Statute of Frauds

Question 1

Must all contracts be in writing?

Answer 1

• No. General Rule = Oral and written Ks are equally enforceable.
  o The Statute of Frauds is an exception to this general rule

Question 2

What does the Statute of Frauds require?

Answer 2

• If a contract falls under the Statute of Frauds (SOF), then
  o The contract must be in writing, AND
  o Signed by the party against whom enforcement is sought

Question 3

Which kinds of contracts are subject to the SOF?

Answer 3

• Marriage Ks
• Ks that can’t be performed within one Year of their making
• Ks for the sale of Land
• Ks of an Executor or administrator to answer for a duty of a decedent
• Ks of Guarantee or suretyship
• Ks for the Sale of goods at a price of $500 or more (UCC 2-201)

Question 4

How is one year measured for SOF purposes?

Answer 4

• Measured from date K made, and NOT the date performance begins.
  o EXAMPLE: In June of her first year of law school, Law Student enters an oral agreement with Law Firm to work for the firm during June, July, and August of her second summer. Although the duration of the contemplated performance is only three months, the performance will not be complete until 14 months after the making of the agreement. Accordingly, the contract is governed by the one-year provision and a signed writing is required in order to secure enforcement.

Question 5

If it is not clear whether performance will take place within one year, how could a court determine whether it is subject to the SOF?

Answer 5

• The court asks whether, at the point of formation, it was at all possible (even if not probable) to complete required performance within 1 year?

Question 6

What are some hypotheticals dealing with the one-year rule for SOF?

Answer 6

• EXAMPLE: It is highly unlikely that the construction of an oil-producing facility in a war-ravaged country would be completed within a year. But because the performance is possible within that time—even if exceedingly unlikely—the agreement is not governed by the one-year provision and no signed writing is required.
• EXAMPLE: One of the parties to an oral construction agreement attempts to back out 14 months into the project and raises the Statute of Frauds as a defense. Because the prospect of performance is measured from the point of making the contract (when completion within a year was possible) rather than from the time of the dispute (when completion within the first year is clearly no longer possible), the agreement is not governed by the one-year provision and no signed writing is required.
• EXAMPLE: A three-year exclusive representation agreement between a professional athlete and his agent cannot be performed within a year—no matter how diligently the agent works. Accordingly, the agreement is governed by the one-year provision and a signed writing is required.

Question 7

Does it matter for SOF purposes whether a contract can be breached or excused within a year of formation?

Answer 7

• Irrelevant. What matters is not whether the K can be breached within one year but whether the K can be performed in full by its terms within one year of its formation

Question 8

Are lifetime or permanent contracts of employment subject to the SOF?

Answer 8

• A lifetime or permanent contract of employment is NOT governed by the one-year rule because employee’s death is possible within a year.

Question 9

What is a contract of suretyship (or guarantee contracts)?

Answer 9

• Contracts to assume the obligation of another person.

Question 10

What is the main purpose exception to the SOF?

Answer 10

• Although guarantee contracts (secondary obligation) are generally within the Statute of Frauds, a primary exception is the main purpose doctrine.
  o That is, where the main purpose of the guarantor is to protect his own economic interests, the guarantee agreement is not governed by the Statute of Frauds, and can be oral.

Question 11

What is the writing requirement of the SOF satisfied?

Answer 11

• All that is necessary is that the writing be a memorandum of the agreement which can be prepared before, during, or after formation.
  o EXAMPLE: “Dear Tony, I regret to inform you that I cannot go through with the sale of my racehorse to you. Although the $100,000 you agreed to pay is very generous, my accountant has advised me of the tax implications, which I had not considered, and so I must regretfully bow out.”

Question 12

Which terms are required to be in writing under the SOF?

Answer 12

• Identity of the parties to the transaction;
• The nature and subject matter of the K; and
• The essential terms of the agreement, such as price and date for performance.

Question 13

What may constitute a sufficient signature that will satisfy the SOF?

Answer 13

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

Question 14

What is the doctrine of part performance?

Answer 14

• SOF may be satisfied with respect to some categories of governed contracts via part performance, in an action for specific performance.

Question 15

For which contracts would part performance be enough to satisfy the SOF?

Answer 15

• Land sale contracts

Question 16

What kind of part performance is required for a land sale contract to satisfy the SOF despite lacking a writing or signature?

Answer 16

• Part performance requires a showing of any combination, or all three of the following:
  o Payment of all or part of purchase price;
  o Taking possession of land;
  o Making substantial improvements to property

Question 17

Besides land sale contracts, which kind of contract may be enforceable through performance despite the SOF?

Answer 17

• One-year contracts, except they must be fully performed in order to be enforceable despite the SOF
  o If only partially performed-not enforceable.

Question 18

Are contracts for the sale of goods subject to the SOF?

Answer 18

• Ks for sale of goods for $500 or more are under the UCC SOF.

Question 19

What are the five ways to satisfy the UCC SOF?

Answer 19

• Signed writing
• Merchant’s confirmation
• Judicial admission
• Partial performance
• Specially manufactured goods

Question 20

How could a signed writing satisfy the UCC SOF?

Answer 20

• Writing;
• Quantity; and
• Signed by the party against whom enforcement is sought.

Question 21

What is a merchant’s confirmation, and how would it satisfy the UCC SOF?

Answer 21

• Two merchants enter oral agreement, one sends the other written confirmation of agreement. SOF satisfied against the recipient merchant if:
  o Both sender and recipient are merchants;
  o Writing is in confirmation of the K and contains a quantity; and
  o Recipient does not send written objection within 10 days.
• EXAMPLE: A and B enter an oral agreement under the terms of which A is to sell B five tobacco barns for a total of $5,000. The following day, B sends A a written confirmation of the agreement and two days later B receives a signed reply that reads in pertinent part: “My understanding is that we don’t have a contract between us, for as I mentioned I am still entertaining other offers for the barns. My apologies for any confusion that may have been caused.” Because A’s reply objects to the confirmation’s contents, the confirmation does not satisfy the UCC Statute of Frauds against A.

Question 22

How would a judicial admission satisfy the UCC SOF?

Answer 22

• Party admits K formation in pleading, testimony, or otherwise in court.

Question 23

How would a partial performance satisfy the UCC SOF?

Answer 23

• Despite absence of writing, an otherwise valid K is enforceable for:
  o goods for which payment made/accepted; or
  o goods which have been received/accepted.

Question 24

How would specially manufactured goods satisfy the UCC SOF?

Answer 24

• SOF satisfied against buyer who orders custom goods from a manufacturer if:
  o manufacturer detrimentally relied by beginning performance before buyer’s withdrawal; and
  o manufacturer can’t resell the goods in the ordinary course of business.