CHAPTER 15
The Form and
Meaning of Contracts
Statute of Frauds
• Certain contracts require a writing
• Failure to Comply- Unenforceable
Statute of Frauds
• Contracts Covered
– Executor’s/Administrator’s Agreements to Personally Pay Decedent’s Debts
– Conditional Promise to answer for the debt of Another
• Collateral/Guaranty Contract
– Nakamura v. Fujii, p.256
» The parents of two college students whose tuition was paid by a third party
must repay the debt because their promise to repay was an original promise.
» Only a conditional promise to pay the debts of
another must be in writing, and there was no
conditional promise here.
» Question 5 at end of chapter
» No. The statute of frauds requires contracts which, by their terms, cannot be performed in
one year to be in writing to be enforceable. We have long interpreted this provision to
encompass only those contracts which have absolutely no possibility of full performance
within one year. If the agreement can be interpreted such that it may per performed in a
year, the statute will not bar enforcement no matter now unlikely or even improbable it is
that such performance will occur within that time frame. There is no time frame stated in
the agreement. Nakamura only promised to pay “certain tuition invoices.” The Fujiis
agreed to repay “on demand.” Given the absence of any specific times for performance, it
cannot be said that the agreement could not be performed within one year, notwithstanding
its actual duration. Additionally, there was no guarantee that the daughters would remain at
USC for even one year. They could have left USC for any of the reasons that commonly
lead many college students either to drop out or to change schools. Nakamura v. Fujii, 67
N.Y.S.2d 113 (N.Y. App. Div. 1998).
Statute of Frauds
• Contracts Covered
– Conditional Promise to answer for the debt of Another
• Collateral/Guaranty Contract
– Question 6 at end of chapter.
» No. Under the statute of frauds, a collateral agreement to pay
the debt of another must be in writing to be enforceable.
However, if the promise is one for primary liability, it is
enforceable without a writing. In this case, only the adult son of
the Valentines was legally represented by the law firm. It was
he who incurred the debt for representation. The parents, who
were not charged with a crime, received no material benefit
from the firm’s representation of Michael. The oral agreement
between the parents and the firm is a separate and collateral
undertaking and thus falls within the statute of frauds. The
statute was adopted to encourage contracting parties to put their
agreements into writing so as to avoid certain pitfalls. It was not
done here. Crozier and Gudsnuk, P.C. v. Valentine, 1992 Conn.
Super. LEXIS 1179 (Super. Ct. Conn. 1992.
Statute of Frauds
• Contracts Covered
– Transfer of Land Interest (Unless part performance in some cases)
• Question 7 at end of chapter.
– No. No action may be brought on a contract for the transfer of an interest
in land unless there is some written memorandum signed by the party to
be charged. In this case there was only an oral promise to convey the
property to Temple. However, the promise can still be enforced if there
has been sufficient part performance. But part performance will not make
an oral contract enforceable unless it is directly referable to that contract.
It must be such as would not ordinarily have taken place in the absence of
a contract, and therefore can serve as proof of the contract. Rangle
promised to convey the property in return for Temple’s resumption of
employment and their social relationship. While Temple did these things,
her actions are not inconsistent with other explanations for her behavior.
The resumption of their relationship is objectively explainable as two
divorced persons who are very fond of each other, who have had a
disagreement, and who have made up. This is completely consistent with
the history of their relationship. Thus, her part performance will not take
this case outside the statute of frauds. Unitas v. Temple, 552 A.2d 1285
(Ct. App. Md. 1989).
Statute of Frauds
• Contracts Covered
– Bilateral Contracts Not Capable of Being Performed w/i
1 Year
• Popanz v. Peregrine Corp., p.257
– The court refuses to enforce an oral promise to an employee that
she could retain her current position until she was 65.
– Many courts take the approach that since the employee could
leave at any time, or die, the contract is terminable within a year.
This court, however, finds that the express terms make such an
interpretation impossible.
