Assignment 5 Statute of Frauds The text talks about reasons why some business people decide not to get

contracts in writing, even though they know about the statute of frauds. But there are still good reasons to comply with the statute (in those rare cases when litigation is necessary). So its important to understand when 2-201 applies and what is necessary for a writing or writings to be sufficient under that section. First, it only applies to contracts for the sale of goods when the price is $500 or more [the amount has been changed in some states]. 2-201(1). Second, the writing does not need to be formal, or use specific wording, or even be a correct statement of the terms of the contract. It need not indicate which party is the seller and which is the buyer. Instead, it need only be sufficient to indicate that a contract for the sale has been made between the parties and it must be signed by the party (or the partys agent) against whom enforcement is sought. 2-201(1). Signed includes any authentication which identifies the party to be charged. 1-201(39). The one important caveat is that the contract will not be enforceable beyond the quantity shown in the writing. An important consequence is that the writing must include a quantity term (since it can only be enforced with respect to the quantity shown; some quantity must be shown or there is nothing to enforce). 2-201(1). Comment 1 states that [a]ll that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction. So, the writing could be a memo, a letter, or notes on a napkin, so long as they meet the requirements above. Note that while a quantity must be included, price, time and place of payment or delivery, and general quality of the goods may all be omitted. The writing need not have been intended to comply with the statute. It may have been written for an entirely different purpose and may not have been delivered to the other party. See Comment 6. The writing must indicate the consummation of a contract, not mere negotiations, nor a mere offer or counteroffer. So the 3 basic requirements of the writing are: (1) it must evidence a contract for the sale of goods between the parties; (2) it must be signed by the one against whom enforcement is sought; and (3) it must specify a quantity. Comment 1. Exceptions to the writing requirement 2-201(3): 1) Merchants exception 2-201(2). Between merchants, a written confirmation received within a reasonable time and sufficient against the sender satisfies the writing requirement of subsection (1) if the recipient has reason to know of its

contents and does not object within 10 days after receipt. This provision is key because the confirmation is enforceable against the recipient, even though the recipient may not have signed the confirmation. So subsection (2) is a limited exception to the signature requirement of subsection (1). Note that the objection must be a denial of the existence of the contract, not merely an objection to the statement of the terms in the confirmation. See General Trading Intl v. Wal-Martconfirmatory writing must indicate consummation of a contract, not mere negotiations. 2) Specially manufactured goodsIf the seller can show that it relied to its detriment on the existence of an oral contract in beginning the manufacture of specially manufactured goods according to that contract, then it is enforceable under 2-201(3)(a) (analogous to promissory estoppel under the common law note that under 1-103 promissory estoppel can still be raised since common law supplements U.C.C. if no conflict). In order for this exception to apply, the seller must also show that the special manufacture began under circumstances which reasonably indicate that the goods are for the buyer. Some commentators have suggested that where the oral contract calls for delivery of divisible or only apportionable units, the seller can enforce it only as to that unit (or units) with respect to which the seller has made either a substantial beginning of manufacture or commitments for their procurement. Others argue that 2-201(3)(a) dispenses with the writing requirement and does not expressly limit recovery to units on which work was begun or for which commitments were made. 3) Admissions in a pleading, testimony, or otherwise in court 2-201(3)(b). Comment 7 says [u]nder this section it is no longer possible to admit the contract in court and still treat the Statute of Frauds as a defense. But courts disagree about how far should the plaintiff be able to pursue his or her case in order to try to obtain an admission. See DF Activities Corp. v. Brown. 4) Partial PerformanceGoods for which payment has been made and accepted or which have been received and accepted. 2-201(3)(c). According to Comment 2, [r]eceipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists. But partial performance can validate the contract only for the goods which have been accepted or for which payment has been made and accepted. [Note: we will discuss in a later assignment when goods have been accepted under Article 2.] Important Point: If the plaintiff cannot meet the writing requirement of 2-201 (or one of the exceptions), then the contract is unenforceable. On the other hand, if the requirement is met, all that happens is that one potential defense to enforcement is removed. The plaintiff must still

prove that a contract exists and that it is otherwise enforceable (no other defenses such as statute of limitations, minority of contracting party, fraud, etc).