writing and records - the statute of frauds

Question 1

Types of contracts that must be in writing - statute of frauds

Answer 1

Guaranty of debt contracts
Contracts involving an interest in real property
Contracts impossible to perform within one year of formation
Contracts for the sale of goods priced at $500 or more
Promises of executors for personal liability for debts of the estate

Question 2

Guarantor

Answer 2

A person who guarantees to pay for someone else’s debt if he or she should default on a loan obligation.

Question 3

Contracts Involving an Interest in Real Property

Answer 3

General Rule—Any contract involving an interest in real property, to be enforceable, must be in writing (unless one of the exceptions in B, below, applies), including:
Real property purchase contracts
Leases of real property (exceptions in most states apply to leases less than one year in length)
Real property mortgages
Easements
Creation of any other real property interests
Real estate broker contracts

Question 4

Contracts that Cannot be Performed within One Year of Formation—General Rule

Answer 4

Any contract that is objectively impossible to perform within one year from the date of contract formation (date of acceptance) without breaching the terms must be in writing or have written evidence of it to be enforceable.
If the contract could be performed within one year, it need not be in writing to be enforceable.
The one-year mark is measured from the date of acceptance; the time frame is not just the period of performance.

The Statute of Frauds does not prevent parties who have oral agreements from honoring them. Also, if the parties have behaved as if there is an underlying contract, then the courts will not allow unjust enrichment. In other words, an executory contract that is oral and required to be in writing cannot be enforced. However, if a contract is executed or partially executed, the courts will not punish the parties for falling short of the Statute of Frauds and will require payment, for example, for work already performed.

Question 5

Requirements for a Valid Writing/Record of a Contract

Answer 5

A record is tangible evidence of the existence of an oral contract. If the record meets all the standards and includes the necessary information, the requirements of the Statute of Frauds are met.
Signature (authentication) of the party to be held liable on the oral contract.
Exception—Merchant’s confirmation memorandum allows one party’s signature to bind both parties (both are merchants) to the agreement.
A writing/record need not be in one document or formal. E-mails, letters, and faxes can be grouped together to establish the written/record requirement for a valid contract.

Question 6

parol evidence rule

Answer 6

The parol evidence rule applies to fully integrated contracts. A fully integrated contract is one that is complete and unambiguous.
Ambiguous terms—If the record of a contract has ambiguities, it is not fully integrated, and parol evidence can be introduced only to clean up the ambiguity.
Obvious clerical or typographical error—In reducing an oral contract to a writing or record, parol evidence can be used for obvious typos and clerical errors because, again, it is not fully integrated.
Incomplete contracts—Parol evidence can be admitted to “fill in” the gaps because an incomplete contract is not a fully integrated contract.
Contract defenses—The parol evidence rule does not prohibit the introduction of evidence that shows a defense to formation, such as fraud or duress.
Under the parol evidence rule, a fully integrated contract (one that is complete, unambiguous, and without defenses in formation) cannot be contradicted, varied, or altered by evidence of the parties’ prior negotiations, prior agreements, or contemporaneous oral agreements. Once the parties reduce their agreement to a record, they are bound by those terms and cannot use the courts to rewrite their agreement with their contemporaneous oral agreements. Without this rule, courts would always be dealing with who said what and when and whether what they said should be part of the contract. Remember the parol evidence rule by thinking, “If what you wanted is not in the contract but promised as an aside in negotiations or as you were signing the contract, you can’t bring that up later and expect to get it.”

Question 7

exceptions to parole evidence rule

Answer 7

Subsequent modification—If the parties to a contract later agree to modify their contract, evidence of the modification is admissible. If the modification is required to be in writing, the parties will need that record as proof of the modification. And there must be additional consideration if common law applies.
Defenses to the formation of the contract—Oral evidence can be introduced to show any of the defenses to formation (covered in the “Defenses to Formation” lesson). For example, if the seller used fraud or mistake or duress to get acceptance by the buyer, then the buyer can have evidence admitted to show that there is no valid contract.
Also, remember, if there is not a fully integrated contract (ambiguous, incomplete contract), then the parol evidence rule does not apply. The parties can introduce evidence to clarify and complete the contract according to their understanding and negotiations.
But, remember, the parol evidence rule applies when the parties want to introduce evidence from their negotiations or contemporaneous with their signing of the contract and contradict what is written in the otherwise clear and complete contract. If what you want or think you have is not written in the contract when you sign it, you are bound by what is in the written contract, not by what you thought or what you agreed to orally