Chapter 16 Writing, Electronic Forms, And Interpretation Of Contracts Flashcards
Statute of frauds
Statute that, in order to prevent the use of perjured testimony requires that certain kinds of transactions be evidenced in writing to be binding or enforceable.
May be evidence by a note or memorandum or by a complete written contract
Validity of oral contracts
In the absence of a statute requiring a contract be written a contract may be oral or written. Potentially any oral communication with the elements of a contract could be deemed a legally enforceable contract
No writing required for services contract that can be performed within one year after the date of agreement
Can stipulate in early discussions that no agreement is binding that is not in writing.
Yazdani-Beioky v. Sharifan
- Yazdani and Sharifan partners in hotel enterprise
- Sharifan asked Yazdani to buy him out via their hotel manager as intermediary
- after some back and forth agreed to 12.5m cash
- Yazdani contends cannot be bound “absent a written agreement”
- judgement for Sharifan, the oral agreement had all the conditions of a contract. No written contract was necessary
What it means when a contract must be in writing
Either contract fully in writing (and signed by both parties) or sufficient written memorandum of the oral contract signed by person being sued for breach of contract
Types of contracts that must be evidenced by a writing
- agreements that cannot be performed within one year after the contract is made
- agreement to sell or a sale of an interest in land
- promise to answer for the debt or default of another
- promise by the executor or administrator of a decedent’s estate to pay a claim against the estate from personal funds
- promises made in consideration of marriage
- sale of goods
Bithoney v. Fulton-DeKalb hospital authority
- Dr. Bithoney sold his home and moved to Atlanta on ORAL promise of job without executed employment agreement
- was then not hired
- sued for 15 month severance described in oral contract/ drafted but unsigned contract
- judgement for hospitals since severance was for 15 months (over a year) then had to be in writing per statue of frauds
Agreements that cannot be performed within one year after the contract is made
Start from the date of the oral contract not time the performance is to begin
No part performance expecting to validate an oral agreement not performable in one year
Statute of frauds not applicable if no time limited specified and complete performance could “conceivably occur within one year
Contract that may be terminated at will of either party could jus the year or else so statute of frauds does not apply
Agreement to sell or a sale on an interest in land
All contracts to sell land, buildings, or interest on lands (mortgages) must be in writing
Leases mostly must be in writing, though in some states a lease for a year or less need not be.
Oral contract for sale of land may be enforced if buyer has taken possession under the oral contract and made substantial improvements the value of which cannot easily be ascertained or paid part of purchase price (part performance doctrine K
Suretyship
Undertaking to pay the debt or be liable for the default of a other
Must be in writing to be enforceable
Main purpose exception for suretyship
When the main purpose of the promisor’s promise to pay the debt on another is to benefit the promisor the statute of frauds is not applicable and an oral promise to pay is binding
MPI v. Jorge Lopez Ventura
- MPI supplied production materials to Sacos, a bag manufacturer
- upon not being paid for shipments request a personal guarantee from Sacos’s general manager Jorge Lopez. Who wrote it up and sent it
- MPI resumed shipments
- Sacos only paid for part of the shipments before they closed
- MPI brought suit against Lopez based on the personal guarantee
- court ruled that the guarantee was enforceable and clearly a personal and not a corporate guarantee due to the wording
Personal representative
Administrator or executor who represents decedents under UPC (uniform probate code)
Had the duty of handling remaining affairs of the decedent, paying debts from the proceeds of the estate and distributing any balance remaining.
Executor
Person named in a will to administer the estate of the decedent
Administrator
Person appointed to wind up and settle the estate of a person who has died without a will
Liability of a personal representative for claims against a decedent’s eatqte
Representative not personally liable for any claims. Promises by representative to pay decedent’s debts with their own money cannot be enforced unless promise is evidence by writing .
A contract on behalf of the estate is not required to be in writing
Promises made in consideration of marriage
Promises to pay money or transfer property in consideration of marriage must be in writing under the statute of frauds
Prenuptial and antenuptial agreements
Entered into by parties before their marriage.
