1. Chapter 11
Written Contracts
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2. Learning Objectives
1.
2.
3.
4.
5.
Identify the goals of the Statute of Frauds.
Identify those contracts that must be in writing.
List the information that must be in the writing.
Explain the Standard Construction Rule.
Discuss the Parol Evidence Rule.
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3. Learning Objectives
6. Explain the exceptions to the Parol Evidence
Rule.
7. Explain the Best Evidence Rule.
8. Discuss the Equal Dignities Rule.
9. Explain the problems associated with cybercommerce.
10.Outline the latest cyber-commerce statutes.
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4. The Statute of Frauds
• Statute of Frauds
– the law that requires certain contracts to be in writing
to be enforceable.
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5. Contracts that Must Be in Writing
1. Contracts that cannot be completed within one
year.
2. Contracts transferring real property rights.
3. Contracts for the sale of goods of $500 or more.
4. Certain contracts entered into by executors and
administrators.
5. Contracts by one party to pay a debt of another
party.
6. Contracts in consideration of marriage.
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6. Can it be completed in a year?
• If the agreement cannot be completed within a
year, writing is required.
• If completion could have been completed within
a year, no writing required, even if completion
didn’t happen in the year.
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7. Contracts Transferring Real Property Rights
• Sale of land
• Also covers trusts that are created by one party
(trustor) that allow a second party (trustee) to
possess and control the land for the advantage of
a third party (beneficiary).
• Easements, etc
– Require a new writing
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8. Contracts Transferring Real Property Rights
• Part performance (equitable estoppel)
– An exception to the rule that contracts for the sale of
land must be in writing
– When a person relies on an owner’s oral promise to
sell real property and then makes improvements on
the property or changes his position in an important
way
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9. Part Performance/Equitable Estoppel
• The plaintiff in such a case must prove three elements:
1. He or she made the improvement relying on the original
promise and without suspecting that the other party intended
to renege on the agreement.
2. Any other remedy, such as restitution for the amount spent, is
not enough to satisfy his or her effort or outlay of funds.
3. The part performance itself is evidence of the existence of the
contract.
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10. Contracts for the Sale of Goods of $500 or More
• Under the UCC, contracts for the sale of goods
(moveable items) for $500 or more must be in
writing to be enforceable
• Four exceptions
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11. Exceptions (to UCC rule)
1. Oral contracts between merchants when a
written confirmation has been received by one
party and not objected to.
2. Specially manufactured goods that cannot be
resold easily.
3. Admissions in court.
4. Executed agreements.
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12. Case Study
Standard Builders Suppliers v. Gush, 614 N.Y.S.2d 632 (NY)
• Mr. and Mrs. Gush made a mostly oral contract with Standard
Builders Suppliers, ordering custom-designed cabinets for their
new home.
• Gushes refused to accept the cabinets, manufacturer sued for
breach of contract.
• The court ruled that the contract, though only partly in writing,
was valid, because the goods ordered were specifically
manufactured and not suitable for sale to others in the ordinary
course of business.
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13. GLACIAL PLAINS COOPERATIVE v. LINDGREN (2009, Minnesota)
• Lindgren agrees by phone to sell grain to Glacial.
• Contracts are drawn up and sent to Lindgren, but he never signs
them
• After partial performance, Lindgren decides he no longer is
obligated to perform since contracts never signed and sells grain to
another buyer at higher price
• Glacial has to buy from another seller at a higher price, sues
• Lindgren admits to the contracts in court but claims no obligation
to perform due to statute of frauds signature requirement.
• Court disagrees because of admission exception
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14. Executors and Administrators
• Executor
– a person who is named in a will to oversee the
distribution of the estate of a deceased according to
the provisions outlined in the will
• Administrator
– a person named by the court to do the work of an
executor if none is named in the will or if the executor
cannot or will not perform those duties
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15. Executors and Administrators
• Neither an executor nor an administrator is
personally liable for the debts of the decedent’s
estate.
• Executors and administrators must pay the debts
of the estate out of the assets of the estate, not
out of their own pockets.
• Thus, any promise to pay the debts of the estate
using the executor’s or the administrator’s own
funds is unenforceable without a writing.
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16. Contracts to Pay a Debt Incurred by Another Party
• Guaranty contract or collateral contract
– A promise made by one party to pay another person’s
debts if that person fails to pay the debt
– Guarantor/cosigner – agree to pay debts of other
person
• Must be in writing to be enforceable.
