Contracts - STATUTE OF FRAUDS

Question 1

Statute of Frauds

Answer 1

statute requires that certain contracts be evidenced by a writing signed by the parties sought to be bound

Question 2

When is a writing required?

Answer 2

CROSS-LIP-B

(1) Contract Modification
(2) Transfer of REAL PROPERTY
(3) performance can’t be completed in ONE-YEAR
(4) Sale of goods of $500 or more
(5) Suretyship
(6) Lease of goods of $1000 or more (NY ONLY)
(7) assignment of INSURANCE CONTRACT (NY ONLY)
(8) PROMISE to pay a discharged debt
(9) Finder’s fee or Broker’s Commission (except to an atty, auctioner, or licensed real estate agent) - NY ONLY

weird extras: promises in consideration of marriage need to be in writing (e.g. I promise to give you 2 a house if you marry my son)

also, Statute of Frauds applies to contracts to pay a fee for negotiating a business opportunity. (from NY MCs)

Question 3

Transfer of Interest in Real Property

Answer 3

must be in writing

• e.g. Bloomberg ORALLY agrees with W to sell him Crawford ranch for $4M - Not enforceable bc not in writing
• e.g.2 Bloomberg ORALLY agrees to LEASE him a cabin - COVERED BY SOF - not enforceable
  e. g3 - W authorizes agent to sell ranch. Must agent’s authorization be in writing? - YES, under EQUAL DIGNITIES RULE

Question 4

EQUAL DIGNITIES RULE

Answer 4

if the underlying transaction falls under the statute of frauds, agent’s authority must be in writing as well

Question 5

Performance CANNOT be completed within ONE YEAR

Answer 5

It doesn’t matter if performance actually takes more than 1 year - IF full performance within a year was THEORETICALLY possible, no writing is required

the one year starts to run on date the contract is MADE

Question 6

Statute of Frauds: One Year Performance Rule - Examples

Answer 6

LIFE TIME CONTRACTS - e.g.1 Sesame street orally agreed to employ Big Bird for the REST OF HIS LIFE

• on MBE, writing not required - makes sense bc could die within the next yr
• NY DISTINCTION***- the DO fall under SOF, so need a writing

e. g2 Sesame street orally agreed to employ big bird for three years - more than 1 year, so need a writing
e. g3 - Sesame Street orally agreed to employ big bird foe one year starting next Monday - NEED WRITING, bc clock starts running when agreement is MADE, so would be over a year

Question 7

SOF: sale of goods for $500 or more

Answer 7

this requires a writing even if exactly $500 (Bar likes to test this exactly so you know it includes $500)

Question 8

SOF: Lease of Goods of $1000 or more (NY ONLY)

Answer 8

Article 2A requires this

watch out for monthly computations
e.g. gateway says Michael Dell orally agreed to lease a computer from Gateway FOR ONE YEAR for $300 a month - is this agreement covered by Article 2A’s SOF?
YES - $300 a month = $3600/year, which is $1000 or more - so needs to be in writing

Question 9

SOF: Suretyship

Answer 9

A suretyship is a promise to “answer for” the debt of another
-must be SECONDARILY LIABLE, cannot be PRIMARILY liable (aka IF he doesn’t pay you, I will)

MAIN PURPOSE RULE: if the main purpose of the promisor is to serve a pecuniary interest of his own, the contract is not within the SOF
-e.g. I buy paint on credit from Lowe’s to paint your house, if you orally promise to pay Lowe’s in the event that I don’t it is suretyship, but NO WRITING REQUIRED bc main purpose is to benefit you

NY DISTINCTION - NY does not follow the MAIN PURPOSE RULE - so would still need to be in writing in NY

Question 10

SOF: Contract Modification

Answer 10

Must be in writing ONLY IF the contract AS MODIFIED (not the original contract) is within the statute of frauds

Question 11

provisions that PROHIBIT ORAL MODIFICATION?

Answer 11

under UCC, the modification would have to be in writing because Article 2 lets parties create their own private statute of frauds - if sayMUST be in writing, article 2 will enforce

COMMON LAW RULE: clauses that prohibit oral modification are NOT ENFORCEABLE (so you can ALWAYS modify a contract orally under the common law, even if you have agreed not to!)

