Statute of Frauds question Forum

[mcat4life87]

Can anyone help me with this hypothetical?

On July 1, ABC, a maker of children's toys, and Bobo orally agreed to a contract under which ABC promised to manufacture and deliver 100 model train sets to Bobo at a unit price of $95 per set. Bobo ordered the trains as part of a long-planned venture into the retail toy trade. On July 14, ABC sent Butler the following note:

"Just a note to confirm that we will provide you with the 50 special train sets for $95 each as we agreed to on July 1. ABC"

On July 18, Bobo discovered that he could purchase a comparable set from XYZ at a cheaper price. So on July 20, Bobo replied to ABC with a note:

"I thought we agreed on 75 trains, but no matter, b/c I've decided that I no longer want them. Hope to do business in the future. Signed, Bobo"

Can Bobo successfully use Statute of Frauds as defense?

End of Hypothetical.


I haven't done an exam question yet, and am curious to see what are the issues I should be spotting in a question like this. Thanks in advance!!

[Arrow]

I'm going to skip the formally and be conclusory.

Yes he can use the statute of frauds defense.

It is a sale of goods for over $500 dollars, and this applies since the total cost of the transaction (even if each unit was under $500) is over $500. It's also missing a signature by Bobo, which he must sign in order to enforce it against him

However, there's an exception, which includes specially manufactured goods made by the seller. This is vague, since 100 model train sets may not be a specially manufactured toy and something ABC has already or a product they normally make.
Alternatively, the note says "50 special train sets."

Since the confirmation was for 50 instead of 100 train sets, there's an offer/acceptance/confirmation/perhaps modification problem but that has nothing to do with the statute of frauds (aka the call of the question).

There's a second exception to the statute of frauds. It only applies to merchants. ABC is a merchant likely since it makes (and since is selling to Bobo) also sells toys. Bobo might be a merchant. If he's planning on a "long-planned venture into retail" then he sounds like he is planning to be a merchant but is not one yet. Thus, he likely also does not have knowledge of the goods in question since he hasn't entered the business yet.

Assuming, arguendo, they are merchants the writing does not have to be signed by Bobo if 1) between merchants, 2) written confirmation signed by the sender is sent within a reasonable time, 3) receiving party has reason to know of the contents, and 4) does not object in 10 days.

A few more problems here. The note is a confirmation since it says "just a note to confirm." It was sent 14 days after the initial oral contract which sounds like a reasonable time but can be argued it leans towards the long side. It is likely signed since it said "ABC" at the end. Bobo obviously "discovered" the note so he knew of its contents (since he also replied). He sent an objection in 10 days upon receipt, which negates 4) and destroys the exception. He received on the July 18th and sent it on July 20th, which is in 2 days and well under 10.

So, once again, likely Statute of Frauds defense.

Fairly clever hypo too I admit, and I feel like I might have missed something.

<3 hypos
Me want more

[papertiger]

I think there can be an argument made for enforcement based on the Statute. ABC would be trying to enforce the contract if Bobo tries to get out of it.

Bobo's reply to ABC can establish a sufficient memorandum, in that it is signed by the party against whom enforcement is sought (Bobo), and the only requirement under the UCC is that it include the quantity of goods, which it does (75). The contract is not enforceable beyond the stated quantity, so the difference in terms between the writings is not fatal to ABC's claim. Bobo's words that "I thought we agreed" indicate that there was a contract between the two parties, and he is just being a d**k and trying to get out of the deal.

I don't feel like arguing for Bobo right now, and I could be entirely wrong about everything I just said, so I'll let Arrow's words stand.

[Arrow]

O.o good point, I totally missed that.

[bigben]

So, once again, likely no Statute of Frauds defense.

You mean there is a statute of frauds defense, right?

Like papertiger was getting at, there could be grounds for enforcement under 2-201(3) because Bobo seems to admit that a contract was made. On the other hand, maybe Bobo considers "agreed" to simply refer to a preliminary negotiation. Clearly, he either thinks that there was no contract or he's just being a jerk.

Just a clarification question for anyone - is SoF a defense and not a requirement of contract formation? The facts in this hypo say that they "orally agreed to a contract."

[underdawg]

I haven't gone over this yet, but you could argue, I think, that this is not what the statute of frauds is really intended for if it is clear that the buyer just found a better price somewhere in the meantime. Some weird cases that I've read (the one with the rabbi getting a donation out of a guy on his deathbed and Whitten, a blackmail with consideration case) suggest that courts just don't like helping out dickheads. Bobo's better defense might be "I asked for 75/100 trains, not 50!" because aren't courts loathe to gap-fill when it comes to quantity?

