1. C H A P T E R
16
Writing
A verbal contract isn’t
worth the paper it’s
written on.
Samuel Goldwyn
quoted in The Great
Goldwyn by Alva Johnson,
1937
16-1

2. Learning Objectives
• List contracts that must be written to
satisfy the Statute of Frauds
• Identify exceptions to the Statute of
Frauds
• Compare UCC with the Statute of
Frauds under common law
• Describe the Parole Evidence Rule
16-2

3. Basics
• In general, a writing is not
required to create a legally
enforceable contract
• However, a writing is preferable
to an oral contract for several
reasons: more definite, use as
evidence, and signature
provides authentication
• Sometimes, a writing is required
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4. The Statute of Frauds
• In 17th Century England,
the Statute of Frauds was
enacted to prevent
fraud by requiring written
evidence before
enforcing certain types
of contracts
• American states
adopted similar statutes
House of Lords, England
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5. Consequences
• If a covered contract does not satisfy
the requirements of the statute of
frauds, the contract is unenforceable
• A person injured by the unenforceable
contract may pursue an action based
on quasi-contract or promissory
estoppel
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6. Covered Contracts
• Collateral contracts
• Contracts for real estate
• Contracts for more than one year
• Contracts for sale of goods over $500
• Executor’s promise
• Marriage as consideration
• See the list on page 435 of the text
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7. Covered Contracts:
Collateral Contracts
• Collateral contracts are those in which a
person (guarantor) promises to perform an
obligation of another person (principal
debtor) to a third person (obligee)
xample: Jason is a
personal guarantor on
a loan from City Bank
to Jason’s sister, Mary
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8. The Collateral Contract
16-8

9. Dynegy, Inc. v. Yates
• Facts & Procedural History:
– 2002: Dynegy board passed resolution authorizing
payment of attorney's fees and expenses to
certain officers and directors, including Olis, if Olis
signed statement that he acted in good faith and
in corporation's best interests, "with no reasonable
cause to believe his conduct was unlawful."
– 06/03: federal grand jury returned an indictment
against Olis, who hired Yates to defend him
• Olis signed written fee agreement with Yates
with no mention of Dynegy
16-9

10. Dynegy, Inc. v. Yates
• Facts & Procedural History:
– 08/03: Dynegy gave letter to Yates stating that
Dynegy would pay Yates directly for legal fees
billed through 8/17/03 and made two payments,
but refused to pay Yates' final invoice
– Yates sued Dynegy in 2005 alleging breach of
contract and fraudulent inducement
– Dynegy argued it never had an oral or written
agreement with Yates to pay Olis' bill
– Jury found for Yates and Dynergy appealed
16-10

11. Dynegy, Inc. v. Yates
• Legal Reasoning:
– Dynegy promised to pay for legal services that
Yates was to provide Olis because Olis was an
officer of Dynegy
• Olis was under investigation for actions taken in
connection with his work for Dynegy that provided
substantial benefits to Dynegy
– Dynegy’s promise was a primary obligation and
not a promise to pay the debt of another, thus
statute of frauds is inapplicable
– Breach of contract claim affirmed in favor of Yates
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12. Exception to
Collateral Contract Rule
• Under the main purpose or leading
object rule, no writing is required where
the guarantor makes a collateral
promise for the main purpose of
obtaining personal economic
advantage
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13. Covered Contracts: Real Estate
• Contracts for the transfer or sale of an
interest in real estate
– Some states require a writing for leases
and certain easements on real property
– Exception: if vendor fully performed on
the contract or vendee reasonably relied
on the contract to his/her detriment
• Then statute of frauds does not apply
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14. Covered Contracts: One Year Rule
• Bilateral contracts that cannot be
performed within a year from the date
of their formation (one year rule)
– Is performance possible within year?
• Probability of performance irrelevant
– Example: Jack signs contract to consult
with Company X for 13 months, so the
contract must be in writing
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15. Schaadt v. St. Jude Medical S.C., Inc.
• Facts & Reasoning:
– Schaadt fired by St. Jude before end of
alleged one-year employment contract
and filed suit
– Question is whether parties can fully
perform their obligations under contract
within one year if those obligations are
not excused
• Schaadt’s obligations begin after St. Jude’s
employment of Schaadt for one year
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16. Schaadt v. St. Jude Medical S.C., Inc.
• Reasoning and Holding:
– Since obligations cannot
be fulfilled within one year,
Statute of Frauds requires
a writing
– St. Jude (party charged
with breach) did not sign
the contract, thus the
contract is unenforceable
at St. Jude’s option
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17. Covered Contracts: $500+ in Goods
• UCC 2-201: contracts for the sale of
goods for a price of $500 or more
• Includes agreements to modify existing
sales contracts if contract as modified is
for a price of $500 or more [UCC section
2–209(3)]
• Example: Pam buys a refrigerator for $501,
thus a writing is required to be enforceable
– No writing required for <$500 refrigerator
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18. Other Covered Contracts
• Though uncommon, the statute of frauds
requires a writing to evidence (a) contracts
in which an executor or administrator
promises to be personally liable for debt of
an estate, or (b) contracts in which
marriage is the consideration
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19. Satisfying the Statute of Frauds
• Most states require only a signed
memorandum of the parties’
agreement stating the essential terms:
– (a) identity of parties, (b) subject matter
identified with reasonable certainty, and
(c) signed by the party to be charged
– The memorandum need not be made
at the same time the contract comes
into being
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20. Satisfying the Statute of Frauds
• UCC 2–201: writing must be sufficient to
indicate a contract for sale has been made
between the parties, but must indicate the
quantity of goods to be sold
– A sales receipt may satisfy the requirement
• Sufficient writing includes: (a) confirmatory
memorandum between merchants, (b) part
payment or part delivery, (c) admission in
pleadings or court, and (d) specially
manufactured goods
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21. Green Garden Packaging Co., Inc. v. Schoen
• Decision:
– Summary judgment evidence conclusively
established that alleged agreement that
Green Garden seeks to enforce against
Schoenmann was for a sale of goods over
$500, so UCC § 2.201 applies to bar breach
of contract claim unless exception applies
– Mere provision of information and samples
does not constitute partial performance
and no other exception applies; affirmed
16-21

