Statute of Frauds

Question 1

SOF: General Rule & Exception

Answer 1

Oral and written Ks are equally enforceable

Exception = if the K falls under the SOF –> It must be in writing + signed by party against whom enforcement is sought

Question 2

SOF: Approach

Answer 2

a) Does the agreement fall within the SOF?
b) Is the SOF satisfied?
c) Is alternative enforcement available?

Question 3

Does the agreement fall within the SOF?

MYLEGS

Answer 3

• Marriage
• Year (can’t be performed within 1 year)
• Land
• Executor
• Guarantee
• Sale of Goods of $500 or more

Question 4

SOF: K that can’t be performed within 1 year

Answer 4

i) Measured from date K made
ii) At point of formation, is it possible (not probable) to complete required performance within 1 year?
iii) Lifetime Ks exempt because it’s possible to die w/in 1 year

Question 5

SOF: Sale of Land

Answer 5

i) Present conveyance of land is outside SOF
ii) Real estate brokerage agreements considered service agreements, so outside SOF
iii) Lease of property K is within SOF

Question 6

SOF: Executor

Answer 6

Ks of an Executor or administration to answer for a duty of a decedent

Question 7

SOF: Guarantee

Answer 7

Ks of Guarantee or suretyship Guaranty – Promise to answer debt of 3rd party

i) 2 exceptions where guarantee agreement is not governed by SOF
(1) When creditor discharges original debtor from his obligation because of a guarantee by a third party to pay the debt
(2) When main purpose of the guarantor is to protect his own economic interests

Question 8

Is the SOF satisfied?

Answer 8

Need writing signed by the party against whom enforcement is sought. If not, party seeking enforcement will lose unless there is a work-around

Question 9

SOF: Writing

Answer 9

Memo of agreement from before, during, or after formation

i) Following terms required:
(1) Identity of the parties to the transaction;
(2) The nature and subject matter of the K; and
(3) The essential terms of the agreement, such as price and date for performance
ii) Land sale Ks: traditionally, needed legal description of land, more recent decisions suggest that an address or some other description of the property is enough

Question 10

SOF: Signature

Answer 10

Any symbol with intention to authenticate the writing (ex: initials, typed, stamped or preprinted signature, letterhead)

Question 11

SOF: Tacking

Answer 11

Writing need not be a single document, you can tack several documents that once combined satisfy all requirements of the SOF

i) Satisfied if all docs are signed or if a signed doc incorporates unsigned documents by reference
ii) If unsigned docs are not incorporated by reference in a signed doc, tacking together can still satisfy SOF if:
(1) There is at least 1 signed writing unambiguously establishing a contractual relationship between the parties;
(2) The signed and unsigned docs clearly refer to the same subject matter; and
(3) There is clear and convincing evidence of agreement to the unsigned docs by the party against whom enforcement is sought

Question 12

SOF: Performance

Land Sale Ks: Part Performance

Answer 12

Part performance will make an oral K for the sale of land enforceable if (need at least 2 of 3):

(1) Payment of all or part of purchase price
(2) Taking possession of land
(3) Making substantial improvements to property

Question 13

SOF: Performance

One-Year Ks

Answer 13

(1) If fully performed –> enforceable despite SOF
(2) If only partially performed –> not enforceable
(3) Quantum meruit –> available to the partly performing party who is otherwise out of luck. Recover reasonable value for part performance

Question 14

SOF: Performance

Sale of Goods Ks

Answer 14

UCC SOF satisfied by part performance of a sale of goods Ks

Question 15

SOF: Is alternative enforcement available?

Answer 15

Party seeking enforcement of K might be able to secure some protection via action for restitution or promissory estoppel

a) Recovery for benefits conferred: One party bestows benefits upon another in connection with an unenforceable oral K, aggrieved party may recover the value of the benefits conferred
b) Promissory estoppel: May be available for detrimental reliance on unenforceable oral K
i) One party to an oral K within the SOF promises other party he will create a signed writing so party relies by not taking other steps to satisfy SOF –> most courts will apply promissory estoppel
ii) Where no specific assurances of creating a signed writing are made, but reliance is instead simply on the underlying oral K itself
(1) Majority: Will apply promissory estoppel
(2) Substantial minority: Promissory estoppel is preempted by SOF (not enforceable)

Question 16

UCC Statute of Frauds Generally

Answer 16

Does the agreement fall within the SOF –> Ks for sale of goods for price of $500 or more are under the UCC SOF

Question 17

UCC SOF: What are the 5 ways to satisfy UCC SOF?

