LAW 506-002 – Contracts II
Statute of Frauds
Does this type of contract require a memorandum?
UCC § 2-201 requires a writing for a sale of good worth more than $500 unless they are specially manufactured for the buyer, the buyer admits that a contract was made, or the goods have been paid for or delivered.
- The following classes of contracts are subject to a statute, commonly called the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception:
- a contract of an executor or administrator to answer for a duty of his decedent (the executoradministrator provision);
- a contract to answer for the duty of another (the suretyship provision);
- a contract made upon consideration of marriage (the marriage provision);
- a contract for the sale of an interest in land (the land contract provision);
- a contract that is not to be performed within one year from the making thereof (the one-year provision).
e.g., A promises B that A will pay C's debt. C only has an obligation to B.
Promising the obligor that you'll pay off his debt is not a suretyship.
Co-signing a loan makes you a co-obligor, not a surety.
Requirement of Suretyship
A contract is not within the Statute of Frauds as a contract to answer for the duty of another unless the promisee is an obligee of the other's duty, the promisor is a surety for the other, and the promisee knows or has reason to know of the suretyship relation.
Main Purpose; Advantage to Surety
A contract that all or part of a duty of a third person to the promisee shall be satisfied is not within the Statute of Frauds as a promise to answer for the duty of another if the consideration for the promise is in fact or apparently desired by the promisor mainly for his own economic advantage, rather than in order to benefit the third person. If, however, the consideration is merely a premium for insurance, the contract is within the Statute.
Contract Made Upon Consideration of Marriage
A promise for which all or part of the consideration is either marriage or a promise to marry is within the Statute of Frauds, except in the case of an agreement which consists only of mutual promises of two persons to marry each other.
Contract to Transfer, Buy, or Pay for an Interest in Land
- A promise to transfer to any person any interest in land is within the Statute of Frauds.
- A promise to buy any interest in land is within the Statute of Frauds, irrespective of the person to whom the transfer is to be made.
- When a transfer of an interest in land has been made, a promise to pay the price, if originally within the Statute of Frauds, ceases to be within it unless the promised price is itself in whole or in part an interest in land.
- Statutes in most states except from the land contract and one-year provisions of the Statute of Frauds short-term leases and contracts to lease, usually for a term not longer than one year.
An interest in land within the meaning of the Statute is any right, privilege, power or immunity, or combination thereof, which is an interest in land under the law of property and is not "goods" within the Uniform Commercial Code.
Action in Reliance; Specific Performance
A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.
Contract Not to Be Performed Within a Year
- Where any promise in a contract cannot be fully performed within a year from the time the contract is made, all promises in the contract are within the Statute of Frauds until one party to the contract completes his performance.
- When one party to a contract has completed his performance, the one-year provision of the Statute does not prevent enforcement of the promises of other parties.
Enforcement by Virtue of Action in Reliance
- 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.
- In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant:
- the availability and adequacy of other remedies, particularly cancellation and restitution;
- the definite and substantial character of the action or forbearance in relation to the remedy sought;
- the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence;
- the reasonableness of the action or forbearance;
- the extent to which the action or forbearance was foreseeable by the promisor.
Is there a sufficient writing?
UCC § 2-201 has four exceptions:
- Between two merchants, the plaintiff can enforce a contract signed only by him as long as it's "sufficient against the sender"—meaning it meets the other requirements of paragraph 1.
- Statute of frauds does not apply if the goods have begun to be specially manufactured for the buyer or materials therefore have been committed to become acquired before notice of repudiation is received.
- When the defendant admits in court that a contract for sale was made, the contract is validated for the goods admitted to.
- "Partial performance" as a substitute for the required memorandum can validate the contract for goods which have been accepted or for which payment has been made and accepted, but only those goods.
General Requisites of a Memorandum
Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which
- reasonably identifies the subject matter of the contract,
- is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and
- states with reasonable certainty the essential terms of the unperformed promises in the contract.
The memorandum may consist of several writings if one of the writings is signed and the writings in the circumstances clearly indicate that they relate to the same transaction.
Memorandum Not Made as Such
The signature to a memorandum may be any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer.
Who Must Sign
Where a memorandum of a contract within the Statute is signed by fewer than all parties to the contract and the Statute is not otherwise satisfied, the contract is enforceable against the signers but not against the others.
Time of Memorandum
A memorandum sufficient to satisfy the Statute may be made or signed at any time before or after the formation of the contract.
Is there an exception?
Goods to Be Severed From Realty: Recording.
- A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this Article if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
- A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this Article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
- The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale.
Modification, Rescission and Waiver.
- An agreement modifying a contract within this Article needs no consideration to be binding.
- A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
- The requirements of the statute of frauds section of this Article ( [UCC § 2-201]) must be satisfied if the contract as modified is within its provisions.
- Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
- A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.