Chapter 16
Form of Contract
Twomey, Business Law and the
Regulatory Environment (14th Ed.)
Contracts and the Statute of Frauds [16-1]
Contracts That Must Be
in Writing
Land

Sales

Mortgages

Options
Contracts Not to Be Performed Within
One Year
Promise to Pay the Debt of Another
 Estates and Personal
Representative
 Guarantor/Surety
Exceptions
Part Performance
Payment and Possession
Improvement
Executed Contracts
None
Promise to Marry
None
Sales of Goods $500 or More
Part Performance
Merchant’s Confirmation Memo
Specially Manufactured Goods
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When the Parole Evidence Rule
Does Not Apply [16-2]
Parole Evidence Rule: Prior or contemporaneous spoken words
will not be allowed to modify or contradict the terms of a written
contract that is complete on its face.





Illegality
(Proof of Illegal
Conduct)
Provision
Omitted Due to:
• Fraud
•Accident
•Mistake
Incomplete
Contract
Ambiguity
in Contract
(c) 2000 West Legal Studies
Modification
of Contract
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Hurdles in the Path of a Contract
WRITING REQUIRED
Statute of Frauds
Exceptions
More than One Year to Perform
Sale of Land
Answer for Another’s Debt or
Default
Personal Representative to Pay
Debt of Decedent
Promise in Consideration of
Marriage
Sale of Goods for $500 or More
Miscellaneous
Part Performance
Promisor Benefit
Detrimental Reliance
Parol Evidence Rule
Exceptions
Incomplete Contract
Ambiguous Terms
Fraud, Accident, or Mistake
To Prove Existence or
Nonbinding Character of
Contract
Modification of Contract
Illegality
Every Complete, Final
Written Contract
(c) 2000 West Legal Studies
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Chapter 16 Summary
An oral agreement can be a contract unless it is the
intention of the parties that they should not be bound by
the agreement unless a writing is executed by them. If
the parties intend to be bound by the oral agreement, it
is a contract. As an exception to this statement, certain
contracts must be evidenced by a writing, or else they
cannot be enforced. The statutes that declare this
exception are called statutes of frauds.
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Chapter 16 Summary
[2]
Statutes of frauds commonly require that a contract
be evidenced by writing in the case of (1) an
agreement that cannot be performed within one year
after the contract is made, (2) an agreement to sell or
a sale of any interest in real property, (3) a promise
to answer for the debt or default of another, (4) a
promise by the executor or administrator of a
decedent’s estate to pay a claim against the estate
from personal funds,
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Chapter 16 Summary [3]
(5) a promise made in consideration of
marriage, and (6) a contract for the sale of
goods for a purchase price of $500 or more.
Local statutes may expand the above list to
include other types of contracts, such as a
contract between a landowner and a real estate
agent employed to sell the land.
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Chapter 16 Summary
[4]
In order to evidence a contract to satisfy a
statute of frauds, there must be a writing of all
material terms. This must be signed by the
defendant against whom suit is brought for
enforcement of the contract or damages for its
breach. The signing may be made by printing,
stamping, typewriting, or any other means that
is intended to identify the particular party.
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Chapter 16 Summary
[5]
Two or more writings can be combined to form
a writing sufficient to satisfy the statute of
frauds, provided there is an express internal
reference in the writings that ties them together.
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Chapter 16 Summary [6]
If the applicable statute of frauds is not satisfied, the
oral contract cannot be enforced. To avoid unjust
enrichment, a plaintiff barred from enforcing an oral
contract may recover from the other contracting party
the reasonable value of the benefits conferred by the
plaintiff on the defendant. To prevent the statute of
frauds from being used to defraud a party to an oral
contract, the courts by decision have made certain
exceptions to the statute of frauds.
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Chapter 16 Summary
[7]
When there is a written contract, the question arises
whether that writing is the exclusive statement of the
parties’ agreement. If the writing is the complete and
final statement of the contract, parol evidence as to
matters agreed to before or at the time the writing
was signed is not admissible to contradict the
writing. This is called the parol evidence rule. Some
courts have liberalized the rule so that parol evidence
is admitted when it will aid in interpreting the
writing.
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Chapter 16 Summary
[8]
In any case, the parol evidence rule does not bar
parol evidence when (1) the writing is
incomplete; (2) the writing is ambiguous; (3) the
writing is not a true statement of the agreement
of the parties because of fraud, accident, or
mistake; or (4) the existence, modification, or
illegality of a contract is in controversy.
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Chapter 16 Summary
[9]
The fact that the parties disagree about the
meaning of a contract or that a court decision is
required to settle the point does not make the
writing ambiguous. Parol evidence may be used
to prove that there is in fact no contract because
there is a mutual mistake or the writing that has
been executed does not correctly set forth the
terms of the contract.
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