SMIPS

Answer 17

• signed writing
• merchant’s confirmation
• in-court admission
• partial performance
• specially manufactured goods

Question 18

UCC SOF: Signed Writing

Answer 18

(1) Writing = any intentional reduction to tangible form
(2) Signed by the party against whom enforcement is sought = Any symbol with intent to authenticate
(3) Sufficient to indicate that a K for sale has been made between the parties
(4) Stating the quantity
(a) If quantity not present, not enforceable, unless:
(i) Other language in the writing provides clear basis for measuring quantity; or
(ii) Output/requirements Ks

Question 19

UCC SOF: Merchant’s Confirmation

Answer 19

Two merchants enter oral agreement, 1 sends the other written confirmation of agreement –> SOF satisfied if recipient fails to object within 10 days

(1) Confirmation of agreement is valid if:
(a) Must be sufficient (signed + quantity term)
(b) Writing is in confirmation of the K
(c) Sent within a reasonable time of formation
(d) Based on a real agreement or discussion between the parties and must be actually received.

Question 20

UCC SOF: Judicial Admission

Answer 20

Party admits K formation in pleading, testimony, etc. –> Only enforceable up to quantity admitted

Question 21

UCC SOF: Partial Performance

Answer 21

(1) Enforceable for:
(a) Goods for which payment made/accepted
(b) Goods which have been received/accepted
(2) If divisible goods –> only enforceable for # delivered/paid for
(3) If indivisible –> part payment renders K enforceable

Question 22

UCC SOF: Specially Manufactured Goods (need all 5)

Answer 22

(1) Specially manufactured for buyer;
(2) Not suitable for sale to others;
(3) Substantially began to manufacture or made commitments to get;
(4) Actions to begin manufacture or procure occurred under circumstances which reasonably indicate goods were for buyer;
(5) Actions to begin manufacture or procure occurred before seller received notice of buyer’s revocation

Question 23

What is the UCC alternative basis for enforcement? (Promissory Estoppel)

Answer 23

i) Majority: promissory estoppel available if a strong case
ii) Minority: express language of UCC precludes it
iii) Construction contractors: all courts protect a general contractor via promissory estoppel even if the oral subcontract in question is for goods $500 or more

Question 24

UCC Gap Fillers Generally

Answer 24

Default provisions used to fill in the gaps when K doesn’t address the matter, but parties free to set default rules aside by contracting otherwise

Question 25

UCC Default Rules for Sale of Goods

Implied Warranties (3)

Answer 25

• Warranty of Title
• Warranty of Merchantability
• Warranty of Fitness for a particular purpose

Question 26

UCC Default Rules for Sale of Goods

Implied Warranties: Warranty of Title

Answer 26

Good title to the goods + Rightful transfer of the goods + No liens attached to the goods

 (1) Can be excluded or modified by:
      (a) Specific language; OR
      (b) Circumstances which give buyer reason to suspect seller does not claim unencumbered title

Question 27

UCC Default Rules for Sale of Goods

Implied Warranties: Warranty of Merchantability

Answer 27

Goods fit for ordinary purposes for which those good would be used

(1) ONLY applies if seller is a merchant
(2) Displaced by:
(a) Specific use of word “merchantability” and conspicuousness if in writing; OR
(b) Any other language / circumstances that would be reasonably understood by a buyer to exclude the warranty (“as is” or patent defects)

Question 28

UCC Default Rules for Sale of Goods

Implied Warranties: Warranty of Fitness for a Particular Purpose

Answer 28

Goods fit for the particular purpose buyer intends to use them for

(1) ONLY applies when, at time of contracting, seller has reason to know:
(a) Particular purpose for which the goods are required AND
(b) The buyer is relying on seller’s expertise to select reasonable goods
(2) Warranty negated when:
(a) Disclaimer is written, clear, and conspicuous; OR
(b) Goods have patent defects which were easily detectable

Question 29

UCC Default Rules for Sale of Goods

Express Warranties

Answer 29

Goods will conform to some standard, arises whenever seller expressly makes them as part of the basis of the bargain in the following ways:

i) Any affirmation of promise or fact;
ii) Any description of the goods;
iii) Any sample or model;
iv) Need not use words “warrant” or “guarantee” to create but a mere affirmation of the value of the goods (puffing) does not create warranty

