5. CONTRACTS: Defenses to Enforcement

WRITING REQUIREMENT: requires only that there be one or more writings signed by the person sought to be held liable on the contract that reflect the material terms of the contract; a letter or receipt, or even a check indicating a quantity of goods on the memo line, could be sufficient.

The signature requirement is liberally construed -- can be printed or typed, initialled or letterhead may be sufficient.

A writing is sufficient even though it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity of goods shown in the writing.

The following must be evidenced by a writing:

--> executor or administrator promises to personally pay estate debts

--> collateral promise to pay the debt of another (surety), unless the main purpose or leading object of the promisor is to serve a pecuniary interest of his own

--> promises in consideration of marriage

--> interest in land -- sales, leases for more than one year, easements of more than one year, fixtures, minerals or the like, or structures if they are to be severed by the buyer -- if the subject matter is growing crops, timber to be cut, or other things attached to realty capable of severance without material harm to the realty it is a contract for the sale of goods

--> a promise that, by its terms, cannot be performed within one year (part performance does not satisfy in this case) -- date runs from date of the agreement -- if the contract allows both parties the right to terminate within one year, the minority view is that it is not subject to the statute

--> goods priced at $500 or more, but not if (1) the goods are specially manufactured for buyer and not suitable to others in the ordinary course of business, where seller has made substantial beginning in their manufacture or committments for their purchase before repudiation is recieved; (2) if the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, but contract will not be enforced beyond quantity of goods admitted; or (3) goods are either received and accepted or paid for, but not beyond the quatity accepted. If the contract has been modified, the statute of frauds applies post-mod, so applies if contract as modified is for more than $500 worth of goods.

If the seller conveys to the purchaser (ie, fully performs), the seller can enforce the buyer's oral promise to pay. Similarly, the purchaser may be able to specifically enforce a land contract if the part performance doctrine is applicable.

Under the doctrine, conduct that unequivocally indicates that the parties have contracted for the sale of the land will take the contract out of the statute of frauds. What constitutes sufficient part performance varies among the jurisdictions. Most require at least two of the following: payment in whole or in part; possession; and/or valuable improvements.

In contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a written confiramation of the understanding that is sufficient under the sttute of frauds to bind the sender, it will also bind the recipient if: (1) he has reason to know of the confirmations's contents; and (2) he does not object to it in writing within ten days of receipt.

Under the majority rule, noncompliance with the statute of frauds renders the contract unenforceable at the option of the party to be charged. If the statute is not raised as a defense it is waived.

Promissory estoppel is sometimes applied in cases where it would be inequitable to allow the statute of frauds to defeat a meritorious claim.

When a defendant falsely and intentionally tells a plaintiff that the contract is not within the statute or that a writing will subsequently be executed, or when his conduct foreseeably induces a plaintiff to change his position in reliance on an oral agreement, courts may use the doctrine to remove the contract completely from the statute of frauds.

In almost all cases, a party can sue for the reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred. This recovery would be in quantum meruit rather than a suit on the contract. The rationale is that it would be unjust to permit a party to retain benefits received under the failed contract without paying for them.

If the part performance rendered takes the contract out of the statute of frauds, the performing party has the option of suing on the contract for expectation damages, rather than merely in restitution for the value of the benefit conferred.

The concept of unconscionability allows a court to refuse to enforce a provision or an entire contract to avoid unfair terms.

Common instances of procedural unconscionability:

inconspicuous risk-shifting provisions: standardized printed form contracts often contain a material provision that seeks to shift a risk normally borne by one party to the other. Courts have invalidated these provisions because they are inconspicuous or incomprehensible to the average person, even if brought to his actual attention.

Courts will deem a clause unconscionable and unenforceable if the signer is unable to procure necessary goods from any seller without agreeing to a similar provision.

An exculpatory clause releasing a contracting party from liability for his own intentional wrongful acts is usually found to be unconscionable because such a clause is against public policy in most states.

A contractual clause limiting liability for damages to property generally will not be found to be unconscionable unless it is inconspicuous. However, if a contract limits a party to a certain remedy and that remedy fails of its essential purpose, a court may find the imitation unconscionable and ignore it.

Unconscionability is determined by the circumstances as they existed at the time the contract was formed.