Dynamic business law 4e kubasek 4e CH18

The written agreement between the parties stipulated that Black Aquifer had six months from the date of the contract's execution to complete the work.. Also included in the written agr

Chapter 18

Contracts in Writing

of frauds?

writing to satisfy the statute of frauds?

sufficient to satisfy the statute of frauds?

evidence rule?

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Chapter 18 Hypothetical Case 1

• Black Aquifer Construction Company, Inc contracted with Amalgamated Machining Corporation to

erect a commercial building on property owned by Amalgamated in Folkston, Georgia The written

agreement between the parties stipulated that Black Aquifer had six months from the date of the

contract's execution to complete the work Also included in the written agreement was a

liquidated damages clause requiring Black Aquifer to pay Amalgamated Machining $2,500 per day

for every day the builder was late in the completion of its work.

Black Aquifer finished construction of the building in seven months, and Amalgamated Machining

now seeks to recover $75,000 in liquidated damages ($2,500 per day multiplied by thirty days)

Black Aquifer refuses to pay the $75,000 The company's owner, Richard Black, recalls that in a

conversation during the contract's execution, Amalgamated Machining's owner, William Riddell,

informed him that his company could have as long as nine months to finish the building Riddell

denies ever having made the statement.

• If the dispute goes to court, would a judge allow the jury to consider William Riddell's alleged

statement regarding the nine-month completion deadline? Ultimately, does Black Aquifer

Construction Company, Inc owe Amalgamated Machining Corporation $75,000 in liquidated

damages?

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Chapter 18 Hypothetical Case 2

• Assume two parties enter into an oral agreement that must generally be

in writing in order to be enforceable The statute of frauds indicates that

the following four types of agreements must be in writing: 1) contracts

whose terms prevent possible performance within one year; 2)

promises made in consideration of marriage; 3) contracts for one party

to pay the debt of another if the initial party fails to pay; and 4)

contracts related to an interest in land According to the Uniform

Commercial Code, contracts for the sale of goods totaling more than

$500 must also be in writing.

• From an ethical standpoint, even though the parties have entered into

an oral agreement, is it permissible for one of the parties to deny

liability based on the statute of frauds or Uniform Commercial Code

writing requirement? In your reasoned opinion, should a party honor an

oral contract, even though the law technically requires the agreement

to be in writing?

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Statute of Frauds

• Definition:

• Rule of state law requiring certain types of contract to be in

writing in order to be enforceable

• Purposes:

• Ease contractual negotiations by requiring sufficient,

reliable evidence to prove existence and specific terms of

contract

• Prevent unreliable, oral evidence from interfering with

contractual relationship

• Prevent parties from entering into contracts with which

they do not agree

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Contracts Subject to

Statute of Frauds

• Contracts that cannot be performed within one

year from the date of their making

• Promises made in consideration of marriage

(prenuptial agreements)

• Contracts to pay the debt/default of another

party

• Real estate contracts

• Contracts for the sale of goods valued at $500 or

more

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Statute of Frauds Writing

Requirements

• Common Law—Written contract must clearly

indicate:

• Parties to contract

• Subject matter/purpose of agreement

• Consideration given by both parties

• Significant terms (price, quantity, etc.)

• Signature of party plaintiff seeks to hold responsible

under contract (i.e., signature of defendant)

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Exceptions to Statute of Frauds

Writing Requirement

• Admission: Statement made in court, under oath, or at some

state during a legal proceeding in which defendant admits that

oral contract existed (even though contract was originally

required to be in writing)

• Partial performance: Performance of portions of unwritten

agreement can constitute proof that oral contract exists

• Promissory estoppel: Legal enforcement of otherwise

unenforceable contract due to party's detrimental reliance on

contract

• Miscellaneous exceptions recognized by Uniform Commercial

Code (UCC): Examples—Oral contracts between merchants,

oral contracts for customized (specially manufactured) goods 18-8

Parol Evidence Rule

• Common law rule stating that oral evidence of

agreement made before or

contemporaneously with written agreement is

inadmissible when parties intended to have

written agreement be complete and final

version of agreement

• To prevent evidence that substantially

contradicts the agreement in its written form 18-9

Exceptions to Parol

Evidence Rule

• Contracts that are subsequently modified

• Contracts conditioned on orally agreed-upon terms

• Contracts that are not final, as they are part written

and part oral

• Contracts with ambiguous terms

• Incomplete contracts

• Contracts with obvious typographical errors

• Void or voidable contracts

• Evidence of prior dealings or usage of trade will

provide clarification 18- 10

Integrated Contracts

• Definition: Written contracts within statute

of frauds intended to be complete and

final representation of parties' agreement

admissibility of parol evidence

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Chapter 18 Hypothetical Case 3

• On January 2, Wabash Construction Company, a general contractor, executed a written contract with

Anderson Brick, Inc., a subcontractor The contract relates to a major strip mall building project in

Morgantown, and Wabash faces a deadline of October 31 in its contract with The Mackie Consortium,

L.L.C., the owners of the new mall In the agreement between Wabash and Anderson, the parties stipulate

that time is of the essence in terms of performance of the bricklaying work, and that the deadline for

Anderson's completion of the bricklaying work is July 15 There is also a liquidated damages clause in the

contract between Wabash and Anderson, indicating that Anderson will pay $2,000 in damages for every

day the bricklaying remains incomplete beyond July 15

Anderson does not complete the bricklaying work by July 15 In fact, the project is not finished until

August 30, and Wabash now claims liquidated damages from Anderson in the amount of $92,000

(representing 46 days beyond the July 15 deadline, multiplied by $2,000 per day.) Anderson refuses to pay

the $92,000, and Wabash sues

At trial, Anderson's attorney seeks to introduce the following evidence: 1) the testimony of Henry

Anderson, Anderson's owner, who is willing to testify under oath that at the time of the signing of the

contract, Wabash's general manager, Fred Stein, said, "Pay no attention to the July 15 deadline in the

contract; if you need more time, all you have to do is ask"; and 2) a crumpled index card, purportedly in

Fred Stein's handwriting, indicating that there was "no 'hard and fast' deadline on Anderson Brick's work."

• Should the trial court judge admit the foregoing evidence?

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Chapter 18 Hypothetical Case 4

• Ginny Sandford agrees to buy a used car from her cousin, Cindy

Markham, for $1,500 Although the total amount of the sale

requires a contract in writing, Sandford and Markham have only an

oral agreement.

Sandford keeps the car for two months and then decides she does

not want it after all She returns the car to Markham and demands

her money back Markham sues, and in court, Sandford says, "Well,

just because I said I'd buy the car at one point in time doesn't mean I

really wanted it I didn't sign anything or formally agree to anything

Cindy has no proof that a contract existed."

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