MT 310 Seminar 5

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 §1: Origins of the Statute of Frauds  1677 England passed the law “An Act for the Prevention of Frauds and Abuses.”  Certain types of contracts must be in writing and signed by the party against whom enforcement is sought to be enforceable.  Today, almost every state has a Statute of Frauds.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 §2: Contracts That Fall within The Statute of Frauds  To be enforceable, the following types of contracts must be in writing and signed: –Contracts involving interest in land. –Contracts involving “One-Year Rule.” –Collateral or Secondary Contracts. –Promise made in consideration of marriage. –Contracts for the sale of goods priced at $500 or more.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Contracts Involving Interests in Land  Land includes all physical objects that are permanently attached to the soil: buildings, fences, trees, and the soil itself.  All contracts for the transfer of other interest in land: mortgages and leases.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 The One-Year Rule  A contract that cannot, by its own terms, be performed within one year from the date it was formed must be in writing to be enforceable.  One-year period begins to run the day after the contract is made. –Test: Whether performance is possible (although unlikely) within one year. –CASE 15.1 Sawyer v. Mills (2007).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Exhibit One Year Rule

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Collateral Promises  Primary v. Secondary Obligations.  “Main Purpose Rule” Exception.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Promises Made in Consideration of Marriage  Prenuptial agreements must be in writing and signed to be enforceable.  Contracts must be supported by some consideration to be enforceable.  Prenuptial agreements may not be enforceable if the agreement is not voluntary.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Contracts for the Sale of Goods  UCC requires a writing or memorandum for the sale of goods priced at $500 or more.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10Exceptions  Exceptions of Applicability of the Statute of Frauds: –Partial Performance. CASE 15.2 School- Link Technologies, Inc. v. Applied Resources, Inc. (2007). –Admissions. –Promissory Estoppel. –Special Exceptions under the UCC.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 §3: Sufficiency of the Writing  Under the Statue of Frauds. –Must name, identify subject matter, consideration, other essential terms, and must be signed by the the party against whom enforcement is sought.  Under the UCC. –Need only name the quantity term and be signed by the party to be charged.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 §4: The Parol Evidence Rule  Oral representations or promises made prior to the contract’s formation or at the time the contract was created, may not be admitted in court.  Integrated Contracts.  Case 15.3 Yocca v. Pittsburgh Steelers Sports, Inc. (2004).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13  Contracts subsequently modified.  Voidable or Void contracts.  Contracts containing ambiguous terms.  Prior dealing, course of performance, or usage of trade. Exceptions to the Parol Evidence Rule

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Exceptions to the Parol Evidence Rule  Contracts subject to orally agreed-on conditions.  Contracts with an obvious or gross clerical error that clearly would not represent the agreement of the parties.

Third party rights

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16Introduction  Only the Parties to a contract have rights and liabilities under the contract.  Exceptions: –Assignment or Delegation. –Third party beneficiary contract.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 §1: Assignments and Delegations  Transfer of contractual rights is an assignment.  Transfer of contractual duties is a delegation.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18Assignments An Assignment is a transfer of rights in a bilateral contract to a third party.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 19Assignments  Rights that cannot be assigned: –If the assignment is contrary to statute. –When a contract is personal in nature. –Assignment materially changes rights or duties of obligor. –If the contract stipulates the right cannot be assigned.  Notice of Assignment.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 20Delegations  Contractual duties in a bilateral contract that are delegated to a third party.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 21 Duties That Cannot be Delegated  When special trust has been placed on the obligor.  When performance requires personal skill or talents.  When performance will vary materially from obligee expectations.  When the contract expressly prohibits delegation.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 22 Effect of a Delegation  Delegator remains liable.  Delegatee liable if delegation contract creates a third party beneficiary relationship in the obligee.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 23 §2: Third Party Beneficiaries Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person. Original parties to the contract intend at the time of contracting that the contract performance directly benefits a third person.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 24 Types of Intended Beneficiaries  Creditor Beneficiaries.  Donee Beneficiaries.  Modern View: Does not draw such clear lines and distinguishes only between intended beneficiaries and incidental beneficiaries.  Determining whether a third party is intended or incidental: CASE 16.2 Midwestern Indemnity Co. v. Systems Builders, Inc. (2004).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 25 The Vesting of an Intended Beneficiary’s Rights  For third party beneficiary contract to be effective, rights under the contract must vest: –Third party’s manifesting assent to the contract. –Third party’s materially altering position in detrimental reliance on the contract.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 26 Determining Third Party Status

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 27 Intended v. Incidental Beneficiaries  Intended: –Promisee intended to confer on the beneficiary the right to bring suit to enforce the contract. –Factors: Performance is rendered directly to 3rd party.Performance is rendered directly to 3rd party. 3rd party’s right to control contract details.3rd party’s right to control contract details. 3rd party expressly designated as beneficiary.3rd party expressly designated as beneficiary.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 28 Intended v. Incidental Beneficiaries  Incidental. –Contract between two parties is unintentional. –Incidental beneficiary cannot sue to enforce the contract. –CASE 16.3 Revels v. Miss America Organization (2007).