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Contracts and the Statue of Frauds

Contracts and the Statue of Frauds. When the Parole Evidence Rule Does Not Apply. Parole Evidence Rule: Prior or contemporaneous spoken words will not be allowed to modify or contradict the terms of a written contract that is complete on its face. . . . . . Provision

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Contracts and the Statue of Frauds

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  1. Contracts and the Statue of Frauds Chapter 16

  2. When the Parole Evidence RuleDoes Not Apply Parole Evidence Rule: Prior or contemporaneous spoken words will not be allowed to modify or contradict the terms of a written contract that is complete on its face.      • Provision • Omitted Due to: • Fraud • Accident • Mistake Incomplete Contract Illegality (Proof of Illegal Conduct) Ambiguity in Contract Modification of contract Chapter 16

  3. Hurdles in the Path of a Contract Chapter 16

  4. Chapter 16 Summary An oral agreement can be a contract unless it is the intention of the parties that they should not be bound by the agreement unless a writing is executed by them. If the parties intend to be bound by the oral agreement, it is a contract. As an exception to this statement, certain contracts must be evidenced by a writing, or else they cannot be enforced. The statutes that declare this exception are called statutes of frauds. Chapter 16

  5. Chapter 16 Summary (cont.) Statutes of frauds commonly require that a contract be evidenced by writing in the case of (1) an agreement that cannot be performed within one year after the contract is made, (2) an agreement to sell or a sale of any interest in real property, (3) a promise to answer for the debt or default of another, (4) a promise by the executor or administrator of a decedent’s estate to pay a claim against the estate from personal funds, Chapter 16

  6. Chapter 16 Summary (cont.) (5) a promise made in consideration of marriage, and (6) a contract for the sale of goods for a purchase price of $500 or more. Local statutes may expand the above list to include other types of contracts, such as a contract between a landowner and a real estate agent employed to sell the land. Chapter 16

  7. Chapter 16 Summary (cont.) In order to evidence a contract to satisfy a statute of frauds, there must be a writing of all material terms. This must be signed by the defendant against whom suit is brought for enforcement of the contract or damages for its breach. The signing may be made by printing, stamping, typewriting, or any other means that is intended to identify the particular party. Chapter 16

  8. Chapter 16 Summary (cont.) Two or more writings can be combined to form a writing sufficient to satisfy the statute of frauds, provided there is an express internal reference in the writings that ties them together. Chapter 16

  9. Chapter 16 Summary (cont.) If the applicable statute of frauds is not satisfied, the oral contract cannot be enforced. To avoid unjust enrichment, a plaintiff barred from enforcing an oral contract may recover from the other contracting party the reasonable value of the benefits conferred by the plaintiff on the defendant. To prevent the statute of frauds from being used to defraud a party to an oral contract, the courts by decision have made certain exceptions to the statute of frauds. Chapter 16

  10. Chapter 16 Summary (cont.) When there is a written contract, the question arises whether that writing is the exclusive statement of the parties’ agreement. If the writing is the complete and final statement of the contract, parol evidence as to matters agreed to before or at the time the writing was signed is not admissible to contradict the writing. This is called the parol evidence rule. Some courts have liberalized the rule so that parol evidence is admitted when it will aid in interpreting the writing. Chapter 16

  11. Chapter 16 Summary (cont.) In any case, the parol evidence rule does not bar parol evidence when (1) the writing is incomplete; (2) the writing is ambiguous; (3) the writing is not a true statement of the agreement of the parties because of fraud, accident, or mistake; or (4) the existence, modification, or illegality of a contract is in controversy. Chapter 16

  12. Chapter 16 Summary (cont.) The fact that the parties disagree about the meaning of a contract or that a court decision is required to settle the point does not make the writing ambiguous. Parol evidence may be used to prove that there is in fact no contract because there is a mutual mistake or the writing that has been executed does not correctly set forth the terms of the contract. Chapter 16

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