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Business Law

Business Law. Chapter 7: Putting It In Writing . Introduction to Written Contracts. The vast majority of business contracts are in some form of writing. The Statute of Frauds.

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Business Law

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  1. Business Law Chapter 7: Putting It In Writing

  2. Introduction to Written Contracts • The vast majority of business contracts are in some form of writing.

  3. The Statute of Frauds • The Statute of Frauds is an ancient legal doctrine that requires certain forms of contracts to be in writing before they will be enforceable.

  4. A Short History of the Statute of Frauds in America • Most states adopted the original English statute verbatim and have made very few changes to it since.

  5. Categories of Transactions That Fall Under the Statute of Frauds • The Statute of Frauds covers the following types of transactions: 1. Contracts involving testamentary transactions (wills, etc.) 2. Contracts to answer for the debt of another.

  6. 3. Contracts in anticipation of marriage (prenuptial/antenuptial agreements) 4. Contracts for the sale of land • Contracts that cannot be performed within one year of the date of their creation.

  7. 1. Contracts for the sale of goods exceeding $500 in value • Uniform Commercial Code §2-201 2. Contracts for the sale of securities (stocks, bonds) • Uniform Commercial Code §8-319

  8. Contracts involving testamentary transactions (wills, etc.) • When a person makes disposition of his or her property through a will, the law requires that the will be in writing.

  9. Contract to answer for the debt of another • Voluntarily assuming another person’s debt is a significant legal transaction and will place this person in the position of paying off the entire balance owed by another.

  10. Prenuptial/antenuptial agreements • When two people are contemplating marriage and enter into an agreement about how their marital estate will be divided in the event of divorce, this agreement is covered by the Statute of Frauds.

  11. Live-in Lovers • In recent years many states have amended their Statute of Frauds to include agreements between persons who cohabit but do not marry.

  12. Contracts for the sale of land • Requiring a writing in real estate transactions may have been one of the primary reasons for the creation of the original Statute of Frauds.

  13. The sale of real estate, especially personal residences, remains one of the biggest financial transactions most people will ever be involved in.

  14. Contracts that cannot be performed within one year of the date of their creation • All states have a provision of their Statute of Frauds that requires any agreement that cannot, by its own terms, be performed within a year to be in writing.

  15. Calculating Time Periods Under the Statute of Frauds • The time period runs from the date of the agreement, not the date that actual performance of the contract begins. • The year expires on the same date the following year, at the conclusion of the day (midnight), unless some other time is expressly provided.

  16. What Type of Writing Satisfies the Statute of Frauds? • Under the Statute of Frauds a “writing” must identify the following elements: • The Parties • The Property • The Consideration • The Promises • The Time and Manner of Performance

  17. No Particular Contract Form is Required • Under the Statute of Frauds there is no requirement that a specific type of contract form be used.

  18. Memorandum of Contract • A memorandum of contract is simply a printed memorandum that notes the important details of the contract.

  19. Preparing the Writing • There is no requirement that ink be used to prepare the contract or the memorandum of contract.

  20. Wording Required Under the Statute of Frauds • Courts have been very liberal in interpreting the language required to create a binding contract under the Statute of Frauds.

  21. Signature of the Parties • Before a contract can be enforced against a party, that party must have signed it.

  22. Is Delivery of the Writing Required? • There is no delivery requirement under the Statute of Frauds.

  23. An Exception to the Statute of Frauds: Partial Performance • Carrying out some, but not all, of a contract, or doing something in reliance on another’s promise.

  24. Alleging the Statute of Frauds in Pleadings • When a contract is in dispute, the plaintiff must prove that the writing is a transaction that is covered by the statute.

  25. The Statute of Frauds under the UCC • With the adoption of the Uniform Commercial Code in all states (in more or less complete form), the Statute of Frauds underwent a significant change.

  26. Two elements to UCC’s Statute of Frauds 1. When the contract involves the sale of goods for the price of $500 or more, or 2. Contracts for the sale of securities (stocks, security agreements, bonds and other personal property not already covered in other sections)

  27. Exceptions to the UCC’s Rule on the Statute of Frauds • A writing is not required for specially manufactured goods, or • When a party admits in a court that an oral contract existed, or • If the goods have been delivered, paid for and accepted.

  28. Concerns with Written Contracts • Drafting contracts has its own specific set of concerns.

  29. Special Clauses in Contracts • The rule followed in all jurisdictions is that any ambiguities in the contract are construed against the party who created them.

  30. Statute of Frauds Considerations in Drafting Contracts • The first question that should be asked before drafting a contract is: Does the Statute of Frauds apply?

  31. Internal Inconsistencies in a Contract • Faced with two possible clauses, one in typed print and the other garbled handwriting, the courts usually opt for the former.

  32. The Statute of Frauds and Real Estate Transactions • Almost all types of real estate conveyances require a writing to be enforceable under the Statute of Frauds

  33. Listing Agreements • Listing agreements are the contract between a real estate broker and the seller.

  34. Offer of Purchase and Contract • This contract sets out the negotiated details between the buyer and seller, including: • The sale price

  35. The date for the closing • The purchase of any items of personal property inside the home (such as drapes, window treatments, or appliances)

  36. The conditions upon which the sale is predicated, such as obtaining sufficient financing to purchase the home and a passing report on the structure by a building inspector • Particular contract clause provisions, such as “time is of the essence.”

  37. Time is of the Essence Contract Clause • When an offer of purchase and contract contains a “time is of the essence” clause, this means that the parties have negotiated a specific date for the closing.

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