Section 10.1

1. Section 10.1

2. Chapter 10 Form of a Contract Section 10.1 The Statute of Frauds Section 10.2 Special Rules and Formalities

3. What You’ll Learn • How to explain the purpose of the Statute of Frauds (p. 206) • How to explain the legal status of a contract that is not in writing (p. 206)

4. What You’ll Learn • How to identify the elements that must be included in a written contract (p. 206) • How to deal with contradictory and ambiguous terms in a written agreement (p. 207)

5. What You’ll Learn • How to identify which contracts must be in writing (p. 208)

6. Why It’s Important Understanding which contracts must be in writing, as well as the elements of a writing, will help you avoid pitfalls associated with the Statute of Frauds.

7. Legal Terms • breach of contract (p. 206) • perjury (p. 206) • Statute of Frauds (p. 206) • memorandum (p. 206) • goods (p. 213) • real property (p. 213)

8. Section Outline Purpose of a Writing Elements of a Writing Evaluating Contradictory Terms Evaluating Ambiguous Clauses

9. Section Outline Contracts That Must Be in Writing Contracts to Pay Debts of Others Contracts to Pay Debts of Deceased Persons Contracts Requiring More Than a Year to Perform

10. Section Outline Contracts That Must Be in Writing, continued Contracts in Consideration of Marriage Contracts for Sale of Goods of $500 or More Contracts to Sell Real Property

11. Pre-Learning Question Why do you think some contracts should be in writing?

12. Purpose of a Writing In early England, contracts did not have to be written to be fully enforceable. Persons could be brought to trial for breach of written or oral contracts.

13. Purpose of a Writing A breach of contract is a wrongful failure to perform one or more promises of a contract.

14. Purpose of a Writing Only persons who were not parties to the contract could be witnesses in court. To protect their friends or self-interests, witnesses often made false statements under oath in court.

15. Purpose of a Writing Making such false statements is called perjury and is a crime.

16. Purpose of a Writing To discourage such practices, Parliament passed the “Act for the Prevention of Frauds and Perjuries,” which became known as the Statute of Frauds. It required certain contracts to be in writing to be enforceable.

17. Purpose of a Writing Most states now have a Statute of Frauds, which are state laws requiring that certain contracts be evidenced by a writing.

18. What is a breach of contract?

19. ANSWER A wrongful failure to perform one or more promises of a contract.

20. Pre-Learning Question What elements should be present in a written contract?

21. Elements of a Writing A memorandum is the written evidence of an agreement, need not be formal, and could be: • a letter • a sales slip • an invoice • a telegram • words written on a check

22. Elements of a Writing Elements of a writing should identify the following: • Place • Date • Parties involved • Subject matter

23. Elements of a Writing • Price and terms • Intent of the parties • Signature of the party who may be charged

24. Evaluating Contradictory Terms If changes are made to a contract, the court will uphold the most recent terms. • If handwritten changes are made to a typewritten or printed contract, the handwritten terms will prevail.

25. Evaluating Contradictory Terms • Typewriting prevails over printing. • A dollar amount written in words will prevail over the amount written in figures.

26. 10.1 Contradictory Terms

27. Evaluating Ambiguous Clauses When a written contract can be understood in different ways, the court will lean in favor of the party who did not draft the contract and against the one who drafted it.

28. Pre-Learning Question What type of contracts do you think should be in writing?

29. Contracts That Must Be in Writing Every state has a law requiring that certain kinds of contracts be in writing to be enforceable.

30. Contracts to Pay Debts of Others A contract that one person makes with another to pay the debts of someone else must be in writing to be enforceable.

31. Contracts to Pay Debts of Deceased Persons An executor uses property from the estate to pay off any debts. If the estate lacks the money to pay the debt, the executor may promise to pay them with his or her own money.

32. Contracts to Pay Debts of Deceased Persons Such an agreement, which is actually an agreement to pay another’s debts, must be in writing to be enforceable.

33. Contracts Requiring More Than a Year to Perform All contracts must be written if they cannot be performed within one year of the date they are made. The year legally begins when the contract is made, not when performance is to start.

34. Contracts in Consideration of Marriage When two persons agree to marry, a written contract is not required. The promises they make to one another serve as the consideration for the contract.

35. Contracts in Consideration of Marriage However, if one person agrees to marry another person in return for a third person’s promise of money or property, then the agreement must be in writing.

36. Contracts for Sale of Goods of $500 or More A contract for the sale of goods for the price of $500 or more must be in writing to be enforceable.

37. Contracts for Sale of Goods of $500 or More Goods consist of movable items, including specially manufactured items. Furniture, books, livestock, cultivated crops, clothing, automobiles, and personal effects of any kind are considered goods.

38. For contracts requiring more than a year to perform, when does the year legally begin?

39. ANSWER When the contract is made.

40. Contracts to Sell Real Property Contracts for the sale of real property, which is land and anything permanently attached to it, must be in writing to be enforceable.

41. Section 10.1Assessment Reviewing What You Learned • What is the purpose of the Statute of Frauds?

42. Section 10.1Assessment Reviewing What You Learned Answer To prevent fraud and perjury

43. Section 10.1Assessment Reviewing What You Learned • What is the legal status of a contract that is not is writing?

44. Section 10.1Assessment Reviewing What You Learned Answer A contract that is supposed to be in writing, but which is not, is unenforceable.

45. Section 10.1Assessment Reviewing What You Learned • What are the elements that must be included in a written contract?

46. Section 10.1Assessment Reviewing What You Learned Answer Place, date, parties, subject matter, price and terms, and intent of the parties.

47. Section 10.1Assessment Reviewing What You Learned • How are contradictory and ambiguous terms in a written agreement interpreted by a court?

48. Section 10.1Assessment Reviewing What You Learned Answer With contradictory terms, the court will uphold the most recent terms. The court will interpret ambiguous clauses against the person who wrote the contract.

49. Section 10.1Assessment Reviewing What You Learned • What contracts must be in writing?

50. Section 10.1Assessment Reviewing What You Learned Answer Contracts to pay the debts of others and to pay the debts of deceased persons, contracts requiring more than a year to perform, and contracts in consideration of marriage.