Statute of Frauds I Contracts March 3 2016

Statute of Frauds I Contracts – March 3, 2016

Agenda • Types of agreements covered: categories • Other requirements • Writing • Signed

The Agreement

Both can be K’s – in the absence of the So. F

Statute of Frauds (So. F): History • Common law courts, 17 th C • Perjury; “subornation” of perjury • Structure and incentives

Common provisions Cal. Civ. Code § 1624 (a)(1) K cannot be performed w/in 1 yr. (a)(2) Suretyship (a)(3) Lease and other real property transactions

Main Requirements • Writing • Signed – but by whom? • See Cal statute

“party sought to be charged” • The party trying to get out of the K; the one the “pro-enforcement” party is “charging” with the K

Why these provisions? • 1 yr • Suretyship • Real property

Lord Mansfield

Chief justice of the Court of King's Bench from 1756 to 1788, was the foremost judicial voice shaping English common law during that era.

“What is surprising about the English common law of the second half of the 18 th century is how much is familiar to us today, ” he said. “Many of the basic ideas and principles of current American law were forged in this earlier time. ” -- Prof. James Oldham, English Common Law in the Age of Mansfield (U. N. C. Press 2004)

Q: Is the agreement “within the statute”? • Categories of agreements; see local (state) statute

CR Klewin v. Flagship Props. • Procedural history

CR Klewin v. Flagship Props. • Procedural history • Certified by 2 d Circuit to Sup Ct Connecticut

Facts

Facts • What was the agreement here?

Agreement • 3/86: “We’ve got a deal”

Agreement • 3/86: “We’ve got a deal” • Dissatisfaction by October, 1987 • New construction mgt firm, March 1988

Estimated duration? • Three to 10 years

Two certified questions • “Indefinite duration” K and the “one year” clause • Contemplated performance more than 1 year but no term stated in the K

Relevance of history

Relevance of history • Affects how the court interprets the provisions of the S o F

Relevance of history • Affects how the court interprets the provisions of the S o F • “Courts look with disfavor” – p. 283

Relevance of history • Affects how the court interprets the provisions of the S o F • “Courts look with disfavor” – p. 283 • Connecticut precedent: what trend?

Main question

Main question • “performance cannot possibly be peformed within one year” • What does “possibly” mean here?

Holding here • “cannot possibly be performed within one year” means under the express terms of the contract • The K itself rules out performance in less than a year • Not surrounding facts

LIFETIME AGREEMENTS (p. 288 -289) 1. Would a contract that said “A promises to work for B for 5 years, but B may fire A at any time upon 1 month’s notice” be within the SOF? What if B can fire A only for cause? 2. What if a contract of employment was “for 6 montshs, with an option on the part of employee to extend it for 4 years”?

(B) INTERESTS IN REAL PROPERTY (p. 290) • Please read!

CONTRACTS FOR THE SALE OF LAND (p. 291) Problems • Which if any of the following would fall within the land contract provision of the SOF? Why? • An owner’s contract with a real estate broker to sell the owner’s land for a commission. • No. The contract conveys no title. Compare a contract to purchase a piece of real property on behalf of a third party, which would fall within the landcontract Statute of Frauds. • An option to purchase a piece of real property • Yes, probably. Most cases hold that an option to purchase is a transfer of an interest in property.

Problems p. 291 • An agreement revoking a contract for the sale of property? • No. Dolansky v. Dolansky, 939 N. Y. S. 2 d 210 (App. Div. 2012). Discharging an agreement transfers no title. • An agreement resolving a disputed boundary between 2 pieces of real estate? • No. Norberg v. Fitzgerald, 453 A. 2 d 1301 (N. H. 1982). This type of agreement does not transfer title; it resolves a dispute about the meaning of deeds.

Suretyship promise Olivia (Obligee) IOU $ Paige (Principal) Suretyship promise Sarah (Surety) Consideration? (surety may be compensated but in this case is not)

Why SOF for suretyships? • Evidentiary • Cautionary

Novation • Newcomer becomes the principal, rather than newcomer just guaranteeing that p will perform. • Do not fall within SOF

Ruh roh

LANGMAN V. ALUMNI ASSOCIATION OF THE UNIVERSITY OF VIRGINIA (p. 294) • Some candy boxes contain poison; “Read the deed” before seizing on it. What was the poison here? • Or, always give gift horse thorough dental exam. • The trial court was right in ruling that enforcement of the Association’s undertaking was not barred by the suretyship clause. • It was an “original” undertaking. • The Association would have made a suretyship undertaking if its promise had been directed to the holder of the mortgage, and if its promise was one of standby liability. (“Standby liability” is a handy variant of “secondary liability”. )

LANGMAN V. ALUMNI ASSOCIATION OF THE UNIVERSITY OF VIRGINIA (p. 294) • How would the case have stood if the Association had signed the deed? • If it had, it would have been accountable whether or not its undertaking was one of suretyship.

LANGMAN V. ALUMNI ASSOCIATION OF THE UNIVERSITY OF VIRGINIA (p. 294) • The transaction in question was neither of these. • Association undertook primary liability: “does assume payment”, reinforcing that with language of indemnification, “hold the Grantors harmless”. • its promise ran to the mortgagors, Langman and Stowe. • The significance of that is before the case: “An undertaking. . . made to a debtor. . ”

Problem p. 295 Caterpillar, Inc. made promise to see that nursing home would be paid for giving care to employee of C. She had suffered a workplace injury. Dr. Just admitted her to nursing home. Dr. J was employed by C to take care of this and similar cases. Dr. asked that bills be sent to C’s workers’ compensation division. C did not pay all the bills. Nursing home sued C for breach. C asserted suretyship provision of SOF. Nursing home argued that C’s promise was original not collateral. Which is it? What kinds of evidence would be helpful? What about testimony of Dr. as to what she meant on behalf of C? What would be most objective evidence?

Rosewood case • In the actual litigation, the trial court dismissed the action, referring to the suretyship clause of the Statute of Frauds. • On appeal, the Illinois Appellate Court reversed. • It relied on authority that, by its reading, limited a suretyship to the making of a promise with respect to the obligation of another, formed either before the suretyship relation or concurrent with it. • Caterpillar thus could not have been a surety for Cook, because Cook had no obligation to Rosewood when Caterpillar made its promise. • On further appeal, the Illinois Supreme Court reversed the Appellate Court, holding that this limitation did not exist. Right result?

THE MAIN-PURPOSE RULE (p. 295) CENTRAL CEILINGS, INC. V. NATIONAL AMUSEMENTS, INC. (p. 296) • Facts • What did National promise (allegedly) to Central? How did this come about? • What did National claim by way of defense? • But what result? • Why does this exception exist?

Problem, p. 298 • School of Self-Interest • Does the main interest doctrine apply? • (This is a fairly hard problem)