Contracts That Must Be in Writing and E-Signatures CHAPTER ELEVEN Contracts That Must Be in Writing and E-Signatures

Oral Versus Written Contracts Not all contracts need to be in writing to be enforced. Courts will enforce an oral contract as long as the existence of the contract can be proven. A contract that has been written out and signed by the parties is much easier to prove than an oral contract.  An oral contract depends upon testimony of witnesses and other proof to be enforced.  Sometimes people will lie to establish a contract in court. Copyright © Houghton Mifflin Company. All rights reserved.

Oral Versus Written Contracts (continued) Due to problems with proving oral contracts, most states have established that certain contracts need to be in writing to be enforced. Most states include the following contracts among those that must be in writing to be enforced: A contract to the pay the debt of another person A contract by an executor or administrator of an estate to personally pay debts of the estate A contract for the sale of land or the sale of an interest in land A contract in consideration of marriage A contract which by its terms cannot be performed within one year A contract for the sale of goods (UCC) for $500 or more Copyright © Houghton Mifflin Company. All rights reserved.

A Contract to Pay the Debt of Another Person One person (usually referred to as the guarantor) agrees with a creditor (person to whom the debt is owed) to pay a third person’s debt. The person who owes the debt (debtor) is primarily responsible for repaying the loan. The guarantor in a guaranty contract is secondarily liable This means the guarantor can be held responsible for paying the debt only if the debtor fails to pay. Remember, this type of contract must be in writing to be enforced. Copyright © Houghton Mifflin Company. All rights reserved.

A Contract to Personally Pay the Debt of a Deceased Person An executor or administrator of an estate is not personally liable for the debts of an estate. The executor or administrator gathers all the deceased person’s assets and then uses them to satisfy the debts of the estate. If the executor or administrator personally promises to pay the debts of an estate where the assets of the estate are insufficient:  This promise must be in writing for the courts to enforce it. Copyright © Houghton Mifflin Company. All rights reserved.

A Contract for the Sale of Real Property A contract to sell any interest in land must be in writing to be enforceable in court. Other interests in land include: Mortgages: land that is the security for a loan Easement: the right to use land without owning it (electric companies are often granted easements to run power lines over land). Leases: the right to use land for a fee, required by most states to be in writing if the lease will be longer than one year. Leases for less than one year generally do not need to be in writing. Each agreement must be in writing for the courts to enforce it. Copyright © Houghton Mifflin Company. All rights reserved.

A Contract in Consideration of Marriage A contract in consideration of marriage needs to be in writing only if the consideration is something other than a return promise to marry. In modern law, the focus is on the prenuptial agreement. A prenuptial agreement modifies the traditional rights and obligations of the people to be married. A prenuptial agreement must be in writing if it is to be enforced. Copyright © Houghton Mifflin Company. All rights reserved.

A Contract That Cannot Be Performed Within One Year from the Date of Formation A contract that by its terms cannot be performed within one year must be in writing to be enforced. If it is at all possible that the contract could be completed within one year (no matter how unlikely), the courts will generally rule that the contract does not need to be in writing to be enforced. One example of a contract that cannot be completed within one year is coach’s multi-year contract to coach a sports team. Since the contract cannot be completed within a one-year time span, the contract must be in writing if the courts are to enforce it. Copyright © Houghton Mifflin Company. All rights reserved.

The Memorandum What constitutes a sufficient writing to satisfy the statute of frauds? Usually the memorandum must contain the following elements:  The names of the parties  The subject matter of the agreement  The consideration being exchanged  All material terms  The signature of the party against whom enforcement is sought (the person being sued) Copyright © Houghton Mifflin Company. All rights reserved.

E-Signatures Electronic or digital signatures are becoming part of everyday life. This where a special pen is used to capture a signature digitally. You may have seen this in stores. On October 1, 2001 the U.S. government enacted the Electronic Signatures in Global and International Commerce Act, which gives electronic or digital signatures the same status as traditional paper and pen signatures. Copyright © Houghton Mifflin Company. All rights reserved.

Parol Evidence Rule Parol evidence: generally, oral testimony or anything submitted to a court to contradict a written contract Parol evidence rule: generally, parol evidence cannot be admitted to contradict the terms of a written agreement. Exceptions to the parol evidence rule include the following: Oral evidence is allowed where an essential term like price is missing. Changes to the agreement are made after the agreement is formed and written down. Oral evidence is allowed to show mistakes, fraud, or misrepresentation. Oral evidence is allowed to explain ambiguous or unclear terms. Copyright © Houghton Mifflin Company. All rights reserved.