George Mason School of Law Contracts I XXII

George Mason School of Law Contracts I XXII. Statute of Frauds F. H. Buckley fbuckley@gmu. edu 1

The importance of a writing o Can a contract be enforced absent a writing: The Statute of Frauds o If there is a writing, can a court look to oral evidence: The Parol Evidence Rule 2

The Statute of Frauds: Why 1677? Party on, dudes! 3

Why 1677? o Juries as fact-finders 4

Why 1677? o Juries as fact-finders o Interested parties not admissible as witnesses 5

Why 1677? o Juries as fact-finders o Interested parties not admissible as witnesses o If that made the Statute of Frauds necessary then, why do we need it now? 6

The problem: A trap for the unwary? 7

What’s the purpose of the So. F? • Mc. Intosh at 517 8

What’s the purpose of the So. F? o Evidentiary n Antifraud 9

What’s the purpose of the So. F? o Evidentiary n Antifraud o Cautionary n Reflects seriousness of contracting 10

What’s the purpose of the So. F? o Evidentiary n Antifraud o Cautionary n Reflects seriousness of contracting o Channeling n Distinguishing enforceable contracts 11

What’s the purpose of the So. F? o Evidentiary n Antifraud o Cautionary n Reflects seriousness of contracting o Channeling n Distinguishing enforceable contracts o [Economizing on court costs? ] 12

The Statute of Frauds Restatement § 110 o o o o 13 (a) a contract of an executor or administrator to answer for a duty of his decedent; (b) a contract to answer for the duty of another (the suretyship provision); (c) a contract made upon consideration of marriage (the marriage provision); (d) a contract for the sale of an interest in land (the land contract provision); (e) a contract that is not to be performed within one year from the making thereof (the one-year provision). (2) The following classes of contracts, which were traditionally subject to the Statute of Frauds, are now governed by Statute of Frauds provisions of the Uniform Commercial Code: (a) a contract for the sale of goods for the price of $500 or more (Uniform Commercial Code § 2 -201); (c) a contract for the sale of personal property not otherwise covered, to the extent of enforcement by way of action or defense beyond $5, 000 in amount or value of remedy (Uniform Commercial Code § 1 -206).

Restatement § 110 MY LEGS o o o 14 M: consideration of marriage; Y: not to be performed within one year; L: sale of an interest in land; E: a contract of an executor; G: sale of goods for $500 or more; S: a contract to answer for the duty of another (the suretyship provision)

What is the sanction for noncompliance? o Restatement § 110(1): not enforceable absent a written memorandum 15

What is the sanction for noncompliance? o UCC § 2 -201(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. 16

So when would we want to require a writing? o What do the categories of Restatement § 110 tell us? o o o 17 M: consideration of marriage; Y: not to be performed within one year; L: sale of an interest in land; E: a contract of an executor; G: sale of goods for $500 or more; S: a contract to answer for the duty of another (the suretyship provision)

The Statute of Frauds What’s its Purpose? Mc. Intosh o Major Contracts o Possibility of a ill-considered promise 18

Marriage Settlements n The old action for breach of promise 19

Marriage Settlements n Restatement § 124 o Within the So. F if the consideration is a “marriage or a promise to marry” unless only “mutual promises of two persons to marry each other” 20

Marriage Settlements o A and B promise to marry and A reneges? 21

Marriage Settlements o A and B promise to marry and A reneges? n Not in So. F if only “mutual promises of two persons to marry each other” 22

Marriage Settlements n A promises to settle Blackacre upon B when she marries A: n Restatement 124, Illustration 1 23

Promises not to be performed within One Year o Restatement § 110(1)(e) n What is the rationale for the rule? 24

Promises not to be performed within One Year o What is the rationale for the rule? o An aide-memoire? o Or a significant contract? 25

Promises not to be performed within One Year o What is the rationale for the rule? o An aide-memoire? o Or a significant contract? o Do you agree with Farnsworth at 521? 26

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n What does the Π have to assert to win in Mc. Intosh at 515? 27

