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Statutes of Frauds
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Overview
A. Statutory Texts
B. Explaining the Legislative Choices
C. Ameliorating Rules
Writing and Otherwise Recording and Authenticating
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Statutory Scope
A. Duration of Performance: The One-Year and Lifetime Clauses
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B. Interests in Real Property
C. Sales of Goods
D. The Suretyship Clause
Reliance and Other Equities
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Capacity
Overreaching
A. Pressure in Bargaining
B. Concealment and Misrepresentation
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Remedies
1. Damages
a. Expectation interest forward looking
b. Reliance interest backward looking
c. Restitution interest - restore benefits conferred to the other party
2. Specific performance
Restatement 344
(a) his "expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the
contract been performed,
(b) his "reliance interest," which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a position as he
would have been in had the contract not been made, or
(c) his "restitution interest," which is his interest in having restored to him
any benefit that he has conferred on the other party.
Sullivan v. OConnor nose job case, failed after three surgeries. Pain and
suffering recoverable under expectation and reliance damages. Also,
opportunity costs can be recovered under expectation and reliance.
Mills v. Wyman Father promises to reimburse P for taking care of his son,
who got sick and died. He later refuses to pay. Holding: No enforceable
contract because no consideration.
Webb v. McGowin Plaintiff saved Ds life, but estate stops paying after D
dies. Holding: Contract enforceable. Consideration in form of an extreme
benefit to promisor and extreme detriment to the promisee.
Promises as Consideration
UCC 2-306
(1) A term which measures the quantity by the output of the seller or the
requirements of the buyer means such actual output or requirements as may
occur in good faith, except that no quantity unreasonably disproportionate to
any stated estimate or in the absence of a stated estimate to any normal or
otherwise comparable prior output or requirements may be tendered or
demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing
in the kind of goods concerned imposes unless otherwise agreed an
obligation by the seller to use best efforts to supply the goods and by the
buyer to use best efforts to promote their sale.
Termination Clauses
Must somehow restrict a right of the party wishing to terminate by timing or
form. Cannot be unlimited right or the agreement is illusory.
Restatement 90
(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
such action or forbearance is binding if injustice can be avoided only by
enforcement
of the promise. The remedy granted for breach may be limited as justice
requires.
(2) A charitable subscription or a marriage settlement is binding under
subsection (1) without proof that the promise induced action or forbearance.
Estoppel clarification
Promissory estoppel: Stop a party from claiming that there is no
consideration when there was reliance and injustice occurred.
Equitable estoppel: Stop party from denying the existence of a fact that was
relied upon by another party that resulted in injustice.
The underlying premise is that gains produced through anothers loss are
unjust and should be restored.
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Restatement 24
An offer is the manifestation of willingness to enter into a bargain, so made
as to
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For it to be an offer, the person presented with the offer must be able to
respond only with "I accept!"
Harvey v. Facey no contract; no offer. will you sell? (first part) Telegraph
lowest cash price (second part) Focus on entire discourse and context. In
this case, only the second part of the question was answered; the first
question was not answered.
Advertisements as Offers
Why?
1. The risk of unexpected demand exceeding supply
2. Desire to encourage advertising because it is socially useful
Lefkowitz Ad said first come first served. Store refused to sell the black
lapin stole for $1. Holding: Ad was an offer. Ad met the clear, definite,
explicit, and leaving nothing open for negotiation test.
Note that this is a significant power, which is highlighted when the offer
includes an error!
If offer included an error but has already been accepted, query whether
offeror can rescind the contract.
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Competitive bidding
Under UCC 2-328, for sale of goods, the general rule is that a request for
bids is not an offer but instead each bid is an offer.
1 The highest/lowest bid is not an acceptance, binding the seller/buyer
(although often the seller/buyer accepts the highest/lowest bid)
1 The seller/buyer may accept or reject highest/lowest bid
1 The bidder may cancel a bid (offer) before acceptance by the seller
Exception is when the auction is made "without reserve" - the request for
bids is treated like an offer and the highest/lowest bid is treated like an
acceptance.
Bidding is not limited to sales of goods and is a significant event in
construction contracting.
Elsinore Union Elementary School District v. Kastorff Mathematical
error in Ds bid. Holding: There was a contract but D was allowed to rescind.
Bid was treated as an offer. What is rescission? Allowance to get out of the
contract.
Honesty of mistake
Not neglect of "legal duty"
Prompt notification
Return of anything valuable
Unconscionability of enforcement
Mistakes by offeror
1 Computational vs. judgmental mistakes
2 All courts agree that if an offeree knows or has reason to know of the
offeror's material mistake at the time of acceptance, the offeror is not
bound.
C. Acceptance
An acceptance is a voluntary act of the offeree whereby he exercises the
power conferred upon him by the offer, and thereby creates the set of legal
relations called a contract. Corbin.
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Offeror, as the master of the offer, can insist the offeree give in return:
performance or a return promise.
International Filter Co. v. Conroe Gin, Ice & Light Holding: Contract.
