Contracts 3: Statute of Frauds
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When is a WRITING required to enforce a contract? (FIVE)
- Transfer of an interest in REAL PROPERTY
- Performance cannot be completed within ONE YEAR
- Sale of Goods for $500 or more
- Lease of goods for $1000 or more (NY ONLY)
Can an ORAL agreement for a LEASE of an EASEMENT be enforced?
NO. Leases (as well as sales) of real property, easements, covenants, etc. ALL fall within the Statute of Frauds.
What is the EQUAL DIGNITIES RULE?
An AGENT'S authority concerning REAL PROPERTY (sale, purchase, etc.) must be in WRITING.
True or False:
If PERFORMANCE takes longer than ONE YEAR, the agreement must always be in WRITING.
If full performance within a year is THEORETICALLY possible, then no writing is required.
Thus, SPECIFIC TASKS never present a statute of frauds problem because in theory, any task can be fully performed within a year (UNLESS the agreement specifies that the task is to be performed at a specific time that is more than one year from the date of agreement)
X orally agreed to employ Y for the rest of Y's life. Is a writing required?
- MBE--NO (Y could die within one year)
When does the clock for the statute of frauds start to run?
When the agreement is made, NOT when performance begins.
For purposes of determining statute of frauds applicability in a LEASE OF GOODS, what is the relevant number?
The SUM of the ENTIRETY of the lease contract.
Thus, if there is a contract for a YEAR at $300 a month, the total lease payment is $3600 and this contract is applicable to the statute of frauds.
What is a SURETYSHIP?
a promise to "answer for" the debt of another (if the debtor doesn't pay)
Are suretyships within the statute of frauds?
Yes. The promise must be in writing.
NOTE: There MUST be a contract between the two parties, which the suretyship is guaranteeing. Otherwise, the guaranty is not a suretyship because the "guarantor" is the ONLY one liable.
When does a CONTRACT MODIFICATION fall within the purview of the statute of frauds (i.e., have to be in WRITING)?
when the contract as modified (not the original contract) is within the statute of frauds
May the parties to a contract agree to prohibit oral modifications?
- Article 2 SOG: YES
- Common Law: NO (oral modification prohibition are NOT enforceable)
Name THREE NY exampless that fall under the purview of the statute of frauds.
- Assignment of an insurance policy
- Promise to pay a discharged debt
- Agreement to pay a finder's fee or broker's commission (EXCEPT to an attorney, auctioneer, or licensed real estate agent)
What constitutes a SATISFACTORY writing under the statute of frauds?
- Art. 2 SOG: Must contain a QUANTITY term and be SIGNED by the party to be charged with the breach of contract (i.e., defendant)
- Art. 2A Lease of Goods: Must state it's a LEASE, include the QUANTITY, DURATION, and RENTAL payments, and be SIGNED by the party to be charged with the breach of contract
- Any other contract: Must contain ALL MATERIAL TERMS (who/what) and be SIGNED by the party to be charged with the breach of contract
What is the EXCEPTION to the REAL PROPERTY statute of frauds requirement?
- Short term leases: leases of one year or less
- "Part performance" exception: requires TWO of THREE: (1) buyer is in POSSESSION of the property; (2) buyer made SOME payment; or (3) buyer made IMPROVEMENTS to the property
What is the EXCEPTION to the ONE YEAR PRONG statute of frauds requirement?
if there has been FULL PERFORMANCE, the party that has performed does not need a writing to satisfy the SOF
What are the EXCEPTIONS to the SALE OF GOODS OF $500 OR MORE (article 2) statute of frauds requirement?
- Goods accepted or paid for by buyer: exception applies to only those goods accepted/paid for (NOT the whole contract)
- Custom-made goods: there must be a SUBSTANTIAL start and it must not be suitable for sale to others in the ordinary course of the seller's business
- Judicial admission: e.g., in a deposition, testimony, etc.
- Merchants' confirmatory memo: one party can use its OWN signed writing to satisfy the statute of frauds against the OTHER party if: (1) BOTH parties are MERCHANTS; (2) writing claims agreement and has quantity; AND (3) there is no written OBJECTION within 10 days
What happens when the goods to be purchased cannot be apportioned and a down payment is made? (e.g., a down payment on a boat) May seller claim a statute of frauds defense?
NO. A deposit or down payment takes the entire contract out of the statute of frauds when the goods cannot be apportioned
What is the EXCEPTION to the SURETYSHIP statute of frauds requirement?
- MBE--If surety's MAIN PURPOSE in making the promise was to benefit HIMSELF, then no writing is required to satisfy the statute of frauds.
- NY--There is NO main purpose exception.
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