22. Cyberlaw
• Electronic Signatures in Global and
National Commerce Act (E-Sign) of 2000
provides that in interstate commerce
transactions, an electronic signature has
the same legal effect as a handwritten
signature, and an electronic contract has
the same legal effect as a traditionally-
printed contract
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23. The CISG and a Writing
• The Convention on the
International Sale of
Goods does not require
any contract to be
written in order to be
enforceable
– A contract need not
take any particular
form, and can be
proven by any means
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24. The Parol Evidence Rule
• Parol evidence rule provides that, when
parties enter a written contract that they
intend as a complete integration (final
statement of agreement), a court will not
permit evidence of contemporaneous or
prior statements to contradict, add to, or
alter the terms of the written contract
• Example:
Hinkel v. Sataria Distribution & Packaging
16-24

25. More on Parol Evidence
• UCC 2-202 includes parol evidence rule
• Admissible parol evidence:
– Additional terms in partially integrated
contracts
– Explaining ambiguities
– Circumstances invalidating contract
– Existence of condition
– Subsequent agreements
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26. Parol Evidence Chart
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27. Test Your Knowledge
• True=A, False = B
– All contracts must be in writing to be
enforceable.
– A contract for the sale of a carpet for $499
must be in writing to be enforceable.
– Jill orally promised the President of First
Bank to pay Jack’s debt to First Bank if
Jack defaulted on the note. Jack
defaulted and Jill must pay Jack’s debt.
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28. Test Your Knowledge
• True=A, False = B
– Eric owes Sookie money, so Eric
contracts with LoanCo for a short-term
loan. Bill orally gave his personal
guaranty to LoanCo that Eric would
repay the loan. Eric defaulted and Bill
must repay the loan for Eric.
– If a state law conflicts with the federal
E-Sign, the provisions of E-Sign prevail.
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29. Test Your Knowledge
• Multiple Choice
– Parol evidence refers to:
a) The evidence required to prove a case
b) Written or spoken statements not contained
in the written contract
c) The lack of evidence
– E-Sign states that:
a) An electronic signature has the same legal
effect as a handwritten signature.
b) A contract in electronic form is not
enforceable unless proven with a hard copy
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30. Test Your Knowledge
• Multiple Choice
– Keisha agreed to sell Susan her Picasso
painting. She wrote the name of the painting
and $600 on a napkin. Both Keisha & Susan
signed the napkin. Susan paid Keisha the
money and Keisha:
a) May refuse to hand over the painting since
contract was on a napkin and is
unenforceable
b) Must give Susan the painting since the
contract satisfies the statute of frauds
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31. Thought Question
• Do the Statute of
Frauds and parol
evidence rule –
legal principles from
the 1600s – still make
sense in today’s
commercial world?
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