Part 3- Contracts, Chapter 16: Writing, Doc 2

This text explores the applicability and enforcement of the statute of frauds across various contract types, particularly focusing on collateral contracts, promises related to real estate, and long-term or performance-based agreements. It explains when written evidence is required for contract enforceability and includes exceptions for certain verbal contracts based on established principles and precedents. Key Points: 1. Collateral Contracts and Primary vs. Secondary Obligations: o In cases where one party promises to pay the debt of another (a collateral contract), the statute of frauds generally requires a written agreement. However, if the promisor’s obligation is primary— meaning they are agreeing to pay for their own benefit rather than solely to cover another’s debt—the oral promise may be enforceable. o In Dynegy v. Yates, the court upheld an oral promise from Dynegy to pay legal fees for an officer under investigation, determining it was a primary obligation as Dynegy intended to benefit from defending its reputation and the officer’s work on behalf of the company. 2. Real Estate Contracts: o Any contract transferring an interest in land must generally be in writing to be enforceable. This includes sales, leases (usually those exceeding one year), mortgages, and easements. However, exceptions include:  Full Performance by Vendor: If a seller completely performs their part of an oral real estate contract (e.g., delivering a deed), the contract may be enforceable.  Part Performance by Purchaser (Reliance): If a buyer relies on an oral contract, making substantial improvements or taking possession, courts may enforce the contract to avoid injustice. 3. Contracts Exceeding One Year: o A contract that, by its terms, cannot be completed within one year requires a writing under the statute of frauds. However, courts interpret this strictly; if a contract could theoretically be completed in one year (e.g., a contract for life), it may not require a writing. o In Schaadt v. St. Jude Medical, the court ruled that an employment contract with a nonsolicitation clause that extended beyond one year required a written agreement since the terms clearly anticipated obligations spanning over a year. 4. Signature Requirements: o The statute of frauds typically requires the party charged with enforcing the contract (the defendant) to have signed the written document. Without a signature, the contract may be unenforceable, as seen in Schaadt, where the court denied enforcement due to lack of a signature from St. Jude on an employment contract with significant terms. 5. Sales of Goods: o Under the UCC, sales contracts for goods valued at $500 or more require written evidence, although modifications (e.g., raising a contract price above $500) can also bring a contract within the statute. 6. Promises of Executors or Administrators: o An executor’s promise to pay a decedent’s debts personally, rather than through estate funds, must be in writing to be enforceable. Summary: The statute of frauds emphasizes the importance of written agreements in highstakes contracts to prevent fraud and clarify parties’ obligations. Exceptions, such as reliance-based part performance in real estate contracts, reflect judicial flexibility when equitable remedies are warranted. Cases like Dynegy and Schaadt illustrate nuances in interpreting “primary obligations” and multi-year commitments under the statute. The statute’s strict formal requirements, especially signatures and clearly documented terms, underscore the role of written contracts in ensuring contractual enforceability and protecting parties’ interests in complex transactions.