Significance of Writing in Contract Law: Enforcing Obligations through Written Agreements , Study notes of Business and Labour Law

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Chapter 16- Writing  Significance of Writing in Contract Law o Purposes of Writing  Oral contracts are legally enforceable, assuming that they can be proven  More easily misunderstood of forgotten than written contracts  More subject to the danger that a person might fabricate terms or fraudulently claim to have made an oral contract when none exists  Writing is important in contract law  When people memorialize their contracts in writing, they are enhancing their chances of proving that an obligation was undertaken and making it harder for other party to deny making promise  A signature on a written contract allows a basis for the contract to be authenticated, or proved to be genuinely the contract of the signer o Signing also communicated to any of us entering the contract the seriousness of the occasion o Writing and Contract Enforcement  There are certain situations where a promise that isn’t in writing can be denied enforcement  In such situations, an otherwise valid contract can become unenforceable if it doesn’t comply with the formalities required by state law  These situations are controlled by a type of statue called the Statue of Frauds  Overview of the Statues of Frauds o History and Purposes  Statues- require certain kinds of contracts to be evidenced by a signed writing, are exceptions to the general rule that oral contracts are enforceable  Statues of fraud have produced a great deal of litigation, due in part to the public’s ignorance of their provisions o Effect of Violation of the Statue of Fraud  Applies only to executor contracts  If an executor contract is within statue of frauds but hasn’t been evidenced by the type of writing required, it isn’t treated as an illegal contract, rather the contract fails to comply and is unenforceable  Although contract will not be enforced, a person who has conferred some benefit on the other party to the contract can recover the reasonable value of his performance in an action based on quasi-contract  Contracts Covered by the Statute of Frauds o A contract is said to be “within” (covered by) the statue if the statue requires that sort of contract to be evidenced by writing o Following types of contracts are within the statue of frauds  Collateral contracts-where a person promises to perform the obligations of another person  Contracts for the sale of an interest in real estate  Bilateral contracts that cannot be performed within a year from date of their formation  Contracts for the sale of goods for a price of $500 or more  Contracts in which an executor/administrator promises to be personally liable for the debt of an estate  Contracts in which marriage is the consideration o Collateral Contracts  Is a contract in which one person(the guarantor) agrees to pay the debt of obligation that a second person(the principal debtor) owes to a third person(the oblige), if the principal debtor fails to perform  Involves at least three parties and 2 promisees  The guarantor promises to pay only if the principal debtor fails to do so  Original obligation- When a person undertakes an obligation that isn’t conditioned on the default of another person, and the debt is his own rather than that of another person  When contract is determined collateral, it is unenforceable unless it is evidenced by a writing  Exception: Main purpose of Leading Object Rule  Main Purpose/Leading Object Rule- no writing is required where the guarantor makes a collateral promise for the main purpose of obtaining some personal economic advantage o When the consideration given in exchange for collateral promise is something the guarantor seeks primarily for his own benefit rather than for the benefit of primary debtor the contract is outside the statue of frauds and doesn’t have to be in writing o Interest in Land  Any contract that creates of transfers an interest in land is within the statute of frauds  Require written evidence of any transaction that will affect the ownership of an interest in land  A contract to sell or mortgage must be evidenced by writing  Exception: Full Performance by the Vendor  An oral contract for the sale of land that has been completely performed by the vendor(seller) is “taken out of the statue of frauds”- that is, is enforceable without writing  Exception: Part Performance (Action in Reliance) by the Vendee  When the vendee(purchaser of land) does an act in clean reliance on an oral contract for the sale of land, an equitable doctrine known as “part performance doctrine” permits the vendee to enforce the contract notwithstanding the fact that it was oral  Doctrine- based on both evidentiary and reliance considerations, recognizes that a person’s conduct can “speak louder than words” and can indicate the existence of a contract almost as well as in writing  Restatement of Contracts- a contract for the transfer of an interest in land can be enforced even without a writing if the person seeking enforcement o Has reasonably relied on the contract and on the other party’s assent o Has changed his position to such an extent that an enforcement of the contract is the only way to prevent injustice  Part performance doctrine, will not permit the vendee to collect damages for breach of contract, but it will permit him to obtain the equitable remedy of specific performance, a remedy whereby the court orders the breaching party to perform his contract  Many states have required that the vendee pay part or all of the purchase price and either make substantial improvements on the property or take possession of it o Contracts that Cannot be Performed within One Year  A bilateral, executory contract that cannot be performed within 1 year from day It came into existence is within the statue of fraud and must be evidenced in writing  Guard against the risk of faulty of willfully inaccurate recollection of long term contracts  If a contract is fully performed by one of the parties, it is taken out of statute, and is enforceable without writing  Apply when terms of contract make it impossible to be completed within one year  If contract for indefinite period of time, not within statue of frauds  Computing Time  If the date is more than one year from the date the contract came into existence, the contract falls within statue of frauds and must be evidenced by a writing to be enforceable o Sale of Goods for $500 or More  UCC  Provides that contracts for the sale of goods for the price of $500 or more are not enforceable without a writing or other specified evidence that a contract was made  Modifications of Existing Sales Contracts  Agreements to modify existing sales contracts can fall within the statue of frauds if the contract as modified is for a price of $500 or more  UCC- provides that the requirements of the statue of frauds must be satisfied if the contract as modified is within its provisions o Promise of Executor/Administrator to Pay a Decedent’s Debt Personally  No writing is required when an executor/administrator-acting in representatives capacity- promises to pay the decedent’s debt from the funds of the decedent’s estate  Statue of frauds requires writing if the executor, acting in her capacity as a private individual rather than in her representative capacity, promises to pay one of the decedent’s debts out of her own (the executor’s) funds. o Contract in which Marriage is the Consideration  Statue of frauds requires a writing when marriage Is the consideration to support a contract  Marriage provision has been interpreted to be inapplicable to agreement that involve only mutual promises to marry  Can apply to any contract in which one party’s promise is given in exchange for marriage, or the promise to marry on the part of the other party  This is true whether the promisor is one of the parties to marriage or a third party  Prenuptial(or ante nuptial) agreements present a common contemporary application of the statue of frauds  They are within the statue of frauds and must be evidenced by writing