Discloses each party’s assets and liabilities (and sometimes income) and sets forth the rights and obligations of each partner (regarding property and otherwise) should the marriage end in divorce
Such contract must be in writing
When there is full disclosure and representation these contracts cannot be set aside unless unconscionable (leaving former spouse unable to support themselves)
Sale of goods
Under the uniform commercial code contracts for the sale of goods prices at $500 or more must ordinarily be in writing
Promissory estoppel
Doctrine that a promise will be enforced although it is not supported by consideration when the promisor should have reasonably expected that the promise would induce action or forbearance of a definite and substantial character on the part of the promised and injustice can be avoided only by enforcement of promise
- promisor makes promise that lacks consideration
- promisor intends/should reasonably expect that promisee will rely on the promise
- promisee relies on the promise in definite & substantial manner
- enforcement of the promise is the only way to avoid injustice
Damages to the amount to restore promisee to position they would be in if had not relied on promise
Aka doctrine of detrimental reliance
Circumventing statute of frauds via promissory estoppel
Party seeking to get around statute of frauds must prove enhanced promissory estoppel
Requires:
- enhanced level of definite and substantial reasonable reliance on the promise
- proof of an unconscionable injury or unjust enrichment
Note or memorandum fulfillment of statute of frauds
- must be signed by the party sought to be bound by the contract was
- must contain all essential terms of the contract so the court can determine what was agreed
- describe consideration
- identify the person bound
- can refer to another document with pertinent information- can be made up if a combination of LINKED writings (linkage may be express or inferable by same subject matter)
Electronic signatures
Under uniform electronic transactions act (UETA) electronic signatures have parity with on paper signature
Parties must decided themselves how to determine signature are valid
Some documents exempt: wills, trusts, commercial law matters
Effect of noncompliance with statute of frauds
Contract that does it comply with statute of frauds in not enforceable in most states
Only a party to the oral contract may raise a defense that it is not binding. (Third parties external to the contract may not)
Stonewall of Woodstock corp. V. Stardust LLC
- Stonewall negotiating to buy property from Oliver Block (LLC)
- Stonewall parties signed emailed contract and sent it and deposit to lawyer acting for Block
- No one acting for Block signed the contract and they later returned the deposit, having sold property to Stardust
- stonewall contends emails were sufficient memorandum of contract
- judgment for Block because a signature by party being charged is required for stature of frauds and without signature by someone authorized to conclude the sale for Block the contract isn’t enforceable
Recovery of value conferred in case of noncompliance with statute of frauds
Generally even if a contract may not be enforced under statute of frauds the party prevented from enforcing the contact may still recover the value of any property/services/money given under the oral contract
Recovery based on quasi contractual obligation
Must restore what was received to prevent unjust enrichment
Parole evidence rule
Rule that prohibits the introduction into evidence of oral or written statements made prior to or contemporaneously with the execution of a complete written contract, deed, or instrument in the absence of clear proof of fraud, accident or mistake causing the omission of the statement in question
Either there never was an oral agreement or the parties abandoned it when they reached the stage of executing their written contract
Gives stability to contracts (cannot include terms that did not exist or did not survive bargaining)
When does the parole evidence rule not apply?
Cases of ambiguity parole evidence may be admitted to clarify meaning
Cases of fraud, duress, or mistake
- parole evidence admitted if shows that omission of provision was result of fraud, duress or mistake
- admissable to show mutual mistake even if language is unambiguous
Parole evidence and the modification of contracts
Parole evidence rule only prohibits contraction off complete written contract. Does not prohibit proof that contract was thereafter modified or terminated
Bourg v. Bristol Boat co
- bourg contracted Bristol Boat to build him a yacht
- contract breached and written settlement agreement provided for completion of yacht including a loan to Bristol Boat for expenses
- promissory note executed for the loan
- payments on loan not made, Bourg sued
- summary judgement for Bourg, Bristol appeals that there was an oral side agreement that the note would be paid for in services rendered
- oral side agreement, as contemporaneous modification that would change promissory note not allowable under parole evidence rule
- appeal judgment for Bourg
Rules of contract construction & interpretation - intention of parties
It is presumed that when entities enter into an agreement they intend for it to have an effect. In a contract lawsuit the court is trying to determine the intent of the parties and give effect to it. Court cannot remake or rewrite contract
Meaning of words in contracts
In absence of proof that a world has a particular meaning / was employed by the parties to the contract with a particular meaning an ordinary word is interpreted according to it’s ordinary meaning
Common meanings used even if alternate meaning exists. Technical or trade terms used in a contract will be interpreted according to the area from which they are take
Words in a list should be given related meabinf
Incorporation by reference
Contract consisting of both the original or skeleton document and the detailed statement that is incorporated in it.