I think SoF is both, bigben. Arguably, they never even made a contract because of SoF and thus the oral "contract" isn't really a UCC-approved shiny contract. But neither party will even bring it up if there's no problem with it anyway, so in the bigger sense of things, you have a contract since both sides will get what they bargained for.

But yeah, again, I've barely gone over contracts, so I might be wrong.

And arrow, you don't even deem us worthy of your "real" answer, and only a "n00b" answer? Most of us don't go to your school man, no need to be a douchey gunner.

[Verify]

There's a second exception to the statute of frauds. It only applies to merchants.

From what I have gleaned reading the E & E to get a glimpse of the contents of my Contract course once I enter law school next fall, the above quoted text seems rather false.

I am quite certain that the Statute of Frauds does not apply merely to merchants, but rather to all.

[underdawg]

Isn't the statute of frauds in the UCC (I might be wrong)? And isn't the UCC meant to be used between two sophisticated merchants? Fuck me I know nothing....

[papertiger]

There's a second exception to the statute of frauds. It only applies to merchants.

From what I have gleaned reading the E & E to get a glimpse of the contents of my Contract course once I enter law school next fall, the above quoted text seems rather false.

I am quite certain that the Statute of Frauds does not apply merely to merchants, but rather to all.

The exception Arrow refers to is only for merchants, not that the Statute is only for merchants.

And the UCC applies to the sale of goods over $500 (it wouldn't apply to things like the one-year provision).

[Arrow]

Oops I did mean there was a SoF defense, and edited it.

You are totally right.

The Statute of Frauds (SOF) does not apply to just and only merchants. Specifically, the sale of goods over $500 does not apply to just and only merchants. I was merely referring to exception. The exception that a signed writing is not required by the party to be charged, however, (to the best of my memory) require it to be between merchants.

And shhh that was my "real" answer, I just thought it was noob because it was rushed (and I hadn't really reviewed contracts since it's my last final) and I was skipping other stuff like contract formation, applicable law and other stuff that could have been relevant.

Lastly, SoF is in the UCC, but that part only applies to the sale of goods over $500. SoF also applies to things outside of the UCC (land/marriage/suretyship/1 year).

[Arrow]

O.o speaking of the 1 year aspect, SoF is also required for contracts that cannot be performed in one year. There's no actual dates to indicate this, but the delivery date could easily have been planned for a year later. The lack of delivery date, the "long planned venture," and perhaps time it takes to make that many "special" toys, all could suggest that they decided that the delivery would be over a year. This is a definitely a stretch though, and it is more likely that the delivery happened within the year (like in a few months). A writing would not be needed if under a year and thus no SoF defense in this view.

[bwv812]

O.o speaking of the 1 year aspect, SoF is also required for contracts that cannot be performed in one year. There's no actual dates to indicate this, but the delivery date could easily have been planned for a year later. The lack of delivery date, the "long planned venture," and perhaps time it takes to make that many "special" toys, all could suggest that they decided that the delivery would be over a year. This is a definitely a stretch though, and it is more likely that the delivery happened within the year (like in a few months). A writing would not be needed if under a year and thus no SoF defense in this view.

Except it is for a sale over $5000.

[Arrow]

The 2003 revised version of the UCC suggests $5000, and I'm not sure but this is used in some jurisdictions. Other jurisdictions (and my professor) stick to the normal UCC which still uses $500.

[bwv812]

The 2003 revised version of the UCC suggests $5000, and I'm not sure but this is used in some jurisdictions. Other jurisdictions (and my professor) stick to the normal UCC which still uses $500.

Either way, the SoF would still apply, even if the K could be performed in less than one year.

[mcat4life87]

Thanks, all, for the great responses.

I have a few last questions (unrelated to hypothetical): Is there important contracts common law I should be aware of applying that is not fully embodied in the Restatement?

Finally, is there a way I should handle this situation--One set of facts in the hypothetical is similar to a case we read such that the case's holding can probably be transferred to this situation. But the conclusion I'm looking for can also be derived through using the Restatement. Would you recommend going through the argument based on Restatement AND analogizing to the case?

[gladiator]

Initial contract was for goods for $9500 so written contract is required.

Written confirmation was sent, objection was made within 10 days.

Therefore, Bobo has a Statute of Frauds defense.

[bwv812]

Initial contract was for goods for $9500 so written contract is required.

Written confirmation was sent, objection was made within 10 days.

Therefore, Bobo has a Statute of Frauds defense.

