BUS 115 Chap011 written contracts


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BUS 115 Chap011 written contracts

  1. 1. Chapter 11 Written Contracts 13-1
  2. 2. Learning Objectives 1. 2. 3. 4. 5. Identify the goals of the Statute of Frauds. Identify those contracts that must be in writing. List the information that must be in the writing. Explain the Standard Construction Rule. Discuss the Parol Evidence Rule. 13-2
  3. 3. Learning Objectives 6. Explain the exceptions to the Parol Evidence Rule. 7. Explain the Best Evidence Rule. 8. Discuss the Equal Dignities Rule. 9. Explain the problems associated with cybercommerce. 10.Outline the latest cyber-commerce statutes. 13-3
  4. 4. The Statute of Frauds • Statute of Frauds – the law that requires certain contracts to be in writing to be enforceable. 13-4
  5. 5. Contracts that Must Be in Writing 1. Contracts that cannot be completed within one year. 2. Contracts transferring real property rights. 3. Contracts for the sale of goods of $500 or more. 4. Certain contracts entered into by executors and administrators. 5. Contracts by one party to pay a debt of another party. 6. Contracts in consideration of marriage. 13-5
  6. 6. Can it be completed in a year? • If the agreement cannot be completed within a year, writing is required. • If completion could have been completed within a year, no writing required, even if completion didn’t happen in the year. 13-6
  7. 7. Contracts Transferring Real Property Rights • Sale of land • Also covers trusts that are created by one party (trustor) that allow a second party (trustee) to possess and control the land for the advantage of a third party (beneficiary). • Easements, etc – Require a new writing 13-7
  8. 8. Contracts Transferring Real Property Rights • Part performance (equitable estoppel) – An exception to the rule that contracts for the sale of land must be in writing – When a person relies on an owner’s oral promise to sell real property and then makes improvements on the property or changes his position in an important way 13-8
  9. 9. Part Performance/Equitable Estoppel • The plaintiff in such a case must prove three elements: 1. He or she made the improvement relying on the original promise and without suspecting that the other party intended to renege on the agreement. 2. Any other remedy, such as restitution for the amount spent, is not enough to satisfy his or her effort or outlay of funds. 3. The part performance itself is evidence of the existence of the contract. 13-9
  10. 10. Contracts for the Sale of Goods of $500 or More • Under the UCC, contracts for the sale of goods (moveable items) for $500 or more must be in writing to be enforceable • Four exceptions 13-10
  11. 11. Exceptions (to UCC rule) 1. Oral contracts between merchants when a written confirmation has been received by one party and not objected to. 2. Specially manufactured goods that cannot be resold easily. 3. Admissions in court. 4. Executed agreements. 13-11
  12. 12. Case Study Standard Builders Suppliers v. Gush, 614 N.Y.S.2d 632 (NY) • Mr. and Mrs. Gush made a mostly oral contract with Standard Builders Suppliers, ordering custom-designed cabinets for their new home. • Gushes refused to accept the cabinets, manufacturer sued for breach of contract. • The court ruled that the contract, though only partly in writing, was valid, because the goods ordered were specifically manufactured and not suitable for sale to others in the ordinary course of business. 13-12
  13. 13. GLACIAL PLAINS COOPERATIVE v. LINDGREN (2009, Minnesota) • Lindgren agrees by phone to sell grain to Glacial. • Contracts are drawn up and sent to Lindgren, but he never signs them • After partial performance, Lindgren decides he no longer is obligated to perform since contracts never signed and sells grain to another buyer at higher price • Glacial has to buy from another seller at a higher price, sues • Lindgren admits to the contracts in court but claims no obligation to perform due to statute of frauds signature requirement. • Court disagrees because of admission exception 13-13
  14. 14. Executors and Administrators • Executor – a person who is named in a will to oversee the distribution of the estate of a deceased according to the provisions outlined in the will • Administrator – a person named by the court to do the work of an executor if none is named in the will or if the executor cannot or will not perform those duties 13-14
  15. 15. Executors and Administrators • Neither an executor nor an administrator is personally liable for the debts of the decedent’s estate. • Executors and administrators must pay the debts of the estate out of the assets of the estate, not out of their own pockets. • Thus, any promise to pay the debts of the estate using the executor’s or the administrator’s own funds is unenforceable without a writing. 13-15
  16. 16. Contracts to Pay a Debt Incurred by Another Party • Guaranty contract or collateral contract – A promise made by one party to pay another person’s debts if that person fails to pay the debt – Guarantor/cosigner – agree to pay debts of other person • Must be in writing to be enforceable. 13-16
