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Chapter 14 Contracts—The Statute of Frauds

Chapter 14 Contracts—The Statute of Frauds. §2: The Statute of Frauds. To be enforceable, the following types of contracts must be in writing and signed: Contracts involving interest in land. Contracts involving “One year rule.” Collateral or Secondary Contracts.

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Chapter 14 Contracts—The Statute of Frauds

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  1. Chapter 14Contracts—The Statute of Frauds

  2. §2: The Statute of Frauds To be enforceable, the following types of contracts must be in writing and signed: • Contracts involving interest in land. • Contracts involving “One year rule.” • Collateral or Secondary Contracts. • Promise made in consideration of marriage. • Contracts for the sale of goods priced at $500 or more.

  3. Contracts Involving Interest in Land • Land includes all physical objects that are permanently attached to the soil: buildings, fences, trees, and the soil itself. • All contracts for the transfer of other interest in land: mortgages and leases.

  4. The One-Year Rule • A contract that cannot, by its own terms, be performed within one year from the date it was formed must be in writing to be enforceable. • Test: Whether performance is possible (even if unlikely) within one year. • One-year period begins to run the day after the contract is made.

  5. Collateral Promises • Primary v. Secondary Obligations. • “Main Purpose Rule” Exception . • Estate Debts.

  6. Contracts for the Sale of Goods • UCC requires a writing or memorandum for the sale of goods priced at $500 or more. • Exceptions: • Partial Performance. • Admissions. • Promissory Estoppel. • Special Exceptions under the UCC.

  7. §3: Sufficiency of the Writing • Under the Statue of Frauds. • Must name, identify subject matter, consideration, other essential terms, and must be signed by the the party against whom enforcement is sought. • Under the UCC. • Need only name the quantity term and be signed by the party to be charged.

  8. §4: Parol Evidence Rule If the court finds that the parties intended their written contract to be a complete and final embodiment of their agreement, a party cannot introduce in curt evidence of any oral agreement or promise made prior to the contract’s formation or at the time the contract was created.

  9. Exceptions to the Parol Evidence Rule • Contracts subsequently modified. • Voidable or Void contracts. • Contracts containing ambiguous terms. • Prior dealing, course of performance, or usage of trade.

  10. Exceptions to the Parol Evidence Rule • Contracts subject to orally agreed-on conditions. • Contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties.

  11. Case 14.1 McInerny v. Charter Golf(One Year Rule) • FACTS: • McInerney, a Charter-Golf sales rep, was offered a position with a Charter competitor. • Montiel, Charter’s President, orally promised McInerney that if he stayed, he would be paid a 10 percent commission “for the remainder of his life” and that he would be discharged only for dishonesty or disability. McInerney accepted. • Charter later fired McInerney and McInerny sued for breach of contract.

  12. Case 14.1 McInerny v. Charter Golf(One Year Rule) • FACTS (cont’d) • Charter argued Montiel’s oral promises were not enforceable because they were not capable of being performed within one year. • The trial court ruled in favor of Charter, and the state intermediate appellate court affirmed. McInerney appealed. • HELD: AFFIRMED. FOR CHARTER. • A ‘lifetime’ employment contract is, in essence, a permanent employment contract which cannot be performed within one year and under the Statute of Frauds must be in writing to be enforceable.

  13. Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule) • FACTS: • McKinney operates a chain of stores known as The Little Stores. • McKinney contracted with Cousins Subs Systems, Inc., to operate Cousins sandwich shops in The Little Stores. • The agreement stated it was the parties’ entire agreement, that there were no other “understandings or agreements,” and that McKinney had not been promised any profits. • McKinney later terminated the arrangement with Cousins and Cousins sued for wrongful termination.

  14. Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule) • FACTS (cont’d): • McKinney counterclaimed against Cousins alleging breach of contract. McKinney claimed that Sobiech, a Cousins rep, orally guaranteed annual sales at each of the franchises of “$250,000 to $500,000.” Cousins filed a motion to dismiss. • HELD: FOR COUSINS. • McKinney’s attempt to invoke alleged oral agreements to contradict the terms of the written agreements is barred by the parol evidence rule. The agreement makes it clear that the contracts were intended to embody all of the agreed on terms.

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