VI. CONTRACTS FOR THE SALE OF GOODS

A. General rule: UCC §2-201(1) says that "a contract for the sale of goods for the price of $500 or more is not enforceable…unless there is some writing sufficient to indicate that a contract for sale has been made.…" So an oral contract for goods at a price of $500 or more is unenforceable under the UCC.

B. Exceptions: Even if a sales contract is for more than $500, it is exempted from the Statute of Frauds requirement in three situations:

1. Specially manufactured goods: No writing is required if the goods are to be specially manufactured for the buyer, are not suitable for sale to others, and the seller has made "either a substantial beginning of their manufacture or commitments for their procurement." §2-201(3)(a).

2. Estoppel: A writing is also not required "if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted." §2-201(3)(b).

3. Goods accepted or paid for: Finally, no writing is required "with respect to goods for which payment has been made and accepted or which have been received and accepted." §2-201(3)(c). (Example: Buyer orally orders three pairs of shoes from Seller for a total of $600. Buyer then sends a check for this amount in advance payment. Once Seller takes the check and deposits it in the bank, Seller loses his Statute of Frauds defense.)

VII. SATISFACTION BY A MEMORANDUM

A. General requirements for: Even if there is no signed "contract," a signed "memorandum" summarizing the agreement may be enough to meet the Statute of Frauds. A memorandum satisfies the Statute if it: (1) reasonably identifies the subject matter; (2) indicates that a contract has been made between the parties; (3) states with reasonable certainty the essential terms of the contract; and (4) is signed "by or on behalf of the party to be charged."

B. Signature: Because of the requirement of a signature "by the party to be charged", some contracts will be enforceable against one party, but not against the other. (Example: Contractor orally agrees to paint Owner's house for $1,000. Contractor then sends a document marked "confirmation," which states, "This confirms our agreement whereby I will paint your house for $1,000. [signed, Contractor]" Owner can enforce the agreement against Contractor, but Contractor cannot enforce it against Owner, since only Contractor has signed the memorandum.)

C. UCC: Under the UCC, a writing satisfies the Statute if it is "sufficient to indicate that a contract for sale has been made between the parties and [is] signed by the party against whom enforcement is sought.…" §2-201(2).

1. Omissions: Even if the writing contains a mistake as to a term, there will often be enough to satisfy the Statute, under the UCC. For instance, a mistake on price or quantity, or even description of the item, will not be fatal (but plaintiff may only recover for the quantity actually stated in the memorandum). Contrast this with non-UCC cases, where a major mistake is likely to invalidate the memorandum.

2. Confirmation: Under the UCC, there is one situation in which a memorandum will be enforceable even against a party who does not sign it: if the deal is between merchants, one merchant who receives a signed confirmation from the other party will generally be bound, unless the recipient objects within 10 days after receiving the confirmation.

Example: Buyer and Seller are both merchants (i.e., they deal in goods of the kind in question). Buyer telephones Seller to order 1,000 widgets at $10 apiece. Immediately after receiving the order, Seller sends a written confirmation, correctly listing the quantity and price. Assume that this confirmation constitutes a memorandum which would be enforceable by Buyer against Seller. Unless Buyer objects in writing within 10 days after receiving the memo, he will be bound by it, just as if he had signed it.

VIII. ORAL RESCISSION AND MODIFICATION

A. Oral rescission: Where a contract is in writing, it can be orally rescinded (i.e., orally cancelled) even though the original was required to be in writing because of the Statute. That is, a rescission does not have to satisfy the Statute of Frauds, in non-UCC cases. Generally, this is true even if the original written agreement contains a "no oral modifications or rescissions" clause.

1. Sale of goods: But a contract for the sale of goods can alter this result. "A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded.…" §2-209(2). (But even where such a "no oral modifications or rescissions" clause is present, if one party relies to his detriment on an oral rescission, this will probably be binding as a "waiver" of the other party's right to rely on the no-oral-rescissions clause.)

B. Modification: Application of the Statute of Frauds to oral modifications is trickier.

1. General rule: Generally, to determine whether an oral modification of an existing contract is effective, the contract as modified must be treated as if it were an original contract. This is true whether the existing contract is oral or written.

a. Consequence: If the modifications are unenforceable under this test, the original contract is left standing. That is, the modification is treated as if it never occurred.

2. Reliance on oral modification: But if either party materially changes his position in reliance on an oral modification, the court may enforce the modification despite the Statute.

3. Modification of UCC contracts: Contracts under the UCC work pretty much the same way: if the contract as modified would (if it were an original contract) have to meet the Statute of Frauds, the modification must be in writing. Also, a written "no oral modifications" clause is generally effective, just as is a "no oral rescissions" clause.

IX. RESTITUTION, RELIANCE AND ESTOPPEL

A. Quasi-contractual recovery: A plaintiff who has rendered part performance under an oral agreement falling within the Statute of Frauds may recover in quasi-contract for the value of benefits he has conferred upon the defendant. (Example: Landlord orally agrees to rent Blackacre to Tenant for two years, at a rent of $1,000 per month. After Tenant has occupied the premises for two months, Tenant moves out. Even though the agreement is unenforceable because it is for an interest in land and must therefore be in writing, Landlord can recover the reasonable value of Tenant's two-month occupancy.)

1. Not limited by contract price: The plaintiff's quasi-contract recovery is not limited to the pro-rata contract price, in most courts. (Example: On the facts of the above example, if Landlord can show that the fair market value of a lease for Blackacre is $2,000 a month, he may recover this amount times two months, even though the pro-rata lease amount is only $1,000 per month.)

B. Promissory estoppel: Instead of a quasi-contract suit (which will generally protect only the plaintiff's restitution or reliance interest), a plaintiff who has relied on a contract that is unenforceable due to non-compliance with the Statute of Frauds may instead use the doctrine of promissory estoppel. Where one party to an oral agreement foreseeably and reasonably relies to his detriment on the existence of the agreement, the court may enforce the agreement notwithstanding the Statute, if this is the only way to avoid injustice. (Example: P works for an established company, and has good job security. He orally accepts a two-year oral employment agreement with D, another company. By leaving his present employer, P loses valuable pension and other rights. Once P leaves the old employer to take the job with D, a court may well apply promissory estoppel to hold that the P-D agreement is enforceable notwithstanding non-compliance with the Statute of Frauds, since injustice cannot be otherwise prevented.)

1. Misrepresentation regarding Statute: Courts are especially likely to apply promissory estoppel where the defendant has intentionally and falsely told the plaintiffs that the contract is not within the Statute, or that a writing will subsequently be executed, or that the defense of the Statute will not be used.

2. UCC: Courts are split about whether promissory estoppel may be a substitute for the Statute of Frauds in a UCC context.

3. Degree of injury and unjust enrichment: The more grievously the plaintiff is injured (or the more extensively the defendant is unjustly enriched) by application of the Statute, the more likely the court is to allow promissory estoppel to be a substitute for compliance with the Statute.