Which of the following is an exception to the Statute of Frauds requirement?

The general rule is this: a contract need not be in writing to be enforceable. An oral agreement to pay a high-fashion model $2 million to pose for photographs is as binding as if the language of the deal were printed on vellum and signed in the presence of twenty bishops. For three centuries, however, a large exception grew up around the Statute of Frauds, first enacted in England in 1677 under the formal name “An Act for the Prevention of Frauds and Perjuries.” The Statute of FraudsA rule requiring that certain contracts be evidenced by a writing, signed by the party to be bound, to be enforceable. requires that some contracts be evidenced by a writing, signed by the party to be bound. The English statute’s two sections dealing with contracts read as follows:

[Sect. 4]…no action shall be brought

1. whereby to charge any executor or administrator upon any special promise, to answer damages out of his own estate;
2. or whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person;
3. or to charge any person upon any agreement made upon consideration of marriage;
4. or upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them;
5. or upon any agreement that is not to be performed within the space of one year from the making thereof;

unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.

[Sect. 17]…no contract for the sale of any goods, wares and merchandizes, for the price of ten pounds sterling or upwards, shall be allowed to be good, except the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the bargain or in part of payment, or that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such contract, or their agents thereunto lawfully authorized.

The Statute of Frauds has been enacted in form similar to the seventeenth-century act in every state but Maryland and New Mexico, where judicial decisions have given it legal effect, and Louisiana. With minor exceptions in Minnesota, Wisconsin, North Carolina, and Pennsylvania, the laws all embrace the same categories of contracts that are required to be in writing. Early in the twentieth century, Section 17 was replaced by a section of the Uniform Sales Act, and this in turn has now been replaced by provisions in the Uniform Commercial Code (UCC).

Figure 13.1 Contracts Required to Be in Writing

However ancient, the Statute of Frauds is alive and well in the United States. Today it is used as a technical defense in many contract actions, often with unfair results: it can be used by a person to wriggle out of an otherwise perfectly fine oral contract (it is said then to be used “as a sword instead of a shield”). Consequently, courts interpret the law strictly and over the years have enunciated a host of exceptions—making what appears to be simple quite complex. Indeed, after more than half a century of serious scholarly criticism, the British Parliament repealed most of the statute in 1954. As early as 1885, a British judge noted that “in the vast majority of cases [the statute’s] operation is simply to enable a man to break a promise with impunity because he did not write it down with sufficient formality.” A proponent of the repeal said on the floor of the House of Commons that “future students of law will, I hope, have their labours lightened by the passage of this measure.” In the United States, students have no such reprieve from the Statute of Frauds, to which we now turn for examination.

Who has a Statute of Frauds defense?

A party who does not sign a contract that is governed by the Statute of Frauds

Analyzing Problems Under the Statute of Frauds

1. Is the Contract within the Statute of Frauds?
2. Is the Statute of Frauds Satisfied?
3. Is Alternative Enforcement Available?

First Question: Is the Contract within the Statute of Frauds?

MY LEGS
(1) Marriage contracts
(2) Contracts not to be performed within one Year of their making
(3) Contracts for the sale of Land
(4) Contracts of an Executor or administrator to answer for a duty of a decedent
(5) Contracts of Guarantee or suretyship
(6) Contracts for the Sale of goods at a price of $500 or more (UCC 2-201)

Contracts Not to Be Performed within a Year

The year at issue under the one-year provision is measured from: the date of MAKING the contract rather than the date of the beginning of performance.
- Standard: Whether, at the point of formation, it is at all possible to complete the required performance within a year's time.

Contracts Not to Be Performed within a Year:
Frequently Tested Situations

(a) Contracts that can be breached or excused within a year of its formation: This is irrelevant.
(b) A lifetime or permanent contract of employment: is not governed by the one-year provision because the employee's death is possible within a year

Land-Sale Contracts

(a) The present conveyance of land promised for money: is held to be outside the land provision of the SoF
(b) Real estate brokerage agreements: Although land is involved, these are SERVICE contracts
(c) Lease of real property: Is a contract falling within the land provision

Guaranty/Suretyship Agreements

Exception #1: When the creditor discharges the original debtor from his obligation on the faith of a guarantee by a third party to pay the debt, the guarantee agreement is not governed by the Statute of Frauds.

Exception #2: The "Main Purpose" Doctrine → Where the main purpose of the guarantor is to protect his own economic interests, the guarantee agreement is not governed by the SoF

Second Question: Is the Statute of Frauds Satisfied?

If a contract falls within the Statute of Frauds, then the general rule is: the contract is unenforceable unless evidenced by a writing signed by the party against whom enforcement is sought.

The Writing Requirement

all that is necessary is that the writing be a memorandum of the agreement, which can be prepared before, during, or after contract formation.

Only the following terms are required:
(a) the identity of the parties to the transaction;
(b) the nature and subject matter of the contract; and
(c) the essential terms of the agreement, such as price and date for performance

Under the common law, the following memoranda have been held to satisfy the writing requirement

(a) a letter from one of the parties to a third party describing the agreement.
(b) the written offer, acceptance of which formed the contract
(c) a letter from one of the parties repudiating, and so admitting, the agreement.

Writing Requirement:
Required Description under the Land Provision

(a) Older case law suggests: you need a legal description of the land
(b) More current decisions suggest: that an address or some other description of the property may suffice.

The Signature Requirement

Any symbol or mark with the intention to authenticate the writing.

Examples: Initials; a typed, stamped, or pre-printed signature; or letterhead.

