Types of Contracts under statutes of fraud
1) Contracts involving conveying an interest in real property
2) Assurity ship contracts (creditor, principle debtor, secondary debtor(assurer).
3) Contracts not to be performed within a year of their making
4) Contracts for the sale of goods over a specified amount
Ontario Statute of Frauds
Doesn’t include sale of goods over a yr from now
Is not one statute of frauds, must look at the jurisdiction.
Statute of frauds only comes up as a defence saying there was no contract.
Only thing you achieve by complying in writing is to avoid that defence.
Checklist for statute of fraud
Is the alleged contract within the Statute?
If so, is there a writing that satisfies the requirements of the Statute?
If no satisfactory writing, is there some exception (e.g. part performance) that renders the alleged
contract enforceable notwithstanding the Statute?
S. 3.1: What Type of Writing is Req?
Dynamic Transport
Sterling v. Taylor
Citation. 152 P.3d 420 (2007)
Brief Fact Summary.
Plaintiff sued Defendant for breach of contract. Defendant moved for summary judgment,
claiming that the alleged contract violated the statute of frauds because the price term
was too uncertain. The trial court granted Defendant’s motion. The court of appeals
reversed. Defendant appealed.
Synopsis of Rule of Law.
A memorandum containing an unclear essential term does not satisfy the statute of frauds
if extrinsic evidence contradicts the terms of the memorandum.
Facts.
Donald Sterling (Plaintiff) sought to purchase three apartment buildings from the Santa
Monica Collection partnership, of which Lawrence Taylor (Defendant) was a general
partner. On March 13, 2000, Plaintiff drafted a memorandum identifying the three
apartment buildings and stating a price term of "approx. 10.468 X gross income[,]
estimated income 1.600.000, Price $16,750." The price term in the memorandum
contained a clerical error and was intended by both parties to read $16,750,000. Only
Plaintiff initialed the memorandum. On March 15, 2000, Plaintiff wrote a letter to
Defendant discussing deposits he had made and discussing other aspects of the sale.
The letter did not mention the price term. Both parties signed this letter. On April 4, 2000,
Defendant sent Plaintiff formal purchase agreements indicating an aggregate price term
of $16,750,000. Plaintiff refused to sign because, after reviewing the rent rolls, he had
found that the actual rental income of the apartment buildings was $1,375,404, rather
than the $1,600,000 estimated in the memorandum. Pursuant to the formula contained in
the memorandum, Plaintiff multiplied the actual rental income by 10.468, resulting in a
purchase price of $14,404,841. Defendant refused to lower the purchase price. In March
2001, Plaintiff sued for breach of contract. Defendant moved for summary judgment,
claiming that the alleged contract violated the statute of frauds because the price term
was too uncertain. The trial court granted summary judgment. The Court of Appeals
reversed, finding that extrinsic evidence sufficiently clarified the price term. Defendant
appealed.
Issue.
Whether a memorandum containing an unclear essential term satisfies the statute of
frauds if extrinsic evidence contradicts the terms of the memorandum.
Held.
No. The court of appeals’ ruling is reversed. A memorandum containing an unclear
essential term does not satisfy the statute of frauds if extrinsic evidence contradicts the
terms of the memorandum.
Concurrence.
While extrinsic evidence is admissible to clarify an ambiguous term in a memorandum for
the purpose of the statute of frauds, the majority erred in resolving the ambiguity at law.
Because this memorandum supports both Plaintiff’s and Defendant’s views, the ambiguity
in the price term should have been resolved by the trier of fact, based on its consideration
of the extrinsic evidence.
Discussion.
