Contract Law Learning Questions - Set 6 Flashcards
Certain agreements, by statute, must be evidenced by a writing signed by the parties sought to be bound.
This is commonly known as:
A
The Statute of Frauds
B
The Confirmatory Memo Rule
C
The Perfect Tender Rule
D
The Parol Evidence Rule
A
In most instances, an oral contract is valid. However, certain agreements must be evidenced by a writing signed by the parties sought to be bound as set forth in the Statute of Frauds. These agreements include things such as suretyship promises, promises creating an interest in land, promises that cannot be performed within one year, and contracts for the sale of goods priced at $500 or more.
The Confirmatory Memo Rule is a special UCC rule used for confirming oral agreements. In contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confirmation of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if: (i) he has reason to know of the confirmation’s contents; and (ii) he does not object to it in writing within 10 days of receipt.
Under the Perfect Tender Rule, if goods or their delivery fail to conform to the contract in any way, the buyer may reject all, accept all, or accept any commercial units and reject the rest.
The Parol Evidence Rule is a rule used in interpreting and enforcing a written contract. Under that rule, when the parties to a contract enter into an agreement in writing, with the intent that the agreement embodies the final expression of their bargain, any other expressions, written or oral, made prior to the writing, as well as any other oral expressions made contemporaneous with the writing, are inadmissible to vary the terms of the writing.
At common law, the Statute of Frauds requires _____________ signed by ____________.
A
A writing or writings reflecting the material terms of the contract; the party to be held liable
B
A formal contract; the party to be held liable
C
A formal contract; both parties
D
A writing or writings reflecting the material terms of the contract; both parties
A
To satisfy the Statute of Frauds, there must be one or more writings that reflect the material terms of the contract signed by the person sought to be held liable on the contract. The Statute does not require both parties to sign, only the party to be charged.
The Statute of Frauds does not require a formal written contract or the signature of both parties. For example, a letter, receipt, or a check containing the material terms (e.g., quantity for sale of goods) and signed by the party to be charged satisfies the Statute of Frauds.
Which of the following contracts must be evidenced in writing?
A
A contract to build a building
B
A mortgage contract
C
A six-month lease of a parcel of land
D
A contract between business partners to buy and sell real estate and divide the profits
B
Under the Statute of Frauds, a promise creating an interest in land must be evidenced by a writing. This includes not only agreements for the sale of real property, but also other agreements pertaining to land, such as a mortgage contract.
Some contracts may have an end result involving an interest in land, but they still do not come within the Statute. For example, a contract to build a building or a contract to buy and sell real estate and divide the profits do not come within the Statute.
A lease of a parcel of land for more than one year is also covered by the Statute, but a six-month lease is not.
Which of the following service contracts must satisfy the Statute of Frauds to be enforceable?
A
A contract for a specific task that will take approximately 12 months to complete
B
A contract for one month of service that is to begin 13 months in the future
C
A contract for the lifetime of the client
D
A contract for the client’s personal care during an illness of unknown duration
B
A contract that by its terms cannot be performed within one year is subject to the Statute of Frauds. The date runs from the date of the agreement and not from the date of performance. Thus, a contract for one month of service that is to begin 13 months in the future must satisfy the Statute to be enforceable.
If the contract is possible to complete within one year, it is not within the one-year prong of the Statute of Frauds, even though actual performance may extend beyond the one-year period. A specific task that will take approximately 12 months to complete might be completed in less time. Likewise, a contract for the client’s personal care during an illness of unknown duration might be completed in less than a year if the client recovers quickly. A contract for the lifetime of the client is not within the Statute because it is capable of performance within a year since the client could die at any time.
A man and a woman met in a bar. While the two enjoyed a couple of drinks, the woman told the man that she greatly admired the diamond stickpin he had in his lapel. “Oh, this,” the man laughed. “It’s no diamond; it’s only a piece of glass.” The woman acknowledged his statement, but kept commenting on how nice it looked. After further conversation, the man orally agreed to sell the stickpin to her for $500. They agreed that in four days, the man would bring the stickpin to the same bar, and the woman would bring the $500 in cash. The woman wrote down her name and phone number on a napkin and asked the man to call her if there were any change in plans. The man duly appeared with the pin, but the woman failed to appear. The man filed suit against the woman for $500.
In an action by the man against the woman for breach of contract, which of the following would be the woman’s best defense?
A $500 was an unconscionable amount to pay for a piece of glass.
B The parties lacked capacity to contract because they were drinking alcohol.
C The agreement violated the Statute of Frauds.
D Neither the woman nor the man was a merchant.
C
A promise for the sale of goods priced at $500 or more is not enforceable under the Statute of Frauds unless evidenced by a writing signed by the party to be charged. Here, the woman is the party to be charged, and her promise to pay $500 was only oral. The napkin with the woman’s name and number would not be sufficient to satisfy the Statute. To satisfy the Statute of Frauds, the UCC requires that the writing indicate that a contract has been made and specify the quantity term. Here, the napkin does not indicate that there is a contract. It merely contains a name and phone number. A court could not enforce a promise based on the writing. Thus, the woman’s promise is unenforceable. (A) is incorrect because the concept of unconscionability allows avoidance of a contract only where the terms are so one-sided as to indicate unfair surprise or a contract of adhesion. Here, neither party had superior bargaining power, and the woman knew exactly what she was buying when she made the agreement. (B) is incorrect because just having alcoholic drinks does not mean that parties no longer have the capacity to contract. To lack capacity due to intoxication, a party must be so intoxicated that the party does not understand the nature and significance of his promise. Nothing in the facts indicates that these parties were intoxicated, let alone so intoxicated that they did not understand what they were doing. (D) is incorrect because the parties’ status as nonmerchants is irrelevant. While the Code relaxes the Statute of Frauds rule in the case of a written confirmation between merchants, that exception does not apply here. There was no writing by either party that would satisfy the Statute of Frauds; thus, even if the parties were merchants, the agreement would be unenforceable.