Except the written document signed by Bobo would seem to make the claim against him valid, inasmuch as it confirms the existence of a k.

The more likely SoF defence would be that the k was incomplete since the number of goods doesn't seem to have been solidly determined. The oral K doesn't look like a solid k but merely a negotiation given ABC's letter to "confirm" the transaction and the disagreement on a fundamental aspect of the k.

There may also be an issue in that a number of jurisdictions seem to interpret a "last shot" doctrine into the old ($500) UCC, under which interpretation Bobo's response which would presumably be controlling. Under the $5000 UCC I imagine that ABC's writing might be controlling, and since it makes a transaction less than $5000, the SoF wouldn't apply. I have no idea what this means.

[snotrocket]

On July 1, ABC, a maker of children's toys, and Bobo orally agreed to a contract under which ABC promised to manufacture and deliver 100 model train sets to Bobo at a unit price of $95 per set. Bobo ordered the trains as part of a long-planned venture into the retail toy trade. On July 14, ABC sent Butler the following note:

"Just a note to confirm that we will provide you with the 50 special train sets for $95 each as we agreed to on July 1. ABC"

On July 18, Bobo discovered that he could purchase a comparable set from XYZ at a cheaper price. So on July 20, Bobo replied to ABC with a note:

"I thought we agreed on 75 trains, but no matter, b/c I've decided that I no longer want them. Hope to do business in the future. Signed, Bobo"

Can Bobo successfully use Statute of Frauds as defense?

B's Statute of Frauds defense should fail.

CONFIRMATION
A contract for sale of goods for the price of $500 or more is not enforceable unless there is a writing signed by the party charged and sufficient to show a contract was made. UCC 2-201(1). Between merchants, it is enough that one party sends a written confirmation to the other within a reasonable time, and the other has reason to know its contents, unless the other objects to its contents within 10 days. UCC 2-201(2). Here the parties are merchants w/r/t toys, because one makes them and the other is buying them for the purpose of selling in a retail store. Two weeks after the contract was made seems like a reasonable time for ABC to send a confirmation in this case.

OBJECTION
B objected to the quantity stated in the confirmation less than 10 days after it was sent, which would prevent the written confirmation from satisfying the SOF against him. But it is unclear why B stated that he thought they agreed on 75 trains rather than 100. If B meant to make an honest objection to the confirmation, we would expect him to assert the quantity actually agreed, which as the facts state was 100 trains. Given that B had found a lower price supplier and repudiated the contract in the same letter in which he objected to the wrong quantity, it seems likely that he made his "objection" only for the purpose of negating ABC's confirmation and setting up an SOF defense should the matter come to litigation. Every contract made under the UCC imposes an obligation on the parties to act in good faith in its performance and enforcement. UCC 1-203. Good faith means honesty in fact and observance of reasonable commercial standards of fair dealing. UCC 2-103(b). B's sham objection (if such it was) is neither honest in fact nor in keeping with reasonable commercial standards of fair dealing, and should not operate as a valid objection. At any rate, if ABC's confirmation is held sufficient under the statute, then it does not matter that the memo misstates the quantity, but ABC can enforce the contract on the basis of that writing only to the quantity specified in the memo (50 trains). UCC 2-201(1).

RELIANCE
The facts suggest that the trains might have been specially made for B's requirements. If the trains were specially manufactured, not suitable for sale to another buyer in the normal course of ABC's business, and if ABC had already made a substantial beginning on making or buying materials for the trains before B's repudiation, then ABC can enforce the contract by virtue of this reliance. UCC 2-201(3)(a). If the trains were not specially made or were suitable for sale to other buyers, then ABC cannot maintain this claim for enforcement. The memo by ABC refers to the trains as "special," suggesting that they were not of ordinary manufacture. But B also found "comparable" trains from another supplier, so this suggests either that they were of a common sort or that B found another supplier willing to undertake their special manufacture. The court would have to resolve this question of fact based on the circumstances of the contract in order to assess ABC's reliance claim. If ABC prevails on this point, then this would defeat B's SOF defense and allow ABC to enforce the contract.

[MTal]

Thank you, Mr. Leews.

[Arrow]

Haha he totally didn't underline and use italics, nor use arguendo and supra/infra or inter alia a ton.

Good exam writing is just organized.

O.o Another good point that the goods might not be specially manufactured because Bobo was able to buy it elsewhere, suggesting that it likely was not as special and unique. However, it says "comparable train set" elsewhere, so the products made by ABC might still be special, but Bobo decided to buy a different train set altogether.

All that talk about offer, acceptance, and battle of the forms and reliance is uber juicy but not the call of the question, still it's a good answer and always good practice.