  17. 17. Contracts to Pay a Debt Incurred by Another Party • Exception to the rule: – Primary objective test (leading objective test or main purpose test) • If the promise to pay another party’s debt is actually made to obtain a gain for the guarantor, no need for a writing 13-17
  18. 18. Contracts in Consideration of Marriage • Refers to promises made by parties before marriage, in which they accept additional obligations not usually covered in the marriage vows. • Prenuptial agreement (premarital, antenuptial) – involves two people who are planning marriage and who agree to change the property rights they possess by law in a marriage 13-18
  19. 19. In North Carolina Chapter 52B. Uniform Premarital Agreement Act. § 52B-1. Short title. This Chapter may be cited as the "Uniform Premarital Agreement Act". (1987, c. 473, s. 1.) § 52B-2. Definitions. As used in this Chapter: (1) "Premarital agreement" means an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage. (2) "Property" means an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings. (1987, c. 473, s. 1.) § 52B-3. Formalities. A premarital agreement must be in writing and signed by both parties. It is enforceable without consideration. (1987, c. 473, s. 1.) § 52B-4. Content. (a) Parties to a premarital agreement may contract with respect to: (1) The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located; (2) The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property; (3) The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event; (4) The modification or elimination of spousal support; (5) The making of a will, trust, or other arrangement to carry out the provisions of the agreement; (6) The ownership rights in and disposition of the death benefit from a life insurance policy; (7) The choice of law governing the construction of the agreement; and (8) Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. (b) The right of a child to support may not be adversely affected by a premarital agreement. (1987, c. 473, s. 1.) § 52B-5. Effect of marriage. A premarital agreement becomes effective upon marriage. (1987, c. 473, s. 1.) § 52B-6. Amendment, revocation. After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by the parties. The amended agreement or the revocation is enforceable without consideration. (1987, c. 473, s. 1.) § 52B-7. Enforcement. (a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves that: (1) That party did not execute the agreement voluntarily; or 13-19
  20. 20. The Contents of a Writing Elements of a writing • Terms of the agreement • Identification of the subject matter • Statement of the consideration promised • Names and identities of the persons to be obligated • Signature of the party sought to be bound to the agreement 13-20
  21. 21. Legal Rules for Written Contracts 1. 2. 3. 4. The standard construction rule The parol evidence rule The best evidence rule The equal dignities rule 13-21
  22. 22. The Standard Construction Rule • Standard construction rule – guides the entire interpretation process by directing the interpreter of a contract to determine the principal objective of the parties in the making of the contract • Principal objective – the primary or main goal that the parties hoped to accomplish by entering the agreement in the first place. 13-22
  23. 23. The Standard Construction Rule • Once principle objective stated, everything else interpreted to promote it • Common words given expected, everyday definition • Technical/professional slang will be given their technical/professional definitions. • Whenever an ambiguous term/clause/line is found in a prewritten or preprinted contract, the ambiguity is interpreted against the party who wrote the contract. 13-23
  24. 24. The Parol Evidence Rule • Parol evidence rule – Once terms of a contract are reduced to writing, only those terms are admissible. – Evidence of oral statements made before signing a written agreement is usually not admissible in court to change or contradict the terms of a written agreement. 13-24
  25. 25. Exceptions to the Parol Evidence Rule • When unfair and unjust decisions might result from its application • Omissions/ambiguities • Typographical or clerical errors • Arguments as to mutual assent or contractual capacity • Conditions precedent • Negotiations to rescind or modify after entering the contract • (UCC) Testimony about how the parties have done business together over a long period of time 13-25
  26. 26. The Best Evidence Rule • Best evidence rule – the courts generally accept into evidence only the original of a writing, not a copy – A copy (or other secondary evidence) is admitted only if the original is unavailable, and if the court finds the excuse for its unavailability acceptable 13-26
  27. 27. The Equal Dignities Rule • Equal dignities rule – provides that when a party appoints an agent to negotiate an agreement that must be in writing, the appointment of the agent must also be in writing 13-27