On April 15, a wholesaler of tulip bulbs telephoned a local nursery and offered to sell to the nursery 80 gross of tulip bulbs for $8,000, not including delivery charges. The nursery accepted immediately. On April 17, the nursery sent the wholesaler an email confirming the deal for the sale of 80 gross of tulip bulbs for $8,000, and stating that it anticipated a waiver of the delivery charges because of the size of the order. On May 3, the wholesaler telephoned the nursery and stated that, due to a poor growing season for tulips, it would not be able to supply any tulip bulbs to the nursery.
If the nursery brings suit against the wholesaler and the wholesaler asserts the Statute of Frauds as a defense, will the nursery prevail?
A Yes, because its April 17 email contained the quantity term.
B Yes, because its April 17 email contained the price term.
C No, because the nursery’s April 17 email varied the terms of the wholesaler’s offer.
D No, because the wholesaler is the party to be charged and has signed nothing.
A
Because the quantity was stated in the April 17 email, the Statute of Frauds is satisfied and the nursery may prevail. This contract is for the purchase and sale of goods; thus, the UCC applies. The Statute of Frauds requires that a contract for the sale of goods for $500 or more be evidenced by a writing signed by the party to be charged. This writing must contain the essential elements of the agreement. The quantity term is the key to the sufficiency of a memorandum, and here the writing includes the quantity term. Thus, the writing complied with the Statute of Frauds. (B) is wrong because all other terms (including price) may be proved by parol evidence. The UCC requires only that the memorandum contain (i) quantity, (ii) the signature of the party to be charged, and (iii) a writing sufficient to indicate that a contract was formed. [UCC §2-201] (C) is wrong because it does not bear on the Statute of Frauds issue, but rather on the issue of the additional terms, which will not prevent a contract from being formed between merchants. (D) is wrong because UCC section 2-201(2) provides that, in a deal between merchants, a writing confirming the deal sent by one party will bind both parties, unless the other party objects in writing within 10 days. Here, the wholesaler did not object within 10 days, and so the nursery’s email confirmed the deal. Thus, the wholesaler can be charged even though the wholesaler has not signed the memorandum.
A landowner and a purchaser orally agreed that the landowner would convey 20 acres of his 160-acre farm to the purchaser. At the time of their agreement, the landowner wrote on the back of an envelope, “I hereby promise to convey the northern 20 acres of my farm to [the purchaser] for $10,000.” One month later, the purchaser tendered $10,000 to the landowner, but the landowner refused to convey the 20 acres.
If the purchaser sues the landowner to convey the land and the landowner prevails, what will be the most likely reason?
A The writing was not signed by the landowner.
B The writing was not signed by the purchaser.
C The writing did not describe the property with specificity.
D The writing was on the back of an envelope.
A
If the landowner prevails, it will be because the writing was not signed by the landowner. Under the Statute of Frauds, to be enforceable a contract for the sale of land must be evidenced by a writing signed by the party sought to be charged. Here, the landowner is the party that the purchaser is seeking to charge, so his signature is required on the writing. (B) is wrong because the purchaser’s signature is not required to bind the landowner. (C) is wrong because the contract need only reasonably describe the subject matter; great specificity, such as a legal description, is not required. Nothing in the facts suggests that “the northern 20 acres of my farm” is not an adequate description, which makes (C) a less certain reason than (A) why the landowner would prevail. (D) is wrong because it does not matter on what substance the writing is made.
A landowner advertised in the newspaper that he wished to sell 40 acres of land at $10,000 per acre. A rancher who was looking to expand his holdings was interested, so he came out to inspect the property. After the inspection, the rancher agreed to purchase the land for $400,000. A contract for the sale of the 40 acres was prepared and signed by the landowner and the rancher. The contract failed to state the purchase price. Later, the rancher had a change of heart and refused to complete the purchase.
In the landowner’s lawsuit for breach of contract, for which party would the court likely hold?
A The landowner, because the parol evidence rule will not bar testimony that the rancher agreed to pay $400,000.
B The landowner, because the Statute of Frauds can be satisfied by combining the original advertisement and the written contract.
C The rancher, because the parol evidence rule will bar all evidence that he agreed to pay $400,000 for the land.
D The rancher, because the Statute of Frauds would require the contract to contain the price in order to be enforced.
D
Under the Statute of Frauds, contracts for the sale of land must be in writing. The writing must contain all essential terms, and the price is considered an essential term. (A) is wrong because although the parol evidence rule might not bar the testimony, the Statute of Frauds will prevent recovery. (B) is wrong; the advertisement was not signed by the rancher, the party charged with breaking the contract. Thus, it is not a memorandum. Furthermore, the ad could not be considered part of the contract because there is nothing in the question indicating that it was attached to or referred to in the contract, or that it was assented to by the parties as part of the contract. In fact, an ad is a mere offer to deal; the actual price term may be very different by the time parties to a contract reach an agreement. (C) is wrong; the parol evidence rule would not bar the testimony, and in any event, that is not the reason the rancher will win.
