Homework Help

Business Law Chapter 16 Homework The Writing Requirement And Electronic

Page Count
10 pages
Word Count
7369 words
Book Title
Business Law: Text and Cases 14th Edition
Authors
Frank B. Cross, Kenneth W. Clarkson, Roger LeRoy Miller
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 formcertain 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.
When a contract has been put in writing, and a dispute arises that ends up in court, the parties may not
introduce evidence of prior written or oral negotiations or promises or contemporaneous oral agreements that
contradict the contract terms. This is the parol evidence rule. For it to apply, the parties must have intended their
writing to be their final agreement. Of course, as with the other concepts covered in this chapter, there are exceptions.
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 contractsa 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.
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
formation.
Collateral contracts.
A. CONTRACTS INVOLVING INTERESTS IN LAND
Contracts for the sale of landincluding 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
different? Probably not, because the transfer of any interest in land must be in writing to be enforceable and
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
The one-year period begins to run the day after the contract is made.
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
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
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 textRestatement (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
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
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 2201]. 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
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
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
In another case, just days before the wedding, a man drove his future wife to his attorney’s office and
asked her to 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 her an opportunity to review the document before signing it, but she did
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
possession, and made permanent improvements to the property, and the parties cannot be
returned to their precontract status, a court may grant specific performance.
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
contract, under which NYKCool agreed to transport weekly shipments of bananas from Ecuador to California
and Japan. After nearly four years of performance, a dispute arose between the parties. An arbitrator held
Pacific liable to NYKCool for nearly $9 million for breach of contract. Pacific appealed, contending that the
arbitrator manifestly disregarded * * * contract law” by concluding that the parties had an enforceable
contract.
The U.S. Court of Appeals for the Second Circuit affirmed the award, reasoning that “the parties'
substantial partial performance on the contract weighs strongly in favor of contract formation.”
..................................................................................................................................................
Notes and Questions
Why did the parties’ trade continue despite their disagreement over the terms of their contract and
the consequent lack of an enforceable writing? Most likely, the parties continued to do business despite
their lack of agreement over the terms of their contract because it was in their mutual economic interest to
stay in business.
B. ADMISSIONS
In some states, if a party against whom enforcement of an oral contract is sought admits under oath that
a contract for sale was made, the contract will be enforceable. Under the UCC, this will of course be
enforceable only to the extent of the quantity admitted.
C. PROMISSORY ESTOPPEL
8 UNIT THREE: CONTRACTS AND E-CONTRACTS
D. SPECIAL EXCEPTIONS UNDER THE UCC
Oral contracts for customized goods and oral contracts between merchants that have been confirmed in
writing may be enforced in certain circumstances.
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.
A. WHAT CONSTITUTES A 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 with reasonable certainty.
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
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
CHAPTER 16: THE WRITING REQUIREMENT AND ELECTRONIC RECORDS 9
CHECKLIST FOR THE BUSINESSPERSON
1. When feasible, use written contracts.
3. If you receive the other party's written or faxed confirmation, read it carefully to make sure that it states
the terms 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.
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 evidenceoral or writtenoutside 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
Carolina state court against Price and Smith, claiming breach of contract. The defendants sought to introduce
parol evidence to challenge Frewll’s claim. The court denied the request and issued a judgment in Frewll’s
favor. The defendants appealed.
..................................................................................................................................................
Notes and Questions
How might the lease at the center of this case have been phrased to avoid the dispute between
these parties? If the lease had clearly and conspicuously stated that the appliances sought by the
defendants as prospective tenants were not included, the dispute in this case might have been avoided
entirely.
What does the decision in this case suggest to landlords and their representatives? The decision in
this case illustrates the importance of providing all material; information to tenants and prospective renters
clearly and fully.
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 lawthat 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
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
contracts for international sales of goods. Article 11 of the CISG does not include the formal requirements of
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
then be more inclined to have everything included in the writing? If some students believe that this
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:
Promises made in consideration of Marriage.
Contracts that cannot by their terms be performed within one Year from the date of formation.
Contracts that involve interests in Land.
4. Exceptions to the applicability of the Statute of Frauds can be abbreviated “CAPPS”:
Confirmation of an oral contract between merchants.
Admissions.
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
1. What is the Statute of Frauds? All states require that certain contracts be in writing. The statutes
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
principal transaction or primary contractual relationship. There are three elements to a collateral promise: (1) three
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
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
be anywhere in a writing. Under the UCC, any confirmation, invoice, sales slip, check, or telegram will satisfy the
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
and possibly false memories. It is also purposed to exclude terms that have been superseded by the writing (for
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
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.
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
If this contract had involved rental of the property rather than its sale, would the result have been
different? Probably not, because the transfer of any interest in land must be in writing to be enforceable and the
writing must include a sufficient description of the property. In this case, the description was not sufficient to support
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
case, the answer to this question should be clear: Salim would have benefitted by consulting an attorney to review
the contractor to draft the contractto make sure that it met the legal requirements for a land sales contract.
If the contract had contained a sufficient description of the property, would the court likely have
forced Solaiman and Chowdhury to go through with the purchase? No, because if the contract contained a
sufficient description of the property, the agreement would most likely also have contained other provisions that would
have allowed the buyers to avoid the sale when title problems developed. For example, the contract might 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.
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
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
Does a signature have to be handwritten and legible to satisfy the Statute of Frauds? No. A signature
can consist of any mark intended to be a signature. It can be in the traditional form, but it may also be printed,
typewritten, or stamped. It may consist of a cross, a crooked line, or a symbol. Simply making a mark by bringing a
pen in contact with paper can be sufficient.
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 carelessnessa worker may have
amount. Would the result be different? Explain. In some states, an oral contractor any contract not evidenced by
a writing that satisfies the Statute of Fraudsmay be enforceable if the party against whom enforcement is sought

Trusted by Thousands of
Students

Here are what students say about us.

Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.