Statute of Frauds
• Contracts Covered
– Bilateral Contracts Not Capable of Being Performed w/i
1 Year
• Question 8 at end of chapter.
– No. Kansas law states that agreements that are not to be
performed within a year must be in writing and signed by
the party to be charged to be enforceable. Stephan argues
that this agreement could not be performed within one year
because it was designed to be perpetual. This contention is
in error. Essentially, the parties agreed never to reveal the
terms for the rest of their lives. As grim as it may sound,
both Tomson and Stephan could have passed away within
that first year, and the contract would have been fully
performed. Therefore, the contract is not within the statute
of frauds. Tomson v. Stephan, 699 F. Supp. 860 (D. Kan.
1988).
Statute of Frauds
• Contracts Covered
– Bilateral Contracts Not Capable of Being Performed w/i
1 Year
• Example: Washington’s statute of frauds, passed in
1881, requires any contract which cannot by its terms
be performed in one year from the making thereof to
be reflected in a signed writing to be enforceable.
This included contracts for personal services. Even
though there was a six-month termination option, the
term of the contract itself was five years. Also, the
fact that French worked for Sabey for 11 months
does not take it out of the statute’s requirement. Part
performance may be proof in a real estate case, but
not in a personal service contract. Sabey did not sign
the contract as required by the statute. It is not
enforceable. French v. Sabey Corp., 951 P.2d 260
(Wash. Sup. Ct. 1998).
Statute of Frauds
• Contracts Covered
– Sale of Goods $500+(UCC)
• Question 10 at end of chapter
– No. Even if there was a contract here (which we do not find),
it would not be enforceable under the UCC’s statute of frauds
provision. The contract was for the sale of a good worth
more than $500. It had to be evidenced by a signed writing.
Although Lee sent several letters to Golomb, including a
letter summarizing their “agreement,” Golomb never signed
any of them. While Voyles did endorse her check, the
contract needed Golomb’s signature to be binding. Lee v.
Voyles, 898 F.2d 76 (7th Cir 1990).
Statute of Frauds
• Contracts Covered
– Sale of Goods $500+(UCC)
• Wehry v. Daniels, p. 260
– The court finds that an exception to the statue of frauds applies in
the sale of a racing helmet where the purchaser openly admitted to
the existence of a contract. The court devotes a good
deal of discussion to the policy logic of
this exception to the writing requirement,
noting that it “makes an open mockery of the
statute to permit the defendant to use the
statute effectively as a defense, yet in
pleadings or in open court admit a contract.
Once the existence of the contract is
established, the policy behind the statute is
fulfilled.” Note also that the court finds
that since the policy behind the statute had
been fulfilled, the only remaining task is to
ascertain the precise terms of the contract.
Daniels testified that Wehry agreed to
Statute of Frauds
– Not Covered Under UCC:
• Specially Manufactured Goods
• Admittance of Contract Not
• Partial Performance
• Acceptance of Delivery
• Merchant Failure to Object Within 10 Days
Statute of Frauds
• Type of Writing Required
– Memorandum of agreement
• Conner v. Lavaca hospital Dist., p.258
– A doctor is not allowed to prove her three-year employment contract with
the hospital board’s minutes because they were not sufficiently specific.
– Court says written employment must contain duration, compensation and
duties. The court sees the parties as still negotiating about an essential
term.
– The doctor also argued that part performance made the contract
enforceable. She argued that she was not fully compensated for the
services rendered while she continued to work without a formal contract.
The court found that she continued to work even after the board rescinded
the motion. Thus, she cannot reasonable be said to have worked in
reliance on the contract. Also, she cannot argue promissory estoppel
because she cannot show sufficient detrimental reliance.
Statute of Frauds
• Type of Writing Required
– Memorandum of agreement
• Question 9 at end of chapter.
– Yes. The memorandum required by the statute does not have to be in one document.