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17. Contracts to Pay a Debt Incurred by Another Party
• Exception to the rule:
– Primary objective test (leading objective test or main
purpose test)
• If the promise to pay another party’s debt is actually made
to obtain a gain for the guarantor, no need for a writing
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18. Contracts in Consideration of Marriage
• Refers to promises made by parties before
marriage, in which they accept additional
obligations not usually covered in the marriage
vows.
• Prenuptial agreement (premarital, antenuptial)
– involves two people who are planning marriage and
who agree to change the property rights they possess
by law in a marriage
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19. In North Carolina
Chapter 52B.
Uniform Premarital Agreement Act.
§ 52B-1. Short title.
This Chapter may be cited as the "Uniform Premarital Agreement Act". (1987, c. 473, s. 1.)
§ 52B-2. Definitions.
As used in this Chapter:
(1)
"Premarital agreement" means an agreement between prospective spouses
made in contemplation of marriage and to be effective upon marriage.
(2)
"Property" means an interest, present or future, legal or equitable, vested or
contingent, in real or personal property, including income and earnings.
(1987, c. 473, s. 1.)
§ 52B-3. Formalities.
A premarital agreement must be in writing and signed by both parties. It is enforceable
without consideration. (1987, c. 473, s. 1.)
§ 52B-4. Content.
(a)
Parties to a premarital agreement may contract with respect to:
(1)
The rights and obligations of each of the parties in any of the property of
either or both of them whenever and wherever acquired or located;
(2)
The right to buy, sell, use, transfer, exchange, abandon, lease, consume,
expend, assign, create a security interest in, mortgage, encumber, dispose of,
or otherwise manage and control property;
(3)
The disposition of property upon separation, marital dissolution, death, or
the occurrence or nonoccurrence of any other event;
(4)
The modification or elimination of spousal support;
(5)
The making of a will, trust, or other arrangement to carry out the provisions
of the agreement;
(6)
The ownership rights in and disposition of the death benefit from a life
insurance policy;
(7)
The choice of law governing the construction of the agreement; and
(8)
Any other matter, including their personal rights and obligations, not in
violation of public policy or a statute imposing a criminal penalty.
(b)
The right of a child to support may not be adversely affected by a premarital
agreement. (1987, c. 473, s. 1.)
§ 52B-5. Effect of marriage.
A premarital agreement becomes effective upon marriage. (1987, c. 473, s. 1.)
§ 52B-6. Amendment, revocation.
After marriage, a premarital agreement may be amended or revoked only by a written
agreement signed by the parties. The amended agreement or the revocation is enforceable
without consideration. (1987, c. 473, s. 1.)
§ 52B-7. Enforcement.
(a)
A premarital agreement is not enforceable if the party against whom enforcement is
sought proves that:
(1)
That party did not execute the agreement voluntarily; or
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20. The Contents of a Writing
Elements of a writing
• Terms of the agreement
• Identification of the subject matter
• Statement of the consideration promised
• Names and identities of the persons to be
obligated
• Signature of the party sought to be bound to the
agreement
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21. Legal Rules for Written Contracts
1.
2.
3.
4.
The standard construction rule
The parol evidence rule
The best evidence rule
The equal dignities rule
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22. The Standard Construction Rule
• Standard construction rule
– guides the entire interpretation process by directing
the interpreter of a contract to determine the principal
objective of the parties in the making of the contract
• Principal objective
– the primary or main goal that the parties hoped to
accomplish by entering the agreement in the first
place.
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23. The Standard Construction Rule
• Once principle objective stated, everything else
interpreted to promote it
• Common words given expected, everyday
definition
• Technical/professional slang will be given their
technical/professional definitions.
• Whenever an ambiguous term/clause/line is
found in a prewritten or preprinted contract, the
ambiguity is interpreted against the party who
wrote the contract.
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24. The Parol Evidence Rule
• Parol evidence rule
– Once terms of a contract are reduced to writing, only
those terms are admissible.
– Evidence of oral statements made before signing a
written agreement is usually not admissible in court to
change or contradict the terms of a written
agreement.
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25. Exceptions to the Parol Evidence Rule
• When unfair and unjust decisions might result from its
application
• Omissions/ambiguities
• Typographical or clerical errors
• Arguments as to mutual assent or contractual capacity
• Conditions precedent
• Negotiations to rescind or modify after entering the
contract
• (UCC) Testimony about how the parties have done
business together over a long period of time
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26. The Best Evidence Rule
• Best evidence rule
– the courts generally accept into evidence only the
original of a writing, not a copy
– A copy (or other secondary evidence) is admitted only
if the original is unavailable, and if the court finds the
excuse for its unavailability acceptable
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27. The Equal Dignities Rule
• Equal dignities rule
– provides that when a party appoints an agent to
negotiate an agreement that must be in writing, the
appointment of the agent must also be in writing
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28. Formalities of Construction
• Signature requirements
– Written agreements should be, but need not be,
signed by both parties.
