpose of the guarantor in
6. What effect does part performance have on the enforcement of an oral contract? In cases involving
contracts relating to the transfer of interests in land, if the buyer has paid part of the price, taken possession, and
made permanent improvements to the property and the parties cannot be returned to their pre-contract status quo, a
14 UNIT THREE: CONTRACTS AND E-CONTRACTS
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
8. What is required to satisfy the writing requirement of the Statute of Frauds? The Statute of Frauds
requires a writing signed by the party against whom enforcement is sought. The signature (an initial is enough) can
9. 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
10. 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
ACTIVITY AND RESEARCH ASSIGNMENTS
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
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 15
EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT
Footnote 1: Mohammad Salim offered to sell a convenience store and gas station to Talat Solaiman and
Sabina Chowdhury. The prospective buyers drafted a “Purchase and Sale Agreement” that described its object simply
as “the property and 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.
In Salim v. Solaiman, 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
If this contract had involved rental of the property rather than its sale, would the result have been
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
What might Salim have done to ensure that the sales contract would be enforceable? After reading this
If the contract had contained a sufficient description of the property, would the court likely have
Footnote 8: Beneficial Homeowner Service Corp. filed a suit in a New York state court against Stephen
and Susan Steele to foreclose on a mortgage. Beneficial claimed that the loan was secured by real property.
Beneficial sought $91,614.34 in unpaid principal, plus interest. The lender asserted that both Steeles had signed the
loan agreement, and filed a motion for summary judgment. But Beneficial’s copy of the agreement identified Stephen
as the sole obligor and it had not been signed.
16 UNIT THREE: CONTRACTS AND E-CONTRACTS
In Beneficial Homeowner Service Corp. v. Steele, the court denied Beneficial’s motion. Because a
mortgage involves a transfer of real property, it and its underlying obligation must be in writing. To be enforceable, the
writings must be signed by the party to be charged. Here, Beneficial sought to enforce an agreement against two
parties—Stephen and Susan Steele—who had not signed it. In fact, Susan was not even mentioned in the agreement
as a party to it.
Suppose that at the hearing, Beneficial can prove the Steeles moved into, and reside in, the property
subject to the mortgage and each of them made at least one payment on the loan. Would these
circumstances constitute an exception to the signature requirement? These circumstances might support a
ruling in the lender’s favor at the hearing on the enforceability of the loan agreement. If the Steeles lived on the
Why might Beneficial have tried to enforce an unsigned document? The lender may have presented the
wrong copy, inadvertently or negligently, due to an office worker’s mistake or carelessness—a worker may have
Suppose that at the hearing, the Steeles admit that they had an obligation to pay the outstanding loan
amount. Would the result be different? Explain. In some states, an oral contract—or any contract not evidenced by
a writing that satisfies the Statute of Frauds—may be enforceable if the party against whom enforcement is sought
