Week 7 - AEM 320/MBA 560 Professor Grossman Week 7 Oct 215...

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AEM 320/MBA 560 Week 7 Professor Grossman Oct. 215 – Oct. 17 1. Statue of Frauds – Contracts in Writing – See NY Gen Ob L 5-701 for the NY version. a. Contracts in writing were originally designed to prevent fraud. i. As a general rule, oral contracts are enforceable. There are, however, some important exceptions. ii. The first issues in cases dealing with the Statue of Frauds is whether the contract has to be written. If the contract does not have to be in writing the case is not over. The plaintiff must first overcome an affirmative defense so that the case is not dismissed based on procedural reasons. Secondly, the plaintiff would have to prove the terms of the contract. b. Categories where a written contract is required: i. A contract that guarantees the debt of another. ii. A contract incapable of full performance within one year. iii. A contract for the sale or other transfer of an interest in land. iv. A contract for the sale of goods valued at more than 500. v. Note also that a contract for sale of IP valued at more than $5000 must be written. 2. Guarantee Agreement a. If you are making a promise to pay the debt of another person, the contract is unenforceable without a written agreement. i. This does not apply if you are agreeing to be primarily responsible (if the agreement allows for collection from your father by the landlord only after the landlord has taken you to court for the rent and found you judgment-proof, so has to be in writing). b. The exception to this rule is the “main purpose rule”. When the plaintiff can prove that the main purpose for guaranteeing the debt is for the defendant’s own benefit, the guarantee can be oral. i. See Power Entertainment v. NFL , case 18-1: NFL had contract with a company allowing it to use NFL logo, etc., on trading cards. Co. went bankrupt and Power Entertainment orally with NFL to pay the debt co. owed the NFL in exchange for right to use logo, etc. When PE sued to enforce this agreement, NFL argued it had to be written since it involved PE’s promise to pay debt of the other co. Court held that requirements of “main purpose rule” present so S/F defense
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AEM 320/MBA 560 Week 7 Professor Grossman Oct. 215 – Oct. 17 would fail. 3. Incapable of Full Performance Within One Year a. If a contract is incapable of full performance within one year, it must be in writing. b. Complete performance must be impossible , not merely improbable. States differ on how they interpret this. c. Examples: i. Assume the professor offers to pay Dave Matthews Band now for a performance on Slope Day, 2010. Full performance is not totally possible within one year and therefore the contract should have been in writing. ii. You go to an insurance company and make an oral agreement to pay premiums in exchange for insurance on your house for 5 years. Does this contract have to be in writing? Even though you would want to keep paying for 5 years rather than have the house burn down, it could burn this year so can be oral.
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