– A signature may be a full name or initials, and it may
be printed, typewritten, or stamped
– Parties should use their usual signatures (the
signatures used in other matters in the regular course
of business).
– However made, a signature must be provided with the
intent to be bound thereby.
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29. Signature Requirements
• Facsimile signature – a signature made by
mechanical means (machine, stamp, electronic,
etc.)
• A facsimile signature will be acceptable on a
contract if the contract states that facsimile
signatures are valid.
• Uniform Facsimile Signatures of Public Officials
Act
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30. Signature Requirements
Figure 13-2 The signature for an incapacitated person bears a witness’s name
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31. Signature Requirements
Figure 13-3 The signature (X) of a person who does not know how to write
has been witnessed.
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32. Witnesses and Acknowledgments
• Witnesses are required in the signing of a will and
sometimes a deed, but in most other documents,
their signatures are at the option of the contracting
parties.
• To ensure that no misunderstanding will arise as to
the acceptance and signing of a written agreement,
the use of witnesses is advised.
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33. Witnesses and Acknowledgments
• Certain official documents require the owner’s
signature and an acknowledgment by a notary public
that the signature was the person’s free act and
deed.
• The notary witnesses the signing of the document
and then acknowledges this act by signing the
document and adding the official seal to it.
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34. The Seal and the Recording of Contracts
• Today’s seal is usually nothing more than the
word seal or the initials L.S. for locus sigilli (place
of the seal) printed or written next to the
signature.
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35. Electronic Commerce
How to avoid the problem of verification
• Adding a term that delays the creation of the
contract until the identities of the parties can be
verified by some means other than computers.
• Customize the verification process for each
contract individually.
• Digital signature
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36. Offer and Acceptance Online
Certain terms should appear in an online agreement
package:
1. payment procedure
2. remedies that can be used by the offeree
3. refund policies
4. the return process
5. dispute settlement instructions
6. the applicability of e-signatures
7. liability disclaimers
8. provisions relating to the offeree’s manner of
acceptance
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37. Electronic Commerce Legislation
• The E-Sign Act
– states that if the parties to a contract have voluntarily
agreed to transact business electronically, the
electronic contract that results will be just as legally
acceptable as a paper contract.
• The Uniform Electronic Transactions Act
– establishes the same type of legal parity between
electronic records and paper records as does the ESign Act.
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38. Electronic Commerce Legislation
• The Uniform Computer Information Transactions Act
(UCITA)
– focuses on contracts that involve the sale or lease of
computer software, computer databases, interactive
products, multimedia products, and any other type of
computer information.
• The Fair and Accurate Credit Transactions Act (FACT)
– Prohibits merchants from using credit card receipts that
show anything other than the last five credit card numbers
– Receipts also cannot display credit card expiration dates
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39. Question?
What law requires certain contracts to be in writing
to be enforceable?
A. Hoax rule
B. Statute of deception
C. Statute of fraud
D. Trickery rule
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40. Question?
What is the exception to the rule that contracts for
the sale of land must be in writing?
A. Equity land grab
B. Equitable estoppel
C. Landici stumppel
D. Veni veci landici
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41. Question?
A _____________ involves two people who are
planning marriage and who agree to change the
property rights they possess by law in a
marriage.
A. Premarital contract
B. Prenuptial agreement
C. Premarital agreement
D. Post-nuptial agreement
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42. Question?
What provides that when a party appoints an agent
to negotiate an agreement that must be in
writing, the appointment of the agent must also
be in writing?
A. Parol evidence rule
B. Primary estoppel
C. Secondary estoppel
D. Equal dignities rule
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43. Question?
What establishes the same type of legal parity
between electronic records and paper records as
does the E-Sign Act?
A. The Uniform Computer Information Transactions
Act
B. Uniform Electronic Transactions Act
C. Fair and Accurate Credit Transactions Act
D. E-Sign Act
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44. Question?
What prohibits merchants from using credit card
receipts that show anything other than the last
five credit card numbers?
A. The Uniform Computer Information Transactions
Act
B. Uniform Electronic Transactions Act
C. Fair and Accurate Credit Transactions Act
D. E-Sign Act
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