Contracts Class Notes 1/26/04


After class, deposit your exams.  You can copy them, but he needs the originals back.


Morone v. Morone


Recall the problem from the previous class:


Say we have two law students, Sodom and Gomorrah, and they shack up for their three years in law school and then get jobs in different cities.  After a while, the woman sues the man for all sorts of services including cutting his hair during law school.  She thinks he ought to get paid for it.  Will she be successful in that lawsuit?  How do they think about it in Marvin v. Marvin?  What about in Morone v. Morone?  How useful is the law of contracts in dealing with this kind of situation?


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 New York says that there’s too much opportunity for fraud to allow contracts implied-in-fact in this circumstances.  Not everyone agrees.  California in Marvin v. Marvin will construe a contract implied-in-fact.  But the New York view is the majority view in the country.  In Meyer’s view, it’s too easy for someone to claim after a relationship ends that the other person should have paid them.


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 New York majority view?  If you can show an express promise to pay for household services and form a partnership, then that’s going to work and possibly enable a recovery in Morone.  You would at least be able to state a cause of action.  Meyer has doubts that the case can be proved, but if we accept the facts alleged, then a cause of action has been stated and there ought to be some relief.


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.


Mitchill v. Lath


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 New York disagrees!  Why should the Laths not have to perform their promise to remove the ice house?  Is there any doubt that the Laths really did make that oral promise?  Nope.  Everyone agrees they really did promise that.  There’s no doubt that they made and broke the promise.  Mitchill is damaged to the tune of $8,000 by their breach.  Why should the Laths get off scot-free?  How can you justify the result of this case?


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.


Clovis will give us a problem to think about in regard to UCC § 2-202.


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[1] “The plural of spouse.  Mouse, mice.  Louse, lice.  Spouse, spice.”