Statute of Frauds
Â• Reasons for requiring writing ? Shows whether someone is lying or not
? Similar reasons to consideration–evidentiary, cautionary, channeling
? Makes intent clearer
? Encourages specificity
? Historical record
? ‘Unfixity costs’–costs born because over time, people’s memory of exactly the same thing will differ
Â• Negatives ? Lack of writing can allow people who intended to be bound at time of contract to get out of it
Â• England has done away with Statute of Frauds–is it really necessary for us?
Â• Differences between California and Connecticut Statutes: ? California Statute probably dominated by interests of Lending Institutions
? Connecticut more traditional contract basis
Â• Particular strictness with respect to brokerage agreements ? High potential for dishonesty
? Disparity in information
Why the one-year clause? ? Risks of unfixity
Â• Significance–we expect more significant contracts to be put in writing. Thus, we are more comfortable imposing statute of frauds on significant contracts, since we will be more suspicious of them being binding when they aren’t in writing.
Â• Lifetime employment cases ? Because lifetime employment contract could be ‘completed’ in less than one year, courts often don’t require such a contract to be in writing–counterintuitive because usually a ‘lifetime’ contract will be longer than a fixed employment contract, which does need to be in writing.
Â• Recording Issues ? How much of contract has to be in writing for it to be valid under statute of frauds?
? Who has to sign for contract to be valid?
? What does it mean to ‘sign’ a contract?
? Does everything need to be in one writing?
Â• Answer to these questions is a ‘muddle’, but:
Â• Key provisions needs to be in writing.
Â• Fields where full provisions would need to be in writing: surety, real estate.
Â• Other fields: would just need evidence that agreement exists, in writing.
Â• Mental leap: if you prove that you have satisfied statute of frauds, you have proved that agreement exists. But in fact satisfying statute of frauds only means you have passed an initial bar.
UCC 2-201: Formal Requirements; Statute of Frauds.
1. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
Â• Various standards are used as to ‘sign’. Sometimes just written signature; sometimes notarized signature; in the case of securities transactions, often bank seal is required.
Â• Exception in UCC for transactions between merchants: Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
Â• Frequent example, where grain dealer contacts a number of farmers for price on grain, grain dealer sends in order, then farmer refuses to perform (because grain prices have gone up). Question then becomes whether farmer is a merchant.
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The Statute of Frauds Explained in the United States of America
(In the U.S. law)
- Contracts (in international or comparative law)