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n What does the Π have to assert to win in Mc. Intosh? o Not terminable at will, but for a fixed term 28

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n What does the Π have to assert to win in Mc. Intosh? o Not terminable at will, but for a fixed term o What term might be 29

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n What does the Π have to assert to win in Mc. Intosh? o Not terminable at will, but for a fixed term o What term might be n Gee, let’s say one year 30

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n What does the Π have to assert to win in Mc. Intosh? o Not terminable at will, but for a fixed term o What term might be o But then Δ asserts the promise is not unenforceable by virtue of the Statute of Frauds 31

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n It’s Feb. 5, 2016. I ask you to work for me from March 1, 2016 until March 1, 2017 32

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n It’s Feb. 5, 2016. I ask you to work for me from March 1, 2016 until March 1, 2017 n Restatement § 130(1) Where any promise in a contract cannot be fully performed within a year from the time the contract is made, all promises in the contract are within the Statute of Frauds until one party to the contract completes his performance. 33

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n It’s Feb. 1, 2016. I ask you to repaint the ceiling of the Sistine Chapel, which likely will take five years. 34

How does the one-year rule work? o It’s November 1, 2012. I ask you to repaint the ceiling of the Sistine Chapel, which likely will take five years. n Restatement § 130(1) Where any promise in a contract cannot be fully performed within a year from the time the contract is made 35

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n I insure your house against fire for five years without a writing. Three years have elapsed. o Restatement § 130, illustration 1. 36

How does the one-year rule work? o “Not to be performed within one year from the making thereof” n I insure your house against fire for five years without a writing. Three years have elapsed. o Restatement § 130, illustration 1. 37

Land: 110(1)(d) 38 “Tis the only thing worth fighting for, worth dying for”

Is land different? o What do real estate agents make you do if you want to buy a house? 39

Is land different? o What do real estate agents make you do if you want to buy a house? n Written offers throughout n Closing 40

Is land different? o Restatement § 125 n “A promise to transfer to any person any interest in land” o Qu. Present conveyances? 41

Is land different? o Restatement § 125 n “A promise to transfer to any person any interest in land” o Qu. Present conveyances? Illustration 11 42

Is land different? o Restatement § 125 n “A promise to transfer to any person any interest in land” o Qu. Leaseholds? Cf. 125(4) 43

Goods worth more than $500 o Restatement § 110(2)(a) → UCC § 2201 n 44 a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

Goods worth more than $500 o Restatement § 110(2)(a) → UCC § 2201 n 45 a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

Goods worth more than $500 o Restatement § 110(2)(a) → UCC § 2201 n 46 a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

Suretyship (guarantor) Seller of Ferrari Idiot, Doting Parent stands surety 47 Spendthrift Child

Suretyship Obligee Principal (obligor) 48

Suretyship Obligee (promisee) Surety for Principal (promisor) 49 Principal (obligor)

Suretyship Agreements o Restatement § 112 n The promisee (Ferrari seller) is an obligee of the other’s duty (owed money by the child) n The promisor is a surety for the other (parent gurantees child’s debt to Ferrari owner) n The promisee knows or has reason to know of the suretyship relation (Ferrari seller knows of guarantee) 50

Executors o Restatement § 111: “if a similar contract to answer for the duty of a living person would be within the So. F to answer for the duty of another” o Piggybacks on the suretyship provision 51

Executors o Restatement § 111: “if a similar contracts to answer for the duty of a living person would be within the So. F to answer for the duty of another” o Piggybacks on the suretyship provision n Cf. Illustrations 1 and 2 52

Getting around the So. F o Estoppel o Part Performance o Note or memorandum in writing 53

Will estoppel work against the So. F? o Restatement § 139(1). A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires. 54

Will estoppel work against the So. F? o Restatement § 139(2) In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant: (a) the availability and adequacy of other remedies, particularly cancellation and restitution; (b) the definite and substantial character of the action or forbearance in relation to the remedy sought; (c) The extent to which the action of forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence; (d) the reasonableness of the action or forbearance; (e) the extent to which the action of forbearance was foreseeable by the promisor. 55