[underdawg]

thanks, professor

[snotrocket]

I have a few last questions (unrelated to hypothetical): Is there important contracts common law I should be aware of applying that is not fully embodied in the Restatement? Finally, is there a way I should handle this situation--One set of facts in the hypothetical is similar to a case we read such that the case's holding can probably be transferred to this situation. But the conclusion I'm looking for can also be derived through using the Restatement. Would you recommend going through the argument based on Restatement AND analogizing to the case?

The only proper answer to this is, "do what your professor expects." So you might need to ignore everything else below.

Some questions, like do we look at the four corners of the contract or at all the circumstances to find the meaning of its words, are not fully and clearly answered by Restatement law, because there is no one answer to them. There are competing views, and different courts will go different ways on these issues. Knowing the one or two main cases that show these opposing views and their reasoning will help you argue back on forth on these sorts of questions, or figure out what facts might favor one or the other.

The Restatement is supposed to "restate" the law derived from the cases. Many of the illustrations in the official comments are in fact drawn from the facts of the same cases taught in Contracts (makes sense, since that's where the rules come from). The Restatement will most often try to state the "majority" or "modern" rule, whereas you'll often read several cases taking opposing viewpoints or following old and new rules in class, to see how the law developed. The Restatement will also often state other rules beyond the principle on which a given case centered. You'll almost never see exactly the same fact pattern on an exam as in a case you read (although making it look like a case you read may be designed to make you think the question has a clear and simple answer). So more often it seems like a better approach to fully analyze whether a holding that you think applies really does apply, and you might pull in other Restatement rules to help with that.

Generally, the Restatement is clearer as to the rules, but less concrete in showing the stories that apply them to facts. If you find it easier to learn the rules in a clearer and more abstract presentation, then you might rely more on knowing the Restatement thoroughly. If you like the stories better, then maybe you learn by thinking out the rules from the cases. Most good exam answers seem to cite the cases mainly just to support a claim that a set of facts falls on one side of a line or the other, rather than as authority for every rule. In general, model contracts answers I have studied cite only one or two cases at most, and more Restatement or UCC sections as needed to make each point.

[snotrocket]

All that talk about offer

Nothing there about an offer ...

acceptance

or an acceptance ...

and battle of the forms

and definitely nothing about BOF ...

The facts state that the parties orally agreed to a contract, so there is no need to look at any of those issues -- only to decide whether there is some writing sufficient to make the contract enforceable under the SOF.

and reliance is uber juicy :) but not the call of the question

It's right there in the statute -- UCC 2-201(3)(a) exists to allow reliance to defeat a SOF defense. How is that not following the call of whether B can successfully use the SOF defense?

[XxSpyKEx]

Can anyone help me with this hypothetical?

"I thought we agreed on 75 trains"

Can Bobo successfully use Statute of Frauds as defense?

NO! He is bound himself to 75 trains by being an idiot. 2-201(3)(B) says that the K is enforceable to the degree the party admits that there was a K. This is the catch of 2-201(2)-- it allow you to get out of the whole deal if you deny there was ever a deal, but if your dumb and say that there was a deal, you're fucked... A better response by Bobo would've been "I have no idea what you're talking about, we have no deal."

[snotrocket]

Can anyone help me with this hypothetical?

"I thought we agreed on 75 trains"

Can Bobo successfully use Statute of Frauds as defense?

NO! He is bound himself to 75 trains by being an idiot. 2-201(3)(B) says that the K is enforceable to the degree the party admits that there was a K. This is the catch of 2-201(2)-- it allow you to get out of the whole deal if you deny there was ever a deal, but if your dumb and say that there was a deal, you're fucked... A better response by Bobo would've been "I have no idea what you're talking about, we have no deal."

Careful -- the admission under 2-201(3)(b) has to be in testimony or pleading or "otherwise in court" (i.e. under oath), so that section will not help us with B's note. We could try to argue under 2-201(1) that, taken together with ABC's confirmation, B's note is a signed writing "sufficient to indicate that a contract for sale has been made between the parties." But the problem is that B disputes the quantity and refutes the agreement in the same breath. B must be to some extent "indicating" that a contract was made -- else why repudiate it? B will argue that they made no deal and that he was just ending negotiations rather than repudiating the contract. The court is likely going to see B as a douchebag trying to use the SOF as cover for ducking a legitimate contract, so they might let ABC slide on the combined writings -- but it's a stretch. It may seem easier to take ABC's note as the writing and argue that B's "objection" has no effect. But it doesn't hurt to make the argument both ways.