Chapter 14 Contracts

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Chapter 14ContractsThe Statute of Frauds
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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

• 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 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.
• 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 Promises

• Primary v. Secondary Obligations.
• Main Purpose Rule Exception .
• Estate Debts.

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Contracts 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

• 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

• 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 contracts formation
  or at the time the contract was created.

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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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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.

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

• FACTS (contd)
• Charter argued Montiels 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. 

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

• FACTS (contd)
• 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.
• McKinneys 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.