Chapter 14Contracts—The Statute

of Frauds

Chapter 14Contracts—The Statute

of Frauds

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§2: The Statute of Frauds§2: 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.

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Contracts Involving Interest in Land

Contracts Involving Interest 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.

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The One-Year RuleThe One-Year RuleA 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.

Test: Whether performance is possible (even if unlikely) within one year.

One-year period begins to run the day after the contract is made.

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Collateral PromisesCollateral Promises

Primary v. Secondary Obligations.

“Main Purpose Rule” Exception .

Estate Debts.

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Contracts for the Sale of GoodsContracts for the Sale of Goods

UCC requires a writing or memorandum for the sale of goods priced at $500 or more.Exceptions:Partial Performance.Admissions.Promissory Estoppel.Special Exceptions under the UCC.

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§3: Sufficiency of the Writing§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.

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§4: Parol Evidence Rule§4: Parol Evidence Rule

If the court finds that the parties intended their written contract to be a complete and final embodiment of their agreement, a party cannot introduce in curt evidence of any oral agreement or promise made prior to the contract’s formation or at the time the contract was created.

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Exceptions to the Parol Evidence Rule

Exceptions to the Parol Evidence Rule

Contracts subsequently modified.

Voidable or Void contracts.

Contracts containing ambiguous terms.

Prior dealing, course of performance, or usage of trade.

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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.

Exceptions to the Parol Evidence Rule

Exceptions to the Parol Evidence Rule

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Case 14.1 McInerny v. Charter Golf(One Year Rule)

FACTS:McInerney, a Charter-Golf sales rep, was

offered a position with a Charter competitor. Montiel, Charter’s President, orally promised

McInerney that if he stayed, he would be paid a 10 percent commission “for the remainder of his life” and that he would be discharged only for dishonesty or disability. McInerney accepted.

Charter later fired McInerney and McInerny sued for breach of contract.  

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FACTS (cont’d)Charter argued Montiel’s oral promises were not

enforceable because they were not capable of being performed within one year.

The trial court ruled in favor of Charter, and the state intermediate appellate court affirmed. McInerney appealed.

HELD: AFFIRMED. FOR CHARTER. A ‘lifetime’ employment contract is, in essence, a

permanent employment contract which cannot be performed within one year and under the Statute of Frauds must be in writing to be enforceable. 

Case 14.1 McInerny v. Charter Golf(One Year Rule)

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Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule)

Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule)

FACTS:McKinney operates a chain of stores known as

The Little Stores. McKinney contracted with Cousins Subs Systems,

Inc., to operate Cousins sandwich shops in The Little Stores.

The agreement stated it was the parties’ entire agreement, that there were no other “understandings or agreements,” and that McKinney had not been promised any profits.

McKinney later terminated the arrangement with Cousins and Cousins sued for wrongful termination.

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FACTS (cont’d):McKinney counterclaimed against Cousins alleging breach

of contract. McKinney claimed that Sobiech, a Cousins rep, orally guaranteed annual sales at each of the franchises of “$250,000 to $500,000.” Cousins filed a motion to dismiss.

HELD: FOR COUSINS. McKinney’s attempt to invoke alleged oral agreements to

contradict the terms of the written agreements is barred by the parol evidence rule. The agreement makes it clear that the contracts were intended to embody all of the agreed on terms.

Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule)

Case 14.2: Cousins Subs v. McKinney(Parol Evidence Rule)