Chapter 12: Contracts in Writing and Third-Party Contracts

Chapter 12Contracts in Writing and Third-Party ContractsStatute of FraudsDefinition: Rule of state law requiring certain types of contract to be in writing in order to be enforceablePurposes of Statute of FraudsEase contractual negotiations by requiring sufficient, reliable evidence to prove existence and specific terms of contractPrevent unreliable, oral evidence from interfering with contractual relationshipPrevent parties from entering into contracts with which they do not agreeContracts Subject to Statute of FraudsContracts that cannot be performed within one year from the date of their makingPromises made in consideration of marriage (Prenuptial agreements)Contracts to pay the debt/default of another partyReal estate contractsContracts for the sale of goods valued at $500 or moreThe “Equal Dignity” RuleRecognized in a minority of jurisdictionsRequires contracts negotiated by an agent, that would normally fall under the Statute of Frauds if negotiated by the principal, to still be in writingExceptions to Statute of Frauds Writing RequirementAdmission: 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 PerformancePromissory Estoppel: Legal enforcement of otherwise unenforceable contract, due to party’s detrimental reliance on contractMiscellaneous exceptions recognized by Uniform Commercial Code (UCC): Examples—Oral contracts between merchants, oral contracts for customized (“specially manufactured”) goodsStatute of Frauds Writing RequirementsCommon 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)Under common law, aforementioned elements can be contained in a memorandum, written document, or compilation of several written documentsStatute of Frauds Writing Requirements (Continued)Uniform Commercial Code (UCC)—Written contract for sale of goods must include quantity of goodsUCC allows variety of written documents to constitute a writing, including faxes, e-mails, invoices, bills of lading, sales slips, checks, or any combination of these documentsParole Evidence RuleDefinition: 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 agreementPurpose of Parole Evidence RuleLends stability, predictability and integrity to written contractsExceptions to Parole Evidence RuleContracts that are subsequently modifiedContracts conditioned on orally agreed-upon termsContracts that are not final, as they are part written and part oralContracts with ambiguous termsIncomplete contractsContracts with obvious typographical errorsVoidable or void contractsEvidence of prior dealings or usage of tradeIntegrated ContractsDefinition: Written contracts within statute of frauds intended to be complete and final representation of parties’ agreementGeneral Rule: Integrated contracts prevent admissibility of parole evidenceThird Party Rights to ContractsObligor and Obligee (Definitions):Obligor: Contractual party who owes duty to other party in privity of contractObligee: Contractual party owed duty from other party in privity of contractAssignment (Definitions):Assignment: Transfer of rights under a contract to a third partyAssignor: Party to contract who transfers his/her rights to a third partyAssignee: Party (not in privity of contract) who receives transfer of rights to a contractContractual Rights That Cannot Be AssignedRights that are personal in natureRights that would increase obligor’s risks/dutiesRights in a contract that, by its terms, expressly forbids assignmentsRights whose assignment prohibited by law/public policyDelegation (Definitions):Delegation: Transfer of duty under a contract to a third partyDelegator: Party to a contract who transfers his/her duty to a third partyDelegatee: Party (not in privity of contract) who receives transfer of duty to a contractContractual Duties That Cannot Be DelegatedDuties personal in natureDuties resulting in performance substantially different from that which obligee originally contracted (i.e., delegatee’s performance will vary significantly from delegator’s)Duties in a contract that expressly forbids delegationThird Party Beneficiary Contracts: DefinitionsIntended Beneficiary: Third party to contract whom contracting parties intended to benefit directly from contract. Intended beneficiaries can sue to enforce contract obligationsPromisor: Party to contract who made promise that benefits third partyPromisee: Party to contract who owes something to promisor in exchange for promise made to third-party beneficiaryThird Party Beneficiary Contracts: Definitions (Continued)Creditor beneficiary. Third party who benefits from contract in which promisor agrees to pay promisee’s debtDonee beneficiary: Third party who benefits from contract in which promisor agrees to give a gift to third partyVesting: Maturing of rights, such that a party can legally act on the rightsIncidental Beneficiary: Third party who unintentionally gains benefit from contract between other parties. Contracting parties do not intend to benefit incidental beneficiary. Incidental beneficiaries cannot sue to enforce contract obligationsCreditor Versus Donee Beneficiaries Creditor BeneficiaryContractual performance fulfills obligation to third partyBeneficiary can enforce rights to contract if contract valid and rights have vestedBeneficiary can enforce rights against promisor or promiseeDonee BeneficiaryContractual performance gives a gift to third partyBeneficiary has limited ability to enforce contract (depending on jurisdiction)Beneficiary can enforce rights against promisor