Question 30

UCC Default Rules for Sale of Goods

Missing Terms

Answer 30

i) Price term = Reasonable price at time established by the K for delivery
ii) Time term = Reasonable time
iii) Place = Seller’s place of biz (i.e. FOB seller)

Question 31

Common Law Default Rule for Service Contracts

Answer 31

Missing price term = reasonable value for services rendered

Question 32

UCC/ Common Law Obligation of Good Faith/ Fair Dealing

Answer 32

a) Good faith = honesty in fact
i) For merchants = Honesty in fact + observance of reasonable commercial standards of fair dealing in the trade

b) Open price terms = Fix in good faith
c) Satisfaction terms = Exercised in good faith

d) Open quantity terms = Party that determines amount of goods sold (buyer demanding delivery of his requirement or seller demanding purchase of her output) must do so in good faith
i) Output contract: Buyer agrees to purchase all or percentage of a seller’s output of a good
ii) Requirement contract: Seller agrees to supply all the buyer’s requirements for a good

Question 33

Interpreting Ambiguous Language

Objective Meaning

Answer 33

Objective meaning trumps subjective except when:

a) Party has reason to know of other party’s subjective understanding (that understanding control);
b) At the time of contracting, both parties share subjective understanding (that understanding controls)

Question 34

Interpreting Ambiguous Language

Contra Proferenem

Answer 34

If ambiguous term is included in K –> construe against the drafter

Question 35

Interpreting Ambiguous Language

Doctrine of Reasonable Expectations

Answer 35

Even unambiguous terms may be interpreted against drafting party if they conflict with reasonable expectations of other party

 a) Only applies to defeat the enforceability of the boilerplate terms inconsistent with the reasonable expectations of the purchaser
 b) Usually insurance Ks or Ks of adhesion

Question 36

Trade Usage, Course of Dealing, Course of Performance

Answer 36

Extrinsic evidence that can be used to fill gaps and resolve ambiguities in Ks

a) Admissible uses: To fill in gaps (supplement terms) + resolve ambiguities (explain terms)
b) Inadmissible uses: To contradict express terms of K
c) If conflict –> course of dealing trumps trade usage, course of performance trumps all

Question 37

Parol Evidence Generally

Answer 37

Governs admissibility of oral and documentary evidence of negotiations and other communications between the parties that took place prior to or during execution of the K

Question 38

Parol Evidence: Integration

Answer 38

a) Partial integration = Terms within K are intended as final expression of those specific terms
NOTE: The terms “full integration” and “partial integration” are interchangeable.

b) Complete integration = K intended to represent a complete and exclusive statement of all the terms

c) Determining Partial and Complete Integration
i) Merger clause = Writing contains complete/entire agreement or other words to that effect

Question 39

Parol Evidence: Purpose for Introduction?

Answer 39

a) Explain/interpret terms of written K - Majority rule: PE Always admissible

b) Supplement the written K - PE admissible UNLESS K is completely integrated
i) UCC distinction: Trade usage, course of dealings and course of performance can supplement completely integrated agreement

c) Contradict terms of written K – PE not admissible for this purpose

Question 40

When will Parol Evidence rule NOT apply?

Answer 40

a) Subsequent agreements entered into after the execution of the written document—only applies to communication prior or during execution
b) Collateral agreements—PE rule will not affect agreements between parties that are entirely distinct from the written agreement of the K at issue

c) Attack on validity of the written agreement
i) Proof of validity allowed:
(1) Failure of oral condition precedent to agreement;
(2) Mistake or duress;
(3) Fraud;
(4) Reformation; must show:
(a) Was an antecedent valid agreement;
(b) Was incorrectly recorded due to mistake or fraud; and
(c) Proof by clear/convincing evidence

Question 41

Obligations under UCC: Seller’s Obligations

Answer 41

transfer and deliver goods

Question 42

Obligations under UCC: Buyer’s Obligations

Answer 42

accept and pay for goods

Question 43

Obligations under UCC

Carrier Cases

Answer 43

Parties agree to use common carrier

a) Shipment Contract: Seller promises to turn the goods over to carrier
i) Risk of loss (ROL) –> On buyer when goods are delivered to the carrier
ii) “FOB Seller”
iii) Buyer bears ROL if goods damaged in transit

b) Destination Contract: Seller promises to tender delivery at a particular destination
i) ROL –> on buyer when goods are tendered at the destination point specified in the K
ii) “FOB Buyer”
iii) Seller bears ROL if goods damaged in transit

c) If K is silent, default rule is shipment K (FOB Seller)