"Tacking Together" Multiple Documents to satisfy SoF

(a) If all documents are signed, or if a signed document incorporates unsigned documents by reference: then the statute of frauds is satisfied.

(b) If unsigned documents are not incorporated by reference in a signed document, "tacking together" the signed and unsigned documents to satisfy the SoF is nevertheless permissible if:
1) there is at least one signed writing unambiguously establishing a contractual relationship between the parties.
2) the signed and unsigned documents clearly refer to the same subject matter
3) there is clear and convincing evidence of acquiescence to the unsigned documents by the party against whom enforcement is sought.

SoF and Performance

The Statute of Frauds may be satisfied with respect to some of the categories of governed contracts via part performance.

SoF and Performance:
Land Contracts

Part performance requires a showing of any combination, or all three, of the following:
1) payment of all or part of the purchase price
2) taking of possession
3) making substantial improvements to the party

SoF and Performance:
One-Year Contracts

(a) If fully performed: then an oral contract not to be performed within one year becomes enforceable despite the SoF.
(b) If only partially performed: then an oral contract not to be performed within one year is not enforceable.

Third Question: Is there an Alternative Basis for Enforcement?

(1) Recovery for Benefits Conferred
(2) Promissory Estoppel

Promissory Estoppel

This may be available for detrimental reliance, for loses suffered on the faith of an oral contract that is unenforceable.
- Easy case: Where a party to an oral contract within the Statute promises the other party he will create a signed writing, and the party relies by not taking other steps to satisfy the statute, most courts will apply promissory estoppel if the promising party does not create such a signed writing.
- Hard Case: Where no specific assurances of creating a signed writing are made, but the reliance is instead simply on the underlying oral contract itself.

UCC Statute of Frauds

First Question: Is the Contract within the UCC Statute of Frauds?
Second Question: Is the UCC Statute of Frauds Satisfied?

First Question: Is the Contract within the UCC Statute of Frauds?

The UCC Statute of Frauds is Section 2-201, which by its terms governs agreements "for the sale of goods for the price of $500 or more."

Second Question: Is the UCC Statute of Frauds Satisfied?

five ways to satisfy the UCC Statute of Frauds:

1. Signed Writing (aka the "old-fashioned way")
2. Merchant's Confirmation (aka "Speak Now or Forever Hold Your Peace")
3. The In-Court Admission
4. Partial Performance
5. The Problem of Specially Manufactured Goods

The first way: Signed Writing (aka the "old-fashioned way")

Requirements

1) a writing
- a "writing" under the UCC = Any intentional reduction to tangible form.

2) Signed by the party against whom enforcement is sought.
- a "signature" under the UCC = Any symbol executed or adopted by a party with present intention to authenticate a writing.
3) Sufficient to indicate that a contract for has been made between the parties

Signed Writing (aka the "old-fashioned way")

Required TERM

you need a quantity term to satisfy the SoF, and the contract is unenforceable beyond the quantity stated in the writing.

If there is no quantity term, the contract is altogether unenforceable, subject to two exceptions:
Exception #1: where other language is in the writing provides an unambiguous basis for measuring quantity.
Exception #2: output of requirements contracts, which satisfies the quantity requirement under the UCC

Signed Writing (aka the "old-fashioned way")

Written Offers

Under the UCC: a written offer does not satisfy the writing requirement because it is insufficient to reveal that a contract has been made.
- Unless a firm offer is created

The second way to satisfy the UCC Statute of Frauds: Merchant's Confirmation (aka "Speak Now or Forever Hold Your Peace")

The UCC Statute of Frauds may be satisfied when two merchants enter an oral agreement and one of them sends the other a written confirmation of the agreement.

Requirements for a Valid Merchant's Confirmation?

1) confirmation has to be sufficient against the sender (signed + quantity terms)
2) the writing is in confirmation of the contract
3) Time-frame for sending (reasonable time)
4) Recipient's "reason to know"

*Exception with the recipient's objecting response: The recipient must send a written notice of objection within 10 days of receipt in order to keep his SoF defense

The third way to satisfy the UCC Statute of Frauds: The In-Court Admission

a party admits in his pleading, testimony, or otherwise in court that a K for sale was made.
- The contract is only enforceable: up to the quantity admitted.

The fourth way to satisfy the UCC Statute of Frauds: Partial Performance.

Despite the absence of a signed writing, an otherwise valid contract is enforceable with respect to:
1) goods for which payment has been made and accepted
2) goods which have been received and accepted.

The fifth way to satisfy the UCC Statute of Frauds: The Problem of Specially Manufactured Goods

5 Elements

1) the goods are to be specially manufactured for the buyer;
2) the goods are not suitable for sale to others in the ordinary course of seller's business;
3) seller has substantially begun to manufacture, or made commitments to procure, the goods;
4) the actions undertaken to begin to manufacture or procure occurred under circumstances which reasonably indicate that the goods are for the buyer; and
5) the actions undertaken to begin to manufacture or procure occurred before seller received notice of buyer's revocation.

Third Question: Is there an Alternative Basis for Enforcement of a UCC SoF?

(1) Majority of courts: hold that promissory estoppel is available as a workaround if a strong case is shown.
(2) Minority of courts: hold that the express language of the UCC SoF precludes promissory estoppel.
(3) Construction contractors: Virtually all courts have protected a general contractor via promissory estoppel

Limitations of the SoF

The contract may still be valid and enforceable for other purposes.
a. The oral contract may provide evidence in establishing an element of a legal claim apart from breach of contract.
b. The oral contract may provide evidence establishing a defense to a legal claim apart from breach.
c. The oral contract may provide evidence of the value of the services already rendered.

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