Was Mc. Intosh a proper case for estoppel? Oh, the hardship!!! 56

Was Mc. Intosh a proper case for estoppel? What do you think would have happened if Mc. Intosh had asked for a written contract? 57

Are salesmen given tenure? Ron Popeil and the Veg-o-matic 58

Was Mc. Intosh a proper case for estoppel? If you’re Murphy, how do you react to the decision? 59

The Limits of Estoppel o Olympic Holding at 522 60

Is land different? o Restatement § 125 n “A promise to transfer to any person any interest in land” o What counts as reliance? Schwedes at 521 n Securing financing? n The offer to send the purchase price? 61

Part Performance and Land o Cf. Restatement § 129 n The party to be charged “has so changed his position that injustice can be avoided only by specific performance” 62

Part Performance and Land o Restatement § 129 n Buyer gives seller purchase price. Can buyer have specific performance? o Cf. Illustration 1 63

Part Performance and Land o Restatement § 129 n Buyer gives seller purchase price. Can buyer have specific performance? o Cf. Illustration 1 o Contrast Illustration 3 64

The “note or memorandum in writing” o Restatement § 131. Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which (a) reasonably identifies the subject matter of the contract, (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and (c) states with reasonable certainty the essential terms of the unperformed promises in the contract. 65

The UCC on the “note or memorandum in writing” o UCC § 2 -201(1)(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. 66

The “note or memorandum in writing” o What is a signature? o Cf. Restatement § 134: “any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer” n Cf. Illustrations 1 and 3 67

Monetti at 525 Melform products 68

Monetti o How was this within the So. F? 69

Monetti o How was this within the So. F? n One year n Sale of Goods? 70

Monetti o How was this within the So. F? n One year n Sale of Goods? n Why might it matter which it is? 71

Monetti o In what sense is this not like a sale of goods? n Cf. UCC 2 -105(1) o Sale of goods or distributorship agreement? n Which one fits better (predominant purpose)? n Both statutes? n A mixed contract (pick and choose)? 72

Monetti o Who is the party to be charged? 73

Monetti o How was the first writing “signed” by Anchor? 74

Monetti o How was the first writing “signed” by Anchor? n Typed initials “SS” on Steve Schneider’s draft “Topics for Discussion” 75

Monetti o UCC § 1 -201(37) Signed “includes any symbol executed or adopted by a party with present intention to adopt or accept a writing. ” o Restatement § 134 (“any symbol made or adopted with an intention, actual or apparent, to authenticate a writing”) 76

Monetti o How was the first writing “signed” by Anchor? n Typed initials “SS” n Did it matter that this was a precontractual draft? 77

Monetti o How was the first writing “signed” in Monetti? n Typed initials “SS” n Did it matter that this was a precontractual draft? o Restatement § 136: “at any time before or after the formation of the contract” 78

Monetti o How was the first writing “signed” in Monetti? n Typed initials “SS” n Did it matter that this was a precontractual draft? o UCC§ 2 -201(1): “has been made” 79

Monetti o What about contracts accepted by email? 80

Monetti o UCC § 1 -201(37) Signed “includes any symbol executed or adopted by a party with present intention to adopt or accept a writing. ” o Restatement § 134 (“any symbol made or adopted with an intention, actual or apparent, to authenticate a writing”) 81

Monetti o What about the internal “summary agreement” by Raymond Davis? 82

Monetti o What about the internal memo? n Δ’s letterhead suffices 83

Monetti o What about the internal memo? n Δ’s letterhead suffices n Is Restatement § 132 applicable? : o Several writings are integrated if one is signed and the circumstances indicate they belong to the same transaction 84

Monetti o What about the internal memo? n Δ’s letterhead suffices n How did Π obtain this? n Is Restatement § 132 applicable? o Posner: probably not, since they don’t refer to each other (527) o Posner: “we are permitted to connect them” (529) 85

Monetti o What was the part performance? n Restatement § 139(2)(b) “definite and substantial character of the action”) n UCC § 2 -201(3)(c) (goods “received and accepted”) 86