Question 44

Obligations under UCC

Non-Carrier Cases

Answer 44

No agreement to use a common carrier

a) Seller is NOT a merchant
i) ROL –> on buyer upon delivery (tendered)

b) Seller is a merchant
i) ROL –> on buyer when goods are physically in buyer’s possession

Question 45

Modification: Common Law

Pre-existing Duty Rule

Answer 45

a) Pre-existing Duty Rule: Increasing compensation for duties already owed = unenforceable modification (because no consideration)

b) Exceptions
i) Mutual modification of an existing K is enforceable if:
(1) Both parties agree to different performance from originally required +
(2) Difference is not a mere pretense of a newly formed bargain
ii) Unforeseen circumstances: Preexisting duty rule not applicable if increased compensation is given in exchange for same performance that has now become substantially more burdensome than reasonably anticipated when K formed
(1) More $$ if performance substantially more burdensome than originally anticipated

Question 46

Modification: UCC

Answer 46

Agreement modifying an existing K needs no consideration to be enforceable as long as made in good faith

Question 47

Excusing Performance Due to Faulty Assumptions

Mistake

Answer 47

1) Mistake: Must significantly impact value of transaction for 1 or both parties
a) Unilateral mistake – 1 party’s mistake about material fact(s) as they exist at the time of contracting. Not excused unless:
i) Other party knew/had reason to know, or
ii) Serious clerical error and reliance (exceptions: error caused by extreme negligence or other party relied on clerical error)
b) Mutual mistake – Both parties labored under a common faulty assumption concerning the present facts. Voidable by disadvantaged party when all 3 met:
i) Mistake relates to material facts +
ii) Mistake made by both parties +
iii) Disadvantaged party did not bear risk of mistake

Question 48

Excusing Performance Due to Faulty Assumptions

Impossibility

Answer 48

Both parties excused if performance has been rendered impossible by events occurring after K formed. Requirements:

 a) Impossibility is objective = performance literally impossible for anyone due to circumstances outside control (i.e. personal service K and party died) +
 b) Contingency that creates the impossibility arose after making the K and was unknown / anticipated by parties
 c) Available under both common law and UCC

Question 49

Excusing Performance Due to Faulty Assumptions

Impracticability

Answer 49

A promisor may be excused from performance where unforeseen difficulties have made performance prohibitively expensive or otherwise extremely burdensome. Requirements:

 a) Impracticability was unforeseen, +
 b) The risk was neither assumed nor allocated by the parties; +
 c) Increased cost / burden of performance would now be far beyond what either party anticipated
 d) UCC: These are business risks, to apply need the shortage to be caused by war/embargo, local crop failure, or unforeseen shutdown of supply (natural disaster)

Question 50

Excusing Performance Due to Faulty Assumptions

Frustration of Purpose

Answer 50

Value to receiving party dramatically reduced. Receiving party’s obligation discharged when:

a) Principal purpose in entering K is substantially frustrated +
b) Frustration was substantial in nature +
c) Non-occurrence of the event that caused frustration was a basic assumption of the K

Question 51

Excusing Performance by Agreement

Rescission

Answer 51

Both parties mid-performance and consideration is given by each party to discharge other’s duties

Question 52

Excusing Performance by Agreement

Accord and Satisfaction

Answer 52

a) Accord = obligee promises to accept substituted performance in satisfaction of the obligor’s existing duty
b) Satisfaction = performance of the accord

c) Need both –> Accord + Satisfaction = discharge of original duty
i) Accord alone only suspends the obligor’s duty

d) Consideration is required for an accord

Question 53

How can Anticipatory Repudiation be established?

Answer 53

1) Anticipatory Repudiation (AR) may be established by:
a) Party’s definitive statement that it will breach, or
b) Voluntary act that renders party unable to perform

Question 54

Anticipatory Repudiation: Adequate Assurance of Performance

Answer 54

If AR cannot be established but reasonable grounds for insecurity exist, insecure party can make demand for adequate assurance of performance
a) After demand, can suspend own performance if commercially reasonable
b) Failure to respond with reasonable assurances (reasonable time or 30 days under UCC)=
repudiation

Question 55

What are the rights of aggrieved party upon repudiation?