  28. 28. Formalities of Construction • Signature requirements – Written agreements should be, but need not be, signed by both parties. – A signature may be a full name or initials, and it may be printed, typewritten, or stamped – Parties should use their usual signatures (the signatures used in other matters in the regular course of business). – However made, a signature must be provided with the intent to be bound thereby. 13-28
  29. 29. Signature Requirements • Facsimile signature – a signature made by mechanical means (machine, stamp, electronic, etc.) • A facsimile signature will be acceptable on a contract if the contract states that facsimile signatures are valid. • Uniform Facsimile Signatures of Public Officials Act 13-29
  30. 30. Signature Requirements Figure 13-2 The signature for an incapacitated person bears a witness’s name 13-30
  31. 31. Signature Requirements Figure 13-3 The signature (X) of a person who does not know how to write has been witnessed. 13-31
  32. 32. Witnesses and Acknowledgments • Witnesses are required in the signing of a will and sometimes a deed, but in most other documents, their signatures are at the option of the contracting parties. • To ensure that no misunderstanding will arise as to the acceptance and signing of a written agreement, the use of witnesses is advised. 13-32
  33. 33. Witnesses and Acknowledgments • Certain official documents require the owner’s signature and an acknowledgment by a notary public that the signature was the person’s free act and deed. • The notary witnesses the signing of the document and then acknowledges this act by signing the document and adding the official seal to it. 13-33
  34. 34. The Seal and the Recording of Contracts • Today’s seal is usually nothing more than the word seal or the initials L.S. for locus sigilli (place of the seal) printed or written next to the signature. 13-34
  35. 35. Electronic Commerce How to avoid the problem of verification • Adding a term that delays the creation of the contract until the identities of the parties can be verified by some means other than computers. • Customize the verification process for each contract individually. • Digital signature 13-35
  36. 36. Offer and Acceptance Online Certain terms should appear in an online agreement package: 1. payment procedure 2. remedies that can be used by the offeree 3. refund policies 4. the return process 5. dispute settlement instructions 6. the applicability of e-signatures 7. liability disclaimers 8. provisions relating to the offeree’s manner of acceptance 13-36
  37. 37. Electronic Commerce Legislation • The E-Sign Act – states that if the parties to a contract have voluntarily agreed to transact business electronically, the electronic contract that results will be just as legally acceptable as a paper contract. • The Uniform Electronic Transactions Act – establishes the same type of legal parity between electronic records and paper records as does the ESign Act. 13-37
  38. 38. Electronic Commerce Legislation • The Uniform Computer Information Transactions Act (UCITA) – focuses on contracts that involve the sale or lease of computer software, computer databases, interactive products, multimedia products, and any other type of computer information. • The Fair and Accurate Credit Transactions Act (FACT) – Prohibits merchants from using credit card receipts that show anything other than the last five credit card numbers – Receipts also cannot display credit card expiration dates 13-38
  39. 39. Question? What law requires certain contracts to be in writing to be enforceable? A. Hoax rule B. Statute of deception C. Statute of fraud D. Trickery rule 13-39
  40. 40. Question? What is the exception to the rule that contracts for the sale of land must be in writing? A. Equity land grab B. Equitable estoppel C. Landici stumppel D. Veni veci landici 13-40
  41. 41. Question? A _____________ involves two people who are planning marriage and who agree to change the property rights they possess by law in a marriage. A. Premarital contract B. Prenuptial agreement C. Premarital agreement D. Post-nuptial agreement 13-41
  42. 42. Question? What provides that when a party appoints an agent to negotiate an agreement that must be in writing, the appointment of the agent must also be in writing? A. Parol evidence rule B. Primary estoppel C. Secondary estoppel D. Equal dignities rule 13-42
  43. 43. Question? What establishes the same type of legal parity between electronic records and paper records as does the E-Sign Act? A. The Uniform Computer Information Transactions Act B. Uniform Electronic Transactions Act C. Fair and Accurate Credit Transactions Act D. E-Sign Act 13-43
  44. 44. Question? What prohibits merchants from using credit card receipts that show anything other than the last five credit card numbers? A. The Uniform Computer Information Transactions Act B. Uniform Electronic Transactions Act C. Fair and Accurate Credit Transactions Act D. E-Sign Act 13-44