The master of the deal was IF but Conroe became the offeror. This case is an
exception to the default rule. What's the default rule? Offeror has to be
notified of the acceptance.
Restatement 56
Except as stated in [the section governing acceptance by silence] or where
the offer manifests a contrary intention, it is essential to an acceptance by
promise either that the offeree exercise reasonable diligence to notify the
offeror of acceptance or that the offeror receive the acceptance seasonably.
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UCC 2-206
(1) Unless otherwise unambiguously indicated by the language or
circumstances
(a) an offer to make a contract shall be construed as inviting
acceptance in any manner and by any medium reasonable in the
circumstances;
(b) an order or other offer to buy goods for prompt or current shipment
shall be construed as inviting acceptance either by a prompt promise
to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of non-conforming goods does
not constitute an acceptance if the seller seasonably notifies the buyer
that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of
acceptance an offeror who is not notified of acceptance within a reasonable
time may treat the offer as having lapsed before acceptance.
Price lists or quotations are not offers. They are mere invitations to
make an offer.
An accommodation is an arrangement or engagement made as a favor
to another. It implies no consideration.
Restatement 69
(1) Where an offeree fails to reply to an offer, his silence and inaction
operate as
an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable
opportunity to reject them and reason to know that they were offered
with the
expectation of compensation.
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(b) Where the offeror has stated or given the offeree reason to understand
that assent may be manifested by silence or inaction, and the offeree
in
remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that
the offeree should notify the offeror if he does not intend to accept.
(2) An offeree who does any act inconsistent with the offeror's ownership of
offered property is bound in accordance with the offered terms unless they
are
manifestly unreasonable. But if the act is wrongful as against the offeror it is
an
acceptance only if ratified by him.
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(2) The offeror's duty of performance under any option contract so created is
conditional on completion or tender of the invited performance in accordance
with the terms of the offer.
UCC- 2-207
(1) A definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time operates as an
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(a) the offer expressly limits acceptance to the terms of the offer;
two parties. Therefore, under UCC 2-207, the disclaimer would materially
alter the agreement between the parties and could not become a part of the
agreement.
ProCD Court did not apply UCC 2-207 because there was only one form,
i.e. no battle of forms. Applied UCC 2-204(1), below. Analogy to UCC 2-606
After opportunity to inspect goods and failure to return goods, there is a
contract; similarly, opportunity to inspect terms. Holding in favor of Pro-CD.
UCC 2-204(1)
A contract for sale of goods may be made in any manner sufficient to show
agreement, including conduct by both parties which recognizes the existence
of such a contract.
Contrast UCC 2-204(1) with common-law rule against acceptance by
silence.
Hill v. Gateway In order for an arbitration clause to be valid, the
purchaser need not receive notice of the clause apart from the terms and
conditions of sale included in a box, and the clause need not be otherwise
prominent or stand out. Notice of enclosed terms is not required on
packaging. Holding in favor for Gateway. By keeping the computer beyond 30
days, the Hills accepted the arbitration clause.
Shrink-wrap license agreements typically involve notice of the agreement on
the product packaging, inclusion of the full terms of the agreement inside the
packaging, and prohibit access to the product absent an express indication of
acceptance. Under such cases, the contract does not form at the time of
purchase; generally it forms when the purchaser makes the express
indication of acceptance, for example by declining to return the product
within a specified period of time.
F. Precontractual Liability
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Restatement 45
(1) Where an offer invites an offeree to accept by rendering a
performance and does not invite a promissory acceptance, an option
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The common law does not require negotiations to be in good faith absent an
agreement to the contrary. However, common law requires good faith in
performance of contracts.
Policies
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Oglebay Norton v. Armco Shipping iron ore agreement over many years.
Holding: Enforceable contract despite questionable definiteness. This case
may be another example of where reliance, and in particular extreme
reliance, creates an exception to a general rule.
A. Overview
Questions are:
Statutory Texts
Agreements that may be prima facie unenforceable if unwritten
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Ameliorating rules
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Full performance by one side takes the agreement out of the one-year
performance SOF
Part performance typically takes an agreement out of the real estate
SOF
Part performance generally gives a remedy of restitution even if SOF
still applies
Reliance on unenforceable promise may lead to claim of estoppel
against promisor
Waiver of SOF defense during litigation
Essential terms
While common law requires price, UCC requires only quantity (not
price)
C. Statutory Scope
C.R. Klewin - An oral contract that does not say, in express terms, that
performance is to have a specific duration beyond one year is equivalent to a
contract of indefinite duration, does not fall under the statute of frauds, and
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Richard v. Richard Oral agreement between father and son/daughter-inlaw to sell real estate. Factors are the three Ps: Possession, Permanent
Improvements, and Payments. Holding: The oral agreement was enforceable
because of part performance.
Sales of Goods
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. A writing is not
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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.
Comment 1: The only term which must appear is the quantity term
UCC 2-201(2)
Between merchants if within a reasonable time a writing in confirmation of
the contract and sufficient against the sender is received and the party
receiving it has reason to know its contents, it satisfies the requirements of
subsection (1) against such party unless written notice of objection to its
contents is given within 10 days after it is received.