Answer 55

a) Cancel K and terminate all rights/obligations under it;
b) Bring action for damages or specific performance; OR
c) Ignore repudiation and continue

Question 56

Anticipatory Repudiation: Retraction

Answer 56

a) Acts in reliance on repudiation;
b) Accepts repudiation by signaling this to breaching party; OR
c) Commences suit for damages/specific performance

Question 57

Conditions: Failure of Conditions under Common Law

A. Failure of Express Conditions

Answer 57

a) Failure of Express Conditions (conditioned upon, unless/until, due upon completion) –>
Discharges party’s obligation to perform
i) Exceptions:
(1) Waiver – party who is discharged by the failed condition can waive and perform anyway
(2) Bad faith – Can’t prevent condition in bad faith
(3) Gross forfeiture – Avoid grossly disproportionate loss for minor infraction

Question 58

Conditions: Failure of Conditions under Common Law

B. Failure of Implied Conditions

Answer 58

b) Failure of Implied Conditions – Court can treat in 1 of two ways:
i) Material breach: If breach is serious enough, treat like failure of an express condition –> Aggrieved party is discharged from performance
ii) Substantial performance: Treat performance as “close enough”, party has rendered substantial performance –> Aggrieved party not discharged of own obligation

Question 59

Conditions: Failure of Conditions under Common Law

C. Failure of Condition that Cannot be Excused

Answer 59

i) Breaching party can argue K is divisible and only part of K has been materially breached
(1) Divisibility Test = is it easily apportioned into agreed equivalents?
(2) TIP: If whole is sum of its parts, then it’s divisible. But if it’s more (i.e., a house), then it isn’t

ii) Quantum Meruit: breaching party may recover reasonable value of benefits conferred which will be reduced by damages caused by breach

Question 60

Conditions: Failure of Conditions under UCC

Perfect Tender Rule

Answer 60

Terms of a K are enforced exactly, every K term treated as an express condition

Question 61

Conditions: Failure of Conditions under UCC

Prefect Tender Rule: When Seller FAILS to make perfect tender…

Answer 61

If seller fails to make perfect tender, buyer can:

i) Reject the Goods
(1) Must do so within reasonable time + notify seller
(2) Buyer may then sue for damages unless cured
(3) If fail to do this, deemed acceptance

ii) Accept the Goods – Occurs when buyer had reasonable time to inspect + signifies acceptance by:
(1) Stating that goods conform to the K;
(2) Taking the goods despite non-conformance;
(3) Failing to make effective rejection; OR
(4) Taking any action inconsistent with seller’s ownership of goods
(5) Legal consequences of doing this? Buyer:
(a) Must pay K price
(b) May seek damages for any non-conformity if seller has been seasonably notified
(c) Can revoke acceptance if non-conformity substantially impairs value and if buyer accepted because unaware of non-conformity, OR seller assured cure but failed to cure

iii) Accept Part and Reject Part - Buyer can only do so in terms of commercial units of that good (can’t accept half a loaf of bread only)

Question 62

Conditions: Failure of Conditions under UCC

Right to Cure

Answer 62

(work-around for breaching sellers)

i) If seller makes non-conforming tender but time for performance has not passed, seller can substitute conforming goods –> Seller must give buyer reasonable notice of intent to cure + cure by K deadline
(1) If seller makes non-conforming delivery and had reasonable grounds to believe delivery would be acceptable to buyer, may substitute a conforming delivery –> Seller must give buyer reasonable notice of intent to cure + cure within reasonable time

ii) Proof of reasonable grounds by seller
(1) Evidence of express assurances from buyer;
(2) Evidence of trade usage, course of dealing, course of performance

Question 63

Conditions: Failure of Conditions under UCC

Imperfect Tender in Installment Ks

Answer 63

(separate lots separately accepted)

i) If non-conforming tender substantially impairs whole K –> breach of whole K and it can be canceled
ii) If substantially impairs value of this installment –> buyer can reject the installment but cannot cancel whole K
iii) If the value of this particular installment is not even substantially impaired –> buyer must allow seller opportunity to cure non-conformity within reasonable time