Contracts: Statute of Frauds: Exceptions

  • Exceptions to the Statute of Frauds (where there’s less chance of fraud) – no writing needed:
    • Real Estate: “Part performance” eliminates need for writing – statutory exception for short term leases.
      • Part performance in real estate contracts requires 2 of 3 things:
        • Some payment
        • Buyer makes permanent improvements.
        • Buyer is in possession of the property.
    • One-year prong: full performance eliminates need for writing
      • Sesame Street orally agrees to employ Big Bird for 2 years for $50,000, payable at the end of the term. Big Bird works for 2 years, but Sesame Street refuses to pay. Does Big Bird need a writing to satisfy the Statute of Frauds? No. There’s very little chance of fraud. Full performance is enough to take this contract out of the Statute of Frauds.
      • Part performance is not enough to satisfy the full performance exception. BUT look out for quasi-contract remedy for the reasonable value of benefit conferred.
    • Sale of goods (Article 2):
      • Goods the buyer accepted or paid for (but not the rest of the goods).
        • A-Rod orally agrees to buy 50 bats for $100 each. Seller delivers 20 bats. A-Rod keeps the 20 bats. Seller sues A-Rod for $2,000. Does A-Rod have a Statute of Frauds defense? No. A-Rod has the 20 bats, so there’s very little chance of fraud. Seller can recover the contract price for the 20 bats without a writing.
        • If Seller does not deliver the other 30 bates, does Seller have a Statute of Frauds defense? Yes, because this suit is about goods that have not been accepted by the buyer.
        • Same facts, but A-Rod had already paid Seller $5,000 for all 50 bats. There’s also an exception for goods the buyer has paid for. Seller took the payment, so he cannot complain that there’s no writing to satisfy the Statute of Frauds.
      • Custom-made goods not suitable for sale to others.
        • If the custom-made good isn’t suitable for sale to someone else in the ordinary course of seller’s business, no writing is needed to satisfy the statute of frauds.
      • Judicial admission in a pleading, in testimony or in response to discovery
      • Merchant’s confirmatory memo exception: a merchant can use its own writing to satisfy the Statute of Frauds against the other party to the contract if:
        • Both parties are “merchants”;
        • The writing claims there is a prior oral agreement; and
        • The recipient does not object in writing within 10 days.
        • Typically, 2 merchants agree over the phone and one follows up with a written confirmation. Article 2 ensures that the oral agreement is enforceable by allowing a merchant to use its own confirmatory memo to satisfy the Statute of Frauds against the other merchant.
    • MBESuretyship: If the surety’s main purpose in making the promise was to benefit himself, then there’s no need for a writing on the MBE.
      • Painter buys paint on credit from Lowe’s to paint House’s house. House orally promises to pay Lowe’s if painter doesn’t pay. Can Lowe’s enforce House’s oral promise against him? On MBE, if the Surety’s main purpose in making the promise is to benefit himself, then the surety’s promise is not within the Statute of Frauds. However, NY has no main purpose exception. The creditor (Lowe’s) will still need a writing to enforce House’s promise against him.
    • Equal Dignities Rule: Written authority to enter a contract on behalf of another is required if the underlying contract falls within the Statute of Frauds. This is a rule of real property law.
      • Izzie claims she is authorized to sign a two-year apartment lease on behalf of her roommates, George and Meredith. Does Izzie need written authorization? Yes, because under the equal dignities rule, if the underlying agreement falls within the Statute of Frauds (like a 2 year lease), then the agent needs written evidence of authority.
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