Chapter 13: Contracts in Writing and Third-Party Contracts

Statute of frauds

A rule requiring certain contracts to be in writing and signed to be enforceable.

Prenuptial agreement

A contract made before marriage that sets property or financial rights if the marriage ends.

Secondary promises

Promises to answer for another person’s debt or duty if that person does not perform.

Collateral promises

Another term for secondary promises; the promisor backs up someone else’s obligation.

Suretyship promises

Promises to pay or perform the obligation of another person, which usually must be in writing under the Statute of Frauds.

Primary obligations

The main duty to perform one’s own contract promise.

Secondary obligations

Duties that arise only if the primary obligor fails to perform.

Main purpose rule

An exception to the Statute of Frauds; if the promisor’s main goal is to serve their own economic interest, the promise may be enforceable even if oral.

Sales more than $500

Under the UCC, contracts for the sale of goods priced at $500 or more generally must be in writing.

Equal dignities rule

If a contract must be in writing, then authority to make that contract for another person also must usually be in writing.

Exceptions to the statute of frauds

Situations where an oral agreement may still be enforceable despite the writing requirement.

Admission

When a party admits in court or in testimony that the contract existed, which can satisfy the writing rule for the admitted portion.

Partial performance

When one party has partly performed the contract, making enforcement of an oral agreement more likely in some situations.

Promissory estoppel

A court-enforced promise made when one party reasonably relied on the promise and would be harmed if it were not enforced.

Exceptions under the UCC

UCC rules that relax the writing requirement in certain sales-of-goods situations, such as special merchant or partially performed transactions.

Parol evidence rule

A rule that usually bars outside evidence of prior or contemporaneous oral agreements that would change a final written contract.

Merger clause

A contract statement saying the writing is the complete and final agreement of the parties.

Exceptions to the parol evidence rule

Circumstances where outside evidence may still be allowed, such as fraud, mistake, ambiguity, or proving a condition precedent.

Subsequently modified contracts

Contracts changed after signing; later changes are generally not barred by the parol evidence rule.

Condition precedent

An event that must happen before a contract or duty becomes effective.

Partially written contracts

Agreements that are written in part but not complete, so outside evidence may be needed to fill gaps.

Ambiguous-term contracts

Contracts with unclear wording, where outside evidence may help explain the meaning.

Incomplete contracts

Contracts missing important terms, which may allow outside evidence to clarify the missing parts.

Typo contracts

Contracts with obvious drafting or typing errors, which may be corrected with outside evidence.

Void contracts

Contracts with no legal effect from the start; evidence about the agreement may be used to show the contract’s actual status.

Evidence of prior dealings

Past conduct between the parties that can help explain contract meaning or the parties’ intent.

Obligor

The party who must perform a contractual duty.

Obligees

The party to whom the duty is owed.

Assignment

The transfer of contractual rights from one party to another.

Assignor

The party who transfers the right.

Assignee

The party who receives the right.

Contractual rights that cannot be assigned

Rights that are personal in nature, would materially change the duty, or are barred by the contract or law.

First assignment in the time rule

When multiple assignments exist, the first valid assignment generally has priority.

English rule

The rule that priority goes to the first person to notify the obligor of the assignment.

Delegation

The transfer of contractual duties to another person.

Delegator

The party transferring the duty.

Delegatee

The party who agrees to perform the duty.

Duties that cannot be delegated

Duties requiring special skill, personal trust, or a unique relationship.

Third-party beneficiary contract

A contract made for the benefit of someone who is not one of the contracting parties.

Intended beneficiary

A third party the contract was meant to benefit directly.

Promisor

The party who makes the promise to perform.

Promisee

The party who receives the promise and provides consideration.

Creditor beneficiary

A third party who benefits because the promisor is satisfying a debt owed to that third party.

Donee beneficiaries

Third parties who receive the benefit as a gift.

Vesting of rights

The point when a third-party beneficiary’s rights become fixed and enforceable.

Vest

To become legally fixed or secured.

Incidental beneficiaries

People who may benefit from a contract indirectly but have no legal right to enforce it.