Contract Defenses - Basics Flashcards
What is a contract defense?
A legal arg claiming an agreement is not enforceable as a contract.
Formation Element Missing
If there is no offer, acceptance, or consideration, then there is no contract and the lack of contract is itself a defense.
Formation Elements Negated
Lack of Capacity
Mistakes
Public Policy Defenses
Illegality
Statute of Frauds
The most important contracts defense is…
The STATUTE OF FRAUDS
Rule: If a contract falls within the statute of frauds, it is not enforceable unless evidenced by a writing signed by the party to be bound.
Policy: We want it in writing because that’s better proof.
What types of contracts fall within the statute of frauds?
MY LEGS
M = Marriage (prenups)
Y = Year
L = Land
E = Executor
G = Goods
S = Suretyship (contract to answer for the debt of another/guarantor)
The 3 most important are:
1. Contracts for the sale of goods for $500 or more.
2. Contracts that cannot be performed within a year.
3. Contracts for interests in land.
Statute of Frauds - Goods
Goods… The price must be $500 or more to require the contract to be in writing.
The $500 threshold includes modified price terms.
Price was 475 > but there was a mistake, it was actually 525. Then customer says he will pay 525. But when he arrives he wants to only pay 475 and enforce that. Is the “preexisting legal duty” a good defense? NO because that rule does not apply to a contract for the sale of goods, you just need a good faith reason for the change.
Because the price is for $500 or more, we only have an oral agreement, and it needs to be in writing.
If you went from 525 to 475, then it’s enforceable even if not in writing.
The price might also be per item, then you would have to add it up.
“John telephoned Jim…”
THIS IS A TRIGGER FOR A STATUTE OF FRAUDS QUESTION
Sales of Goods Statute of Frauds 4 Exceptions in the UCC
SWAP Exceptions
S = Specially manufactured goods
W = Written confirmation by merchant
A = Admissions
P = Performance
The S in SWAP
S = Specially manufactured goods. A contract for the sale of goods even over $500 can still be enforced WITHOUT a writing if those goods are SPECIALLY MANUFACTURED. These are custom-made goods that are made to order. An unusual or handmade or thing only suitable for sale to a particular buyer. K can be enforced against buyer even without evidence in writing. Why? Seller would have to be crazy to start building goods just for this one buyer unless the seller actually had a K with that buyer.
The W in SWAP
W = Written confirmation by merchant. “The merchant’s confirmatory memo rule” applies only in Ks between merchants. Need both. What is a merchant? Remember: anyone in business or ordinarily deals in goods of the kind sold.
THE EXCEPTION: In Ks between merchants, if one party after a reasonable time after oral agreement has been made sends the other party written confirmation of the deal sufficient after the deal to bind the sender, it will also bind the recipient as long as they don’t object in writing within 10 days of receiving it.
In summary: The Merchants’ Confirmatory Memo Rule involves:
- Merchants
- Oral agreement
- Written confirmation
- Sufficient to bind sender
- No written objection within 10 days
The A in SWAP
If you ADMIT to having a contract in court or in a deposition or in discovery, then you are bound.
The P in SWAP
P means Performance. It takes the contract out of the SoF to the extent of performance. If the buyer accepted 400 out of 700 widgets, then it’s enforceable to the extent of those 400 goods taken. If a buyer takes something, still gotta pay for it. Common sense.
Y in MY LEGS
Y stands for Year. If the K takes over a year to perform, must be in writing under the SoF.
If it shows up, it might be a K for a short duration but would actually take a year. The classic example is to pop popcorn 2 years from now. Must be evidenced by a signed writing.
What would you really see? An oral K for a celebrity to make an appearance 15 months from now. It only takes 1 day, but it’s over a year from now. K can’t be completed within a year of its making. Need writing.
What about to employ someone for life? Does it have to last over a year? No. Person could die within a year. Theoretically, anyone can die at any time. A K to perform for life is NOT within the statute of frauds and IS ENFORCEABLE WITHOUT A WRITING.
What about a K with no set date of performance? Not falling within the statute of frauds, doesn’t need a writing. Even a K to build a 100-story building is enforceable without written evidence.
L in MY LEGS
Land sale contracts need a writing. But any INTEREST IN LAND also needs writing. Often related to the Year issues.
Lease? Need writing BUT ONLY IF IT’S OVER A YEAR
Easement? Need writing.
Some Ks sound like they involve an interest in land but actually don’t. A K to build a house is for BUILDING, not land. A construction K is not within the statute.
Broker contracts are NOT within the L of MYLEGS. Not within the statute, no writing necessary.
EXCEPTION: Full performance by the seller takes the K out of the statute. Part performance by buyer also could do so. Part performance that unequivocally indicates the parties have contracted for the sale of land. Most states require 1) payment of purchase price in whole or in part, 2) possession of the land AND/OR 3) improvements on the land. Doing 2 of these is enough to take the project out of the statute of frauds.
