Chapter_15_Answers_to_Problems - C HAPTER15...

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CHAPTER 15 CONTRACTS IN WRITING 1 ANSWERS TO PROBLEMS CHAPTER 15 1. Rafferty was the principal shareholder in Continental Corporation, and, as a result, he received the lion's share of Continental's dividends. Continental Corporation was eager to close an important deal for iron ore products to use in its business. A written contract was on the desk of Stage Corporation for the sale of the iron ore to Continental. Stage Corporation, however, was cautious about signing the contract; and it did not sign until Rafferty called Stage Corporation on the telephone and stated that if Continental Corporation did not pay for the ore, he would. Business reversals struck Continental Corporation, and it failed. Stage Corporation sues Rafferty. What defense, if any, has Rafferty? Answer: Suretyship Provision . Main Purpose Doctrine . Rafferty has the defense that his oral agreement to pay for the iron ore was a contract to guarantee the payment of the debt of another which the statute of frauds requires to be in writing to be enforceable. Rafferty's oral promise to pay Continental Corporation's debt was collateral to the debt or liability of Continental Corporation. Rafferty's promise cannot be said to be an original promise or undertaking even though he was the principal shareholder in Continental Corporation. However, the main purpose doctrine will be available to Stage Corporation and bind Rafferty to his oral promise. 2. Green was the owner of a large department store. On Wednesday, January 26, he talked to Smith and said, “I will hire you as sales manager in my store for one year at a salary of $28,000; you are to begin work next Monday.” Smith accepted and started work on Monday, January 31. At the end of three months, Green discharged Smith. On May 15, Smith brings an action against Green to recover the unpaid portion of the $28,000 salary. Is Smith’s employment contract enforceable? Answer: One Year Provision . Decision in favor of Green. The oral contract of employment between Green and Smith was entered into on Wednesday, January 26, but Smith was not required to begin work until Monday, January 31, five days after the making of the contract. The agreement was thus not capable of performance within one year from the day on which it was made and is within the statute of frauds. The contract is, hence, not enforceable. Where a contract of service is for the term of a year beginning or which may begin on the day of the making of the contract, the statute of frauds is inapplicable. An oral contract for a year’s services, as here, to begin more than one day after the contract is entered into is impossible of performance within one year from the date of making and is therefore unenforceable under the statute of frauds. Part performance of an oral contract not performable within a year does not take a contract out of the statute of frauds. 3.
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This note was uploaded on 01/16/2012 for the course BLAW 3201 taught by Professor Fry during the Fall '08 term at LSU.

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Chapter_15_Answers_to_Problems - C HAPTER15...

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