The statute of frauds states that certain contracts are unenforceable, unless there is a
memorandum of the agreement, signed by the party to be charged. The memorandum
must contain the essential terms of the contract. If an essential term in the memorandum
is unclear, extrinsic evidence is admissible to explain the essential term. A memorandum
containing an unclear essential term satisfies the statute of frauds if the extrinsic evidence
clarifies the term with reasonable certainty. Extrinsic evidence will not provide reasonable
certainty where it contradicts the terms of the memorandum. In a contract for the sale of
land, the price term is an essential term. The memorandum at issue provides that the
price would be approximately 10.468 multiplied by gross income, which was estimated at
$1,600,000. Plaintiff argues that "gross income" was intended to refer to actual rental
income, which would result in a price term of $14,404,841. However, Plaintiff’s extrinsic
evidence contradicts the terms of the memorandum, which expressly states the price was
$16,750,000. Moreover, the memorandum gives no indication that the price term was to
fluctuate according to actual rental income. Consequently, the extrinsic evidence does
not show with reasonable certainty that the price alleged by Plaintiff was intended by the
parties.
Lenson v Lenson
Part performance - Got an oral contract and 1 person starts doing things in part performance then
other party says there is no contract. Judicial exception making to statute of frauds.
Son sueing father for specific performance of oral agreement. Father says there was never any
contract.
Given that there is a contract and it is verbal does the part performance take it out of the statute
of frauds?
Lensen v. Lensen (1984)
Doctrine of part performance requires unequivocal act in relation to the object of the contract
The court expounded on the requirements to avoid the Statute of Frauds requirements for claiming
a land contract without a written document. In this case, the large investments of the son could
hardly be equated with that of a tenant. In addition, the court found that the son had passed up on
other chances to buy land because he believed that the family farm had been dedicated to him.
Acting upon the alleged contract to his detriment "is an important circumstance when determining
whether or not the acts relied upon are sufficient enough."
Does not req detrimental reliance as an element.
Howard M. Schoor Assocs.
Brief Fact Summary.
Plaintiffs sued Defendant to recover the outstanding amount owed to Plaintiffs for
engineering and surveying work for one of Defendant’s developments. The trial court
ruled in favor of Plaintiffs and granted them a judgment of $24,105.30. The court of
appeals reversed.
Synopsis of Rule of Law.
If a promisor agrees to answer for the debt of another mainly for his own pecuniary or
business advantage, that promise does not fall within the statute of frauds.
Facts.
Holmdel Heights Construction Co. (Defendant) is a real estate developer. Defendant hired
Howard M. Schoor Associates, Inc. and another corporation (Plaintiffs) to conduct
engineering and surveying work for one of Defendant’s developments. On April 14, 1970,
Plaintiffs met with Alan Sugarman, Defendant’s attorney, to discuss outstanding bills
owed to Plaintiffs. At this meeting, Defendant’s attorney wrote Plaintiffs a check from his
trust account for $2,000. Plaintiffs later claimed this payment was made in good faith to
ensure Plaintiffs continued their work under the agreement. On June 12, 1970,
Defendant’s attorney sent a letter requesting that Plaintiffs continue their work, and
enclosing a check for $1,000 from his own funds as a good faith payment. Plaintiffs
completed the work but were not paid. Plaintiffs thereafter sued to recover the outstanding
amount. The trial judge found that Plaintiffs’ work was crucial to Defendant’s financial
success, that Defendant’s attorney had a substantial financial interest in Defendant, and
that Defendant’s attorney had orally promised to guarantee Defendant’s debts if Plaintiffs
continued to perform their work. The trial court found in favor of Plaintiffs and granted
them a judgment of $24,105.30. The court of appeals reversed, finding that Defendant’s
attorney’s promise would be unenforceable under the statute of frauds.
Issue.
Whether a promise falls within the statute of frauds if a promisor agrees to answer for the
debt of another mainly for his own pecuniary or business advantage.
Held.
No. The court of appeals’ ruling is reversed. If a promisor agrees to answer for the debt
of another mainly for his own pecuniary or business advantage, that promise does not fall
within the statute of frauds.
Discussion.
The statute of frauds states that a promise to answer for the debt of another is
unenforceable unless it is in a writing and signed by the party to be charged. However,
where a promisor agrees to answer for the debt of another mainly for his own pecuniary
or business advantage, rather than mainly for the benefit of the original debtor, the
promise does not fall within the statute of frauds and is enforceable. A court must examine
the circumstances surrounding the transaction, the relationship of the parties to one other,
and the nature of the consideration given for the promise. Here, Defendant’s attorney had
a substantial pecuniary and business interest in Defendant’s success. It is unlikely he
offered his own money on behalf of Defendant merely in his capacity as Defendant’s
lawyer. Therefore, this court agrees with the trial court that Defendant’s attorney
guaranteed the debts of Defendant mainly for his own personal benefit.