When contract does not cover all key terms and another document is attached to cover those terms (schedule, files etc) “incorporated herein and made part of this contract”
Contract must sufficiently describe the incorporated document
Contract construed as a whole
Provisions of a contract must be construed as a whole in such a way that every part is given effect.
If the plain language of the contract viewed as a whole solves the dispute the court makes no further analysis
C.A. Acquisition Newco v. DHL express
C.A. Acquisition has interest in Cyphermint Inc. (CI) who entered into a contract with DHL to provide software for their shipping kiosks
Contract include provision that if DHL terminated for a reason other than material breach by CI they would pay CI 50k for each month remaining in the contract
DHL ended all domestic delivery service in the US before the end of the contract - said they weren’t required to pay termination fee because they were just exercising their discretion to change number of shipping spots (to 0)
Judgement for CI
Contract reviewed AS A WHOLE provides for termination fees without regard for if termination was recognized. Reducing shipping spots to 0 was, effectively, termination
Contracts with contradictory and ambiguous terms
When:
- one term in a contract conflicts with another
- or one term has multiple meanings
Court must determine if there is a contract and, if so, what the contract really means
“within the four corners of the contract”
On the pqye
Ambiguity in a contract
- when the intent of the parties is uncertain
- and the contract or contract provision is capable for more than one reasonable interpretation
- the contract reasonably supports the interpretations
Role of judge (question of law) to determine if a contract is or is not ambiguous
Role of jury (question of fact) to determine which interpretation is correct
Background may be used to determine intention
Nature of writing in contradictory contracts
Contract that is partially printed, partially typewritten, partially handwritten and the parts conflict
Handwritten prevails over printed or typewritten
Typewritten prevails over print
Conflicts in amount between amount/qty expressed in numerals vs in words the words prevail (less chance of a typo)
Strict construction against drafting party
An ambiguous contract is interpreted strictly against the party who drafted it.
Secondary rule involved after all other ordinary interpretive guides exhausted. Assigns risk of unresolvable ambiguity to the party who created it
Implied terms
When court needs to imply a term to cover a situation not provided for in the contract or to give the contract meaning that is reasonable
Implied details of performance not expressly stated
Implied covenant of good faith and fair dealing
Good faith
Absence of knowledge of any defects or problems
Obligation of good faith in performance or enforcement imposed under the uniform commercial code
Implied covenant of good faith and fair dealing
Implied contractual obligation that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract
Court’s interpretation should be in harmony with this covenant
Holguin v. Dish network
Holguin’s purchased bundled services from Dish network and others
Installation process went badly resulting in severe damage to home and health issues from mold
Holguin’s sued Dish, etc. Original judgement for Holguin’s, defendant’s appealed
Defendant’s contend that proper installation was not a term in the contract and original court wrong to imply it
Appeal judgement still for Holguin’s
- express contractual terms give rise to implied duties, the violation of which may themselves constitute breach of contract.
Every contract includes a common-law duty to perform with skill, care, reasonable experience. And faithfulness the thing agreed to be done. Original court had implyed correctly
Conduct of the parties
The conduct of the parties in carrying out the terms of a contract is the best guide to determine the parties’ intent
Usage of trade
Language and customs of an industry
May be used to interpret the terms of a contract
Cannot override express provisions inconsistent with custom and usage
Avoidance of hardship and contracts
Generally parties to a contract are bound to it even if things go wrong
- when hardship arises that the contract has no provision for sometimes a court will imply a term to avoid the hardship
If possible courts will interpret a vague contract in a way to avoid any forfeiture of a party’s intetest
