1. Commercial Law (Mgmt 348) Professor Charles H. Smith The Statute of Frauds-Writing Requirement (Chapter 15) Spring 2009

2. “Putting It In Writing”  Always a good idea – this chapter deals with two issues that pertain to doing just that −Statute of frauds (Civil Code § 1624) – requires certain contracts to be in writing. −Parol evidence rule (C.C.P. § 1856) – written contract is final statement of parties’ agreement.

3. Introduction to the Statute of Frauds  Actually not a statute but an old common law rule though California and other states have codified it.  Statute of frauds requires certain contracts to be in writing; examples include agreement that cannot be performed within a year, promise to answer for debt of another, and real estate contract.  Statute of frauds simply reflects policy decision that some contracts need to be in writing.

4. Statute of Frauds – Contract Cannot be Performed Within One Year  This means that, by its terms, it is impossible to perform the contract within a year (Civil Code § 1624(a)(1)).  Therefore, contract not covered by statute of frauds if performance within a year is merely improbable or not desired.  Case study – Sawyer v. Mills (pages 305-06).

5. Statute of Frauds – Promise to Pay Another’s Debt  “Promise to answer for the debt of another” (Civil Code § 1624(a)(2)).  Examples include −Co-signing loan. −Personal guarantee for company obligation.  Case study – Case Problem 15-10 (pages 319-20).

6. Statute of Frauds – Transactions Involving Real Estate  Civil Code § 1624(a)(3) provides these situations −Lease for more than one year. −Sale of real estate; can be any interest, not just 100%.  Case study – Case Problem 15-6 (pages 318-19).

7. Exceptions to Application of Statute of Frauds  Part performance; case study – School-Link Technologies, Inc. v. Applied Resources, Inc. (pages 309- 10).  Admission – must occur in court proceedings; e.g., during deposition or trial testimony, or in papers filed with court.  Promissory estoppel – detrimental reliance on oral contract; however, must be reasonable; case study – Case Problem 15-4 (page 318).

8. What is a “Writing” for Purposes of Statute of Frauds?  Evidence Code § 240 provides broad definition of “writing.”  Civil Code § 1624(a) requires the writing to be “subscribed [signed] by the party to be charged” – how to “subscribe” (or sign) electronic contract?

9. Introduction to the Parol Evidence Rule  Old common law rule – writing intended as final expression of parties’ agreement cannot be contradicted by evidence of prior agreement or contemporaneous oral agreement; therefore, writing should correctly and fully reflect parties’ agreement.  Policy is to uphold written contract that is intended to be final statement of parties’ agreement; this intent can be shown by testimony or “integration” clause.  Many exceptions to parol evidence rule which will be described in subsequent slides.

10. Parol Evidence Rule – Case Studies  Yocca v. Pittsburgh Steelers Sports, Inc. (pages 313-15).  Case Problem 15-8 (page 319).

11. Exception - Course of Dealing or Usage of Trade  Words often have special meaning different from ordinary meaning in certain industries or settings; thus, evidence can be admitted to provide definitions/context.  Example – “baker’s dozen” means 13, not 12; general phrase like “time is of the essence” may have specific meaning given history of parties’ history.  Student examples.

12. Exception – Validity of Contract in Dispute  Is mutual assent being questioned?  Can include situations where someone alleges the contract is voidable such as duress or undue influence.  Also can include situations where someone alleges the contract is void due to an illegal purpose.

13. Exception – Ambiguity  Parol evidence rule exception about “ambiguity” of contract terms can be very wide-ranging since “[t]he test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible... A rule that would limit the determination of the meaning of a written instrument to its four-corners merely because it seems to the court to be clear and unambiguous, would either deny the relevance of the intention of the parties or presuppose a degree of verbal precision and stability our language has not attained” (Pacific Gas & Electric Co. v. G.W. Thomas Drayage, 69 Cal.2d 33, 38 (1968)).  Caveat – do not depend on being able to testify as to any “ambiguities.”

14. Cutting Edge Legal Issue  Case study – “Prenuptial Agreements and Advice of Counsel” (pages 312-13).  Discuss with small groups – where do you stand (and why)?