Basics
• In general, a writing is not required to
create a legally enforceable contract
• However, a writing is preferable to an
oral contract for a number of reasons:
more definite, signature provides
authentication, and use as evidence
• Sometimes, a writing is required…
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The Statute of Frauds
• In 17th Century
England, the Statute of
Frauds was enacted to
prevent fraud by
requiring written
evidence before
enforcing certain types
of contracts
• - American
states
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Covered Contracts
•
•
•
•
Collateral contracts
Contracts for real estate
Contracts for more than one year
Contracts for sale of goods over
$500
• Executor’s promise
• Marriage as consideration
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Covered Contracts
• Collateral contracts in which a
person (guarantor) promises to
perform an obligation of another
person (principal debtor) to a
third person (obligee)
–Example: Bob is a personal
guarantor on a loan from City Bank
to Bob’s brother, John
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The Collateral Contract
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Exception to Collateral Contract
Rule
• Under the main purpose or
leading object rule, no writing is
required where the guarantor
makes a collateral promise for
the main purpose of obtaining
personal economic advantage
• See Wintersport Ltd. v.
Millionaire.com, Inc.
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Wintersport Ltd. v. Millionaire.com
Inc.
• Facts & Procedural History:
– Wintersport Ltd. printed one issue of
Millionaire.com’s magazine
– They negotiated to print another issue, but
order and price cut due to magazine’s
financial trouble
– Concerned over creditworthiness, Leiter
(Wintersport) told Strong (Millionaire.com)
that Wintersport would only extend credit to
Millionaire.com if the firm paid a $10,000
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down payment and a stockholder (White)
Wintersport Ltd. v. Millionaire.com
Inc.
• Facts & Procedural History:
– White (Millionaire.com) gave Leiter personal
guaranty via the phone and sent a $10,000
check
– Millionaire.com failed to pay balance and
Wintersport sued Millionaire.com
– Trial court entered judgment for Wintersport
against Millionaire.com and White, but White
appealed, arguing that the action should
have been dismissed because the statute of
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frauds prevented the enforcement of his oral
Wintersport Ltd. v. Millionaire.com
Inc.
• Issue and Legal Reasoning:
– Does the statute of frauds prevent
enforcement of White’s oral guaranty?
– An original promise – outside statute of
frauds – occurs when the promisor receives
a direct benefit from the promise
– Wintersport did not show that White’s benefit
was anything more than an indirect incident
of share ownership
– Reversed and dismissed in favor of White
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Covered Contracts
• Contracts for the transfer or sale
of an interest in real estate
– Some states require a writing for
leases and certain easements on real
property
– Exception: if vendor fully performed on
the contract or vendee reasonably
relied on the contract to his/her
detriment
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Covered Contracts
• Bilateral contracts that cannot be
performed within a year from the
date of their formation (one year
rule)
–Is performance possible within
year?
• Probability of performance irrelevant
–Example:
Jack
signs
contract
to
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Covered Contracts
• UCC 2-201: contracts for the sale of
goods for a price of $500 or more
• Includes agreements to modify
existing sales contracts if contract as
modified is for a price of $500 or
more [UCC section 2–209(3)]
• Example: Pam buys a refrigerator for
$501, thus a writing is required to be
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enforceable
Covered Contracts
• Though uncommon, the statute of
frauds requires a writing to
evidence (a) contracts in which
an executor or administrator
promises to be personally liable
for debt of an estate, or (b)
contracts in which marriage is the
consideration
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Satisfying the Statute of Frauds
• Most states require only a signed
memorandum of the parties’
agreement stating the essential
terms:
– (a) identity of parties, (b) subject
matter identified with reasonable
certainty, and (c) signed by the party to
be charged
16 - 14– Memorandum need not be made at
Satisfying the Statute of Frauds
• UCC 2–201: writing must be
sufficient to indicate a contract for
sale has been made between the
parties, but must indicate the quantity
of goods to be sold
– A sales receipt may satisfy the
requirement
• Sufficient writing includes (a)
confirmatory memorandum between
merchants, (b) part payment or part
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Consequences
• If a covered contract does not
satisfy the requirements of the
statute of frauds, the contract is
unenforceable
• A person injured by the
unenforceable contract may
pursue an action based on quasicontract or promissory estoppel
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The CISG & a Writing
• The Convention on
the International
Sale of Goods
does not require
that a contract be
in writing to be
enforceable
– A contract need not
take any particular form,
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Cyberlaw
Electronic Signatures in
Global and
National Commerce Act (E-Sign) of 2000
The federal E-Sign provides that in
interstate commerce transactions, an
electronic signature has the same legal effect
as a handwritten signature, and an electronic
contract has the same legal effect as a
traditionally-printed contract
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The Parol Evidence Rule
• The parol evidence rule provides
that, when parties enter a written
contract that they intend as a
complete integration (final
statement of agreement), a court
will not permit the use of evidence
of prior or contemporaneous
statements to add to, alter, or
contradict the terms of the written
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Watkins & Sons Pet Supplies v.
the lams Company
• Facts & Procedural History:
– Iams, a pet food manufacturer,
required distributors, including
Watkins, to sign yearly written
distributorship agreements
– Iams offered a 2% discount to
distributors who sold Iams products
exclusively
– Watkins alleged it became an
exclusive Iams distributor because it
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Watkins & Sons Pet Supplies v.
the lams Company
• Facts & Procedural History:
– Contract of 1/31/93 stated that Iams
“may appoint any other distributor to
sell Products within the Territory” and
contained an “entireties” clause
– The contract expired by its terms and
Iams gave an exclusive distribution
contract to a competitor of Watkins
– Watkins sued and district court granted
summary judgment to Iams; Watkins
appealed
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Watkins & Sons Pet Supplies v.
the lams Company
• Issue:
– Was Watkins’ reliance on alleged
representations of Iams reasonable?
• Law Applied to Facts :
– The four corners of the document
determine the terms of the agreement
– When a written contract is the final
statement of the parties’ agreement (a
complete integration), the parol evidence
rule prohibits the parties from introducing
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Watkins & Sons Pet Supplies v.
the lams Company
• Holding:
– The integration
clause in the contract
makes Watkins’s
reliance on Iams’s
representations
unreasonable as a
matter of law
– Affirmed in favor of
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Iams
More on Parol Evidence
• UCC 2-202 includes parol
evidence rule
• Admissible parol evidence:
– Additional terms in partially integrated
contracts
– Explaining ambiguities
– Circumstances invalidating contract
– Existence of condition
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Parol Evidence Chart
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