Contracts
Class Notes
After
class, deposit your exams. You can copy
them, but he needs the originals back.
Recall
the problem from the previous class:
Say we have two law students,
What
would the guy argue? If the basis of her
suit is contract implied-in-fact, what’s missing? How does it differ from going to the barber
and having to pay for your haircut? It
differs in that there is no intent to charge in the case of living together. Rather, we have the presumption of a gift. “[H]ousehold services rendered and received
by persons living together as a family are presumed to be gratuitous and…an
express contract to pay would have…to be proved to overcome this presumption.” In re
Schoenkerman’s Estate, Dawson, p. 244.
This
is a legal and common sense presumption.
In a family setting, money doesn’t usually change hands. It’s usually not the understanding that at
the breakup of the family it’s appropriate to sue for a whole bunch of money. For example, when a parent promises a child
an allowance, such a promise is unenforceable because there is understood to be
an intention not to be legally bound.
Consider,
on the other hand, Shold v. Goro. Junior can borrow money from Mom or Dad and
be obligated to repay. Sometimes we’ll
construe a contract in a family situation.
You can make contracts in family circumstances and they can be enforced
in the courthouse.
Contracts
between spice[1]
probably won’t be enforced in the courtroom.
Judge
Meyer in the Court of Appeals of
There’s
a third approach that could be taken.
Could the court find a quasi-contract on the basis of a contract
implied-in-law? Was there unjust
enrichment to disgorge even in the absence of an agreement to compensate? What’s the problem with that? Why is that unlikely to produce a positive
result for a plaintiff? Has there been
enrichment? But is it unjust? Probably not.
If the services were rendered as gifts or as part of some informal
arrangement to share services, then retaining the benefit of those services is
not unjust.
But
what will work under the
What
about the express contract? The woman
alleges there was an express agreement to share in the benefits of the “joint
venture” of the man going out into the world and getting a salary while the
woman stays at home. What are the
problems with an express contract on the facts of this case? The express contract was oral, and the man is
almost certainly going to deny it. The contract
was also vague. Even if she can prove
it, it will be debatable just what the terms were.
The
court talks about Gorden, where they
reversed because there wasn’t “clear and convincing” evidence to establish a contract
against someone who died. It would be difficult
and messy to prove an express contract!
But
there is one good thing about having an express contract that would make it
less difficult. Say the parties think it
through, get a lawyer, draft it, sign it, and keep a copy in their respective safe
deposit boxes. That’s an agreement that
actually will be enforced. Educated,
well-off people may tend to think through and write down an express agreement
covering this kind of situation. On the
other hand, less sophisticated people who don’t do this and rely on vague oral
express agreements will have difficulties.
Of
course, oral agreements can have the problem of running into the statute of
frauds. This one would have been okay
because it could have been performed within one year. Also, partnerships are commonly formed
orally.
So
this can be done, but it must be thought through with a lawyer and it must end
up with a writing signed by both parties.
Now,
on the other hand, you could get married.
That imposes a marriage contract on you that you can only end through a
divorce or dissolution proceeding. If
you die, there is protection for the surviving spouse. That’s a situation where the law comes in and
handles it.
Once
upon a time, just living together rose to the status of common law marriage,
but in most places common law marriage has been abolished by statute. It caused more problems than it was worth.
You
can have an impact on the marriage contract before you get married with prenuptial
agreements. There are some things that
you can’t change. You can’t contract for
bigamy.
The parol evidence rule
A
lot here is mysterious, but there are some things that are clear. The word is spelled “parol”, not “parole”.
There
are some other things that are clear, but many other things that are not clear.
What
happened in this case? The Laths owned a
big farmhouse in the country. Mitchill
wanted to buy it as a summer residence.
In order to get Mitchill to buy the house, Lath promised to tear down an
ice house across the street on a different parcel of property. Mitchill didn’t like the ice house. The Laths didn’t tear down the ice
house. Mitchill put a bunch of money
into improving the farm and farmhouse. Mitchill
sued for specific performance of the promise to tear down the ice house, and
the trial court granted either that or, alternatively, Lath would have to pay
$8,000 (which is pretty much everything they got for the farm).