This is a mechanism to enforce contract against party that has not made a
writing sufficient to satisfy UCC 2-201(1). Consider this an ameliorating rule
for sales of goods involving merchants.
UCC 2-201(3)
A contract which does not satisfy the requirements of subsection (1) but
which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are
not suitable for sale to others in the ordinary course of the seller's
business and the seller, before notice of repudiation is received and
under circumstances which reasonably indicate that the goods are for
the buyer, has made either a substantial beginning of their
manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his
pleading, testimony or otherwise in court that a contract for sale was
made, but the contract is not enforceable under this provision beyond
the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and
accepted or which have been received and accepted (Sec. 2-606).
The above can be considered as additional ameliorating rules under UCC.
Suretyship Agreements
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The "leading object" or "main purpose" exception to the SOF, requiring three
elements:
1 A third party is indebted
1 There is no novation
1 The third party's duty to the creditor will be terminated by the
performance promised by the defendant.
Reliance may provide grounds to estop another party from asserting the
relevant SOF.
Monarco v. Lo Greco - A plaintiff is estopped from relying upon the statute
of frauds when the opposing party has so seriously changed his position in
reliance upon the oral agreement that he would suffer an unconscionable
injury if the contract were not enforced, and further, the person seeking to
have the contract enforced reaped the benefits of the contract so that he
would be unjustly enriched if he could escape his obligations. Estoppel
applies.
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.
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B. Overreaching
Pressure in Bargaining
Duress/Coercion
Physical threats
o Confinement
o Bodily harm
Economic threats
o Confiscation of property
o Destruction of property
Limitations
o Some degree of actual temerity
o Sometimes resistance required
o Threats to take lawful action may or may not constitute duress
Circumstances important
Fraud, misrepresentation, concealment
Affirmative false statements as well as omissions
Defining duress
Pre-existing duty rule does not require duress but often applies in
circumstances involving duress
o Absence of consideration is one circumstance indicating there
may have been duress
The question of duress may be addressed separately from the question
of the pre-existing duty rule
Statutes
Restatement 89(b)
A promise modifying a duty under a contract not fully performed on either
side is binding to the extent provided by statute.
UCC 2-209(1)
An agreement modifying a contract within this Article needs no
consideration to be binding.
Rescission
Modification
Promissory modification
Restatement 89(a)
A promise modifying a duty under a contract not fully performed on either
side is binding if the modification is fair and equitable in view of
circumstances not anticipated by the parties when the contract was made.
New Consideration
Restatement 73
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his house after his arrest and ask him to resign or else theyll publicize his
charges. No duress because threat was to take lawful action. Holding: A party
may rescind an agreement by showing such agreement was the result of
undue influence.
Caveat emptor
o Still the common law in some jurisdictions that latent defects
may not need to be disclosed depending on the circumstances
In other jurisdictions, the law may be different
o Newer common law providing limited remedies for nondisclosure
in more circumstances
E.g., Synagogue allowed to rescind contract because rabbi
failed to disclose conviction for defrauding insurance
company and disbarment for bribing a police officer
o Legislative disclosure requirements for latent defects, particularly
dangerous ones
Remedy for improper concealment varies
o Affirm the contract and obtain expectation damages
o Rescind the contract and obtain restitution
o Punitive damages as form of relief for tort
o Reformation of contract
Bare nondisclosures versus Something more
o Something more includes half-truths, subject matter is
broached, or full false statement
o If general subject is addressed, must disclose all known, material
facts bearing upon the subject
Reformation of contract = Court reforms the contract and hold the parties to
the original agreement
Fraud=intent to deceive
Misrepresentation
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Canned Answers
The first issue is consideration, which is bargained-for exchange. Parties may
exchange promise or performance. A performance may consist of an act or
forbearance; however, past performance cannot constitute consideration.
Promises are only consideration if the promisee is aware of the promise and
if the promise is not illusory. A promise may, however, be implied. Here -------.
On the other hand ------. Nonetheless, ----------. Thus, there is/is not
consideration.
The Statute of Frauds is designed to prevent parties from inventing deals or
mistakenly relying on terms that were never actually agreed to. Of course,
--------- may argue that the principal reason for the SOF is cautionary: to
give contracting parties more time to think about entering deals. The writing
requirement serves to slow things down. This goal, however, is less
important in deals between merchants who are presumed better able to take
care of themselves. Accordingly, ------- defense should fail.
UCC 2-207(1) provides that any expression of acceptance or written
confirmation will act as an acceptance even though it states terms that are
additional to or different from those contained in the offer.
An expression of acceptance does not form a contract if it is expressly
made conditional on assent to additional or different terms.
If at least one party is not a merchant, the additional term does not prevent
the offerees response from giving rise to a contract, but the additional term
does not become part of the contract unless the offeror explicitly assents to
it.
If both parties are merchants, then the additional term automatically
becomes part of the contract, unless it materially alters the contract or the
offeror objects to the additional term.
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