It can be pieced together out of separate writings, as long as those writings are
connected in some way. At least one writing, which establishes a contractual
relationship, must be signed by the party to be bound. The signed contracts here
show a contractual relationship. There is no signed document stating the exact
number of volumes to be included in the anthology. However, the unsigned
announcement and interoffice memo, as well as the letters, clearly indicate a contract
for an eight-volume anthology. Biggle v. Harper & Row Publishing, Inc., 675 F.2d
107 (6th Cir. 1982).
– Electronic Signatures O.K.
Interpreting Contracts
• Rules of Construction
– Determine Principal Objective of the Parties
– Written Terms Control over Printed Terms
• Question 11 at end of chapter
– Curtis O. Griess & Sons, Inc. v. Farm Bureau Ins. Co. of Nebraska
» An insurance term covering livestock loss due to wind damage
is interpreted to cover swine killed by a virus carried to the
swine herd by a tornado.
» This is a good example of the court construing a contract in
favor of the insured and against the maker of the form contract.
» For insurance contracts and other form contracts between
businesses and lay people, this is a common rule of
construction.
Interpreting Contracts
• Rules of Construction
– Evergreen v. Tan-It-All, p. 261
• The court finds that an insurance term covering
equipment loss clearly and specifically covers a 100
foot area outside of Suite C-5 and declines to expand
coverage to encompass a greater area. Note that courts
aim at construing a contract in favor of the insured and
against the maker of the form contract; that the court
did not here may speak to the stark lack of ambiguity or
the very plain and apparent meaning of the words of the
contract. In insurance contracts and other form
contracts between businesses and lay people, this is a
common rule of construction.
Interpreting Contracts
• Rules of Construction
– Example: Faced with two equally fair constructions of the policy
language, we rely on the one favoring the insured. Coverage is
activated by the impact of a vehicle, but is not conditioned on physical
contact between the vehicle and the insured’s body. One of the
definitions of the term “impact” is, “an impelling or compelling
effect”. Once the coverage is activated by a vehicle, it is immaterial
whether the injury-causing blow is delivered by the vehicle, or the
object which the vehicle set in motion. There is no rational distinction
between a blow struck by an object propelled by a moving car, and a
blow struck by an object propelled by the spinning wheels of a car.
Both blows result from the “impact” of the car. Davis’ injuries are
covered by the policy. Davis v. Preferred Risk Mutual Insurance Co.,
372 S. E. 2d 150 (Sup. Ct. Va. 1988).
Parole Evidence Rule
• Purpose- Cannot Vary Terms in Writing by Prior
Evidence
– Burke v. Manfroni, p. 263
• A written lease assignment incorporates all terms
and cannot be varied by oral agreement.
Incorporation clauses and requiring alterations to
be in writing are good ways to prevent later
attempts to orally alter a contract. Burke, et al.
were attempting to assert a separate contract, but
the court found that the assignment incorporated
all terms. Claims of fraud and misrepresentation
would not be barred by the parole evidence rule.
Parole Evidence Rule
• Purpose- Cannot Vary Terms in Writing by Prior
Evidence
– Question 12 at end of chapter
• Boginis v. Marriott Ownership Resorts, Inc.
– A written employment contract which states it
incorporates all terms and cannot be varied except by a
writing cannot be altered by oral testimony.
– Incorporation clauses and requiring alterations to be in
writing are good ways to prevent later attempts to
orally alter a contract. The fact that this was an
individually negotiated contract carried weight with the
court.
Parole Evidence Rule
• MCC-Marble Ceramic Center v. Ceramica
Nuova D’Agostino, S.P.A., p. 264
– The CISG is interpreted as allowing parole
evidence so that a party to a written contract
can testify to the subjective intent of the
parties when the contract was signed. Note
that a few major U.S. trading partners such as
Japan and Great Britain have not signed the
Convention. Parties should settle this issue in
advance by putting an arbitration clause in
their contract and/or a choice of law clause.
Parole Evidence Rule
• Exceptions
– Evidence of Lack of Voluntary Consent
– Ambiguous Contracts
– Incomplete Writings
– Subsequent Oral Contracts
– Conditions Precedent