But
the high court in
Are
the Laths protected by the statute of frauds? No. The
Laths promised to perform a service to remove an ice house from Lt. Governor
Lunn’s land across from Mitchill’s house.
They could have done that within a year.
So it’s enforceable, event though the promise was oral. But why shouldn’t we enforce their promise?
What’s
we’re trying to do is figure out what the contract is. A contract is a promise or set of promises
that the law will enforce. So is the contract
only the writing, or the writing plus the oral promise to remove the ice house? The majority says that the agreement in
regard to the ice house is very closely connected
to the written agreement for the purchase and sale of the farm. Since the ice house isn’t mentioned in the
writing, you can’t prove the agreement about the ice house. Evidence about it should be kept out, and it’s
not going to be part of the deal.
Why
should that be the law? The courthouse
door is open to liars, and sometimes people win on the basis of lies. So part of what’s going on is an attempt to
screen out liars. But we apply the rule
in this case to Mitchill even though it seems clear she isn’t lying. Mitchill seems to get punished for not
including everything in the writing that should be there. Writings are pretty objective. Witness testimony is messy and expensive to
deal with.
We
could cite Andrews. “Notwithstanding
justice here and there, on the whole it works for good.”
Another
problem is that if parol evidence is allowed, perjury might increase. But opinion after opinion denies that this is
the point. Another “virtue” of the rule
is that is favors the party with the writing, which is the economically
dominant party. Another justification is
that if there were no parol evidence rule, it would be very difficult to decide
any contract case on summary judgment. Efficiency
pushes towards deciding cases on the basis of the writing.
The
parol evidence rule divides people. Some people would admit a lot of extrinsic
evidence, and others would keep out huge amounts of such evidence. Williston was an example of a “conservative”
on this, while Corbin was an example of a “liberal” view on the rule. Corbin is more in the ascendancy right now,
but there’s a little of both in every jurisdiction. Even within one person, no one is probably
entirely “liberal” or entirely “conservative”.
So
why does the majority keep the oral agreement with respect to the ice house
out? They all agree with the “old-fashioned”
three-part test that deals with the “collateral agreement”. Some people call this the “collateral
agreement exception”. Collateral means “alongside,
related but separate, supplementary” and that kind of thing. So the first requirement is:
1. The agreement must be a
collateral one in form. The majority and
dissent agree that the ice house agreement was in this form.
2. The oral agreement mustn’t
contradict express or implied provisions of the writing. There is no contradiction of the express provisions of the writing,
because it doesn’t say anything explicit about ice houses. There is some question, however, about
whether there is an implied term of
the writing. Andrews thinks you could
infer a term that says: “This is the whole agreement and there is no more.” If the writing looks like a complete
agreement, then when you try to supplement it you reach a contradiction.
3. This is the tough one: the
ice house agreement must be one that the parties would not ordinarily be expected to embody in the writing. If they would ordinarily put it in the
writing, they better darn well put it in there or else it doesn’t count. The word “natural” is used. If the agreement had really been made,
Andrews says it would be “natural” to include the agreement in the writing.
Lots
of people think this case is wrong!
People are surprised that Cardozo could have concurred in this “miscarriage
of justice”! But why would anyone think
that you must include everything in a writing on pain of not having the thing
being enforced?
One
reason we have this rule is to let judges keep the testimony of liars away from
juries. Judges will claim that
credibility is a question for the jury, but in fact they will use the rule to
keep people away from juries.
What
if the Laths wanted to prove that Mitchill had promised to pay $9,000 for the
farm whereas the price in the writing was $8,400? What if the writing says $8,400 as the price
while Mitchill claims that they agreed on $7,400 as the price? That would be a case where there is a
contradiction of an express term in the writing. This may tend to make you more vigorous in
excluding oral evidence.
What’s
the modern parol evidence rule? The rule
is found in § 213. We’ll look at it in Hatley v. Stafford.