Question 12

SOF: Miscellaneous Provisions in NY

Answer 12

Assignment of an insurance policy, a promise to pay a discharged debt, and an agreement to pay a finder’s fee or broker’s commission, EXCEPT to an attorney, auctioneer or licensed real estate agent

Question 13

What constitutes a SATISFACTORY WRITING for SOF purposes?

Answer 13

Depends on nature of contract

Article 2 - must contain:

(1) Quantity term and
(2) be signed by the party to be charged with breach of contract (ie the D)
- note: “signed” is broadly defined, can be initials, symbol etc

Lease of Goods (article 2A NY ONLY)
must state 
(1) it is a LEASE
(2) include the Quantity, Duration, and Rental Payments; and
(3) be Signed by the D

Any Other Contract: the writing must contain ALL MATERIAL TERMS, and be SIGNED BY Defendant

Question 14

EXCEPTIONS to SOF for real property

Answer 14

(1) Real Property
(a) Leases of One Year or Less
(b) “Part Performance Exception”

Part performance exception - requires 2 out of 3
(1) buyer is in POSSESSION of the property
(2) buyer made SOME PAYMENT
(3) buyer made IMPROVEMENTS to the property
— if 2 out of 3 present, still enforceable even if not in writing
BUT NEED 2 out of 3 - even payment in FULL, alone, is not enough

Question 15

EXCEPTIONS TO SOF: One-Year Rule- for FULL PERFORMANCE

Answer 15

e.g. Sesame Street orally agreed to employ Big Bird for two years for $50,000. Big Bird works for two years, but Sesame Street won’t pay. because contract has been FULLY PERFORMED, enforceable without a writing

what if big bird only worked for 3 months? no full performance so still need a writing, so not going to be able to get him for breach, but maybe sue under RESTITUTION for reasonable value of services rendered

Question 16

EXCEPTIONS TO SOF: Sale of Goods for $500 or more

Answer 16

Goods Accepted OR Paid For by Buyer - if goods are either received and accepted, or paid for, the contract is enforceable. However, the contract is not enforceable beyond the quantity of goods accepted and paid for

**NOTE: ONLY applies to the goods accepted or paid for, NOT THE WHOLE CONTRACT

e.g. A-rod orally agrees to buy 50 bays for $100 each. A-rod gives seller a check for $2,000 and seller refuses to deliver any bats. A-rod brings suit. — S has no defense with respect to the 20 bats already paid for, but does for the other 30.

PARTIAL PAYMENT of NONDIVISIBLE GOOD - under this rule - e.g. Joe ORALLY contracts with Suzy to buy a car for $15,000 and gives Suzy a $1,000 downpayment - - this IS ENFORCEABLE even though no writing!

CUSTOM-MADE GOODS - if customs made goods have been substantially started, and are not suitable for sale to others in the ordinary course of seller’s business, still enforceable even though not in writing (e.g. custom jersey with your family name on the back or something)

JUDICIAL ADMISSION - if you admit to the existence of the contract in a deposition, or testimony etc. - but must be an admission in a JUDICIAL context

Question 17

EXCEPTIONS TO SOF: Sale of Goods of $500 or more

MERCHANTS’ CONFIRMATORY MEMO

Answer 17

Article 2: MERCHANTS’ CONFIRMATORY MEMO: one party can use ITS OWN SIGNED WRITING to satisfy the SOF against the other party if:

(1) Both parties are MERCHANTS
(2) WRITING CLAIMS AGREEMENT/HAS QUANTITY; and
(3) There is NO WRITTEN OBJECTION WITHIN 10 DAYS

Question 18

EXCEPTIONS TO SOF: Suretyship

MAIN PURPOSE RULE

Answer 18

MAIN PURPOSE RULE: if the main purpose of the promisor is to serve a pecuniary interest of his own, the contract is not within the SOF
-e.g. I buy paint on credit from Lowe’s to paint your house, if you orally promise to pay Lowe’s in the event that I don’t it is suretyship, but NO WRITING REQUIRED bc main purpose is to benefit me

NY DISTINCTION - NY does not follow the MAIN PURPOSE RULE - so would still need to be in writing in NY