Sugarman was making promise for his own benefit not for benefit of construction
company.
McCintosh v. Murphy
Citation. 52 Haw. 29, 469 P.2d 177 (Supreme Court of Hawaii, 1970)
Brief Fact Summary. An employee agreed to move to Hawaii to work for an
employer. The parties never entered into a written agreement. The employer fired the
employee and the employee brought suit. The employer alleged the agreement must,
but did not satisfy the Statute of Frauds ("SOF")..
Synopsis of Rule of Law. Courts can circumvent the harshness of the SOF by exercising
their equity powers, specifically via the doctrines of part performance or equitable
estoppel.
Facts. The Plaintiff, Dick McIntosh (the "Plaintiff"), allegedly entered into a one-year oral
employment contract over the phone on Saturday, April 25, 1964 with the Defendant,
Murphy Motors, Ltd. (the "Defendant"), to be an assistant sales manager. The Plaintiff
arrived in Hawaii on Sunday, April 26, 1964 and began working for the Defendant on
Monday, April 27, 1964. In reliance on the job offer, the Plaintiff moved some belongings
to Hawaii, sold other belongings, obtained an apartment and forwent other employment
opportunities. The Plaintiff continued working with the Defendant until July 16, 1964 when
he was discharged. The trial court found on the Defendant's motion for directed verdict
found that the contract did not come within the SOF because it was a contract for exactly
a year. The jury awarded the Plaintiff damages.
Issue. Did the oral employment agreement violate the provision of the SOF requiring
contracts that cannot be performed in one year be in writing?
• Does the doctrine of equitable estoppel apply to these proceedings making the SOF
inapposite?
Held. The court found the one-year provision was not operative. The court first examined
when the Plaintiff accepted the Defendant's agreement of employment. The Defendant
argued that the contract would have been outside the SOF if a Saturday or Sunday were
counted when computing the one-year period. However, the trial court refused to
consider the Saturday or Sunday. The court, however, did not decide the case of this
ground.
• Instead, the court began by discussing the history of the SOF and how it was initially
promulgated to stop fraud. The court then stresses how courts have tempered the effects
of the SOF by not adhering to it to the letter. The goal of this is to "mitigate the harshness
of mechanical operation." The court also stresses how courts have circumvented the
SOF by exercising their equity powers. Specifically the "legal labels of 'part performance'
or 'equitable estoppel.' " Relying on a Supreme Court of California case [Monarco v. Lo
Greco, 35 Cal.2d 621, 623, 220 P2d 737, 739 (1950)] the court observed "[t]he doctrine
of estoppel to assert the statute of frauds has been consistently applied by the courts of
this state to prevent fraud that would result from refusal to enforce oral contracts in certain
circumstances. Such fraud may inhere in the unconscionable injury that would result from
denying enforcement of the contract after one party has been induced by the other
seriously to change his position in reliance on the contract * * *."
• The court then adopts the approach to equitable estoppel advocated by the Second
Restatement of Contracts. Applying the relevant facts, the court observed that the
Defendant was aware the Plaintiff would have to move to Hawaii in order to perform his
duties. After being let go by the Defendant, the court recognized the Plaintiff was in
Hawaii without a job. The Plaintiff relied on the Defendant's promise.
Dissent. The dissenting judge disagrees with the majority's circumvention of the
SOF. The dissenting judge accuses the majority of usurping the legislature's power.
Discussion. This case demonstrates a creative way by which courts can circumvent the
SOF.
Class notes
When is the contract made? Can the contract be performed within a year of that day?
This is a separate exception for the req of statute of fraud to be in writing.
Part performance is essentially an estoppel doctrine.
Detrimental reliance may cause an exception to statute of fraud. This is not clearly
recognized in Canadian and English cases.
Just getting past statute of frauds does not mean there is a contract.