Week 4-1

Contracts—The Statute
of Frauds
 §2: The Statute of Frauds
To be enforceable, the following types of
contracts must be in writing and signed:
Contracts involving interest in land.
Contracts involving “One year rule.”
Collateral or Secondary Contracts.
Promise made in consideration of marriage.
Contracts for the sale of goods priced at $500
or more.
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 Contracts Involving
Interest in Land
Land includes all physical objects that
are permanently attached to the soil:
buildings, fences, trees, and the soil itself.
All contracts for the transfer of other
interest in land: mortgages and leases.

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 The One-Year Rule
A contract that cannot, by its own terms,
be performed within one year from the
date it was formed must be in writing to
be enforceable.
Test: Whether performance is possible
(even if unlikely) within one year.
One-year period begins to run the day
after the contract is made.

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 Collateral Promises
Primary v. Secondary Obligations.
“Main Purpose Rule” Exception .
Estate Debts.

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Contracts for the Sale of Goods
UCC requires a writing or memorandum
for the sale of goods priced at $500 or
more.
Exceptions:
Partial Performance.
Admissions.
Promissory Estoppel.
Special Exceptions under the UCC.

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§3: Sufficiency of the Writing
Under the Statue of Frauds.
Must name, identify subject matter,
consideration, other essential terms, and must
be signed by the the party against whom
enforcement is sought.
Under the UCC.
Need only name the quantity term and be
signed by the party to be charged.

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 §4: Parol Evidence Rule
If the court finds that the parties
intended their written contract to be a
complete and final embodiment of their
agreement, a party cannot introduce in
curt evidence of any oral agreement or
promise made prior to the contract’s
formation or at the time the contract was
created.
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 Exceptions to
the Parol Evidence Rule
Contracts subsequently modified.
Voidable or Void contracts.
Contracts containing ambiguous
terms.
Prior dealing, course of
performance, or usage of trade.
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 Exceptions to
the Parol Evidence Rule
Contracts subject to orally agreed-
on conditions.
Contracts with an obvious or gross
clerical error that clearly would not
represent the agreement of the
parties.

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 Case 4.1 McInerny v. Charter Golf
(One Year Rule)

FACTS:
McInerney, a Charter-Golf sales rep, was offered a
position with a Charter competitor.
Montiel, Charter’s President, orally promised
McInerney that if he stayed, he would be paid a 10
percent commission “for the remainder of his life” and
that he would be discharged only for dishonesty or
disability. McInerney accepted.
Charter later fired McInerney and McInerny sued for
breach of contract.

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 Case 4.1 McInerny v. Charter Golf
(One Year Rule)

FACTS (cont’d)
Charter argued Montiel’s oral promises were not
enforceable because they were not capable of being
performed within one year.
The trial court ruled in favor of Charter, and the state
intermediate appellate court affirmed. McInerney
appealed.
HELD: AFFIRMED. FOR CHARTER.
A ‘lifetime’ employment contract is, in essence, a
permanent employment contract which cannot be
performed within one year and under the Statute of Frauds
must be in writing to be enforceable.
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Case 4.2: Cousins Subs v. McKinney
(Parol Evidence Rule)

FACTS:
McKinney operates a chain of stores known as The
Little Stores.
McKinney contracted with Cousins Subs Systems, Inc.,
to operate Cousins sandwich shops in The Little Stores.
The agreement stated it was the parties’ entire
agreement, that there were no other “understandings or
agreements,” and that McKinney had not been
promised any profits.
McKinney later terminated the arrangement with
Cousins and Cousins sued for wrongful termination.

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 Case 4.2: Cousins Subs v. McKinney
(Parol Evidence Rule)

FACTS (cont’d):
McKinney counterclaimed against Cousins alleging breach of
contract. McKinney claimed that Sobiech, a Cousins rep, orally
guaranteed annual sales at each of the franchises of “$250,000 to
$500,000.” Cousins filed a motion to dismiss.
HELD: FOR COUSINS.
McKinney’s attempt to invoke alleged oral agreements to
contradict the terms of the written agreements is barred by the
parol evidence rule. The agreement makes it clear that the
contracts were intended to embody all of the agreed on terms.

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