Statute of Frauds

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Commercial Law
(Mgmt 348)
Professor Charles H. Smith
The Statute of Frauds-Writing
Requirement (Chapter 15)
Spring 2009
“Putting It In Writing”
 Always a good idea – this
chapter deals with two issues
that pertain to doing just that
−Statute of frauds (Civil Code
§ 1624) – requires certain
contracts to be in writing.
−Parol evidence rule (C.C.P. §
1856) – written contract is
final statement of parties’
agreement.
Introduction to the Statute
of Frauds
 Actually not a statute but an old
common law rule though California
and other states have codified it.
 Statute of frauds requires certain
contracts to be in writing; examples
include agreement that cannot be
performed within a year, promise to
answer for debt of another, and real
estate contract.
 Statute of frauds simply reflects
policy decision that some contracts
need to be in writing.
Statute of Frauds – Contract Cannot
be Performed Within One Year
 This means that, by its terms, it is
impossible to perform the contract
within a year (Civil Code §
1624(a)(1)).
 Therefore, contract not covered by
statute of frauds if performance
within a year is merely improbable
or not desired.
 Case study – Sawyer v. Mills (pages
305-06).
Statute of Frauds – Promise to
Pay Another’s Debt
 “Promise to answer for the debt of
another” (Civil Code § 1624(a)(2)).
 Examples include
− Co-signing loan.
− Personal guarantee for company
obligation.
 Case study – Case Problem 15-10
(pages 319-20).
Statute of Frauds – Transactions
Involving Real Estate
 Civil Code § 1624(a)(3) provides
these situations
− Lease for more than one year.
− Sale of real estate; can be any
interest, not just 100%.
 Case study – Case Problem 15-6
(pages 318-19).
Exceptions to Application of
Statute of Frauds
 Part performance; case study –
School-Link Technologies, Inc. v.
Applied Resources, Inc. (pages 30910).
 Admission – must occur in court
proceedings; e.g., during deposition
or trial testimony, or in papers filed
with court.
 Promissory estoppel – detrimental
reliance on oral contract; however,
must be reasonable; case study –
Case Problem 15-4 (page 318).
What is a “Writing” for
Purposes of Statute of Frauds?
 Evidence Code § 240 provides broad
definition of “writing.”
 Civil Code § 1624(a) requires the
writing to be “subscribed [signed] by
the party to be charged” – how to
“subscribe” (or sign) electronic
contract?
Introduction to the Parol
Evidence Rule
 Old common law rule – writing intended as
final expression of parties’ agreement
cannot be contradicted by evidence of prior
agreement or contemporaneous oral
agreement; therefore, writing should
correctly and fully reflect parties’
agreement.
 Policy is to uphold written contract that is
intended to be final statement of parties’
agreement; this intent can be shown by
testimony or “integration” clause.
 Many exceptions to parol evidence rule
which will be described in subsequent slides.
Parol Evidence Rule – Case
Studies
 Yocca v. Pittsburgh Steelers Sports,
Inc. (pages 313-15).
 Case Problem 15-8 (page 319).
Exception - Course of Dealing
or Usage of Trade
 Words often have special meaning
different from ordinary meaning in
certain industries or settings; thus,
evidence can be admitted to provide
definitions/context.
 Example – “baker’s dozen” means
13, not 12; general phrase like “time
is of the essence” may have specific
meaning given history of parties’
history.
 Student examples.
Exception – Validity of Contract
in Dispute
 Is mutual assent being questioned?
 Can include situations where
someone alleges the contract is
voidable such as duress or undue
influence.
 Also can include situations where
someone alleges the contract is void
due to an illegal purpose.
Exception – Ambiguity
 Parol evidence rule exception about
“ambiguity” of contract terms can be very
wide-ranging since “[t]he test of admissibility
of extrinsic evidence to explain the meaning of
a written instrument is not whether it appears
to the court to be plain and unambiguous on
its face, but whether the offered evidence is
relevant to prove a meaning to which the
language of the instrument is reasonably
susceptible . . . A rule that would limit the
determination of the meaning of a written
instrument to its four-corners merely because
it seems to the court to be clear and
unambiguous, would either deny the relevance
of the intention of the parties or presuppose a
degree of verbal precision and stability our
language has not attained” (Pacific Gas &
Electric Co. v. G.W. Thomas Drayage, 69
Cal.2d 33, 38 (1968)).
 Caveat – do not depend on being able to
testify as to any “ambiguities.”
Cutting Edge Legal Issue
 Case study – “Prenuptial
Agreements and Advice of Counsel”
(pages 312-13).
 Discuss with small groups – where
do you stand (and why)?
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