Assume two (2) parties enter into an oral agreement that must generally be in wr
ID: 465879 • Letter: A
Question
Assume two (2) parties enter into an oral agreement that must generally be in writing in order to be enforceable. (The “statute of frauds” indicates that the following four (4) types of agreements must be in writing: 1) contracts whose terms prevent possible performance within one year; 2) promises made in consideration of marriage; 3) contracts for one party to pay the debt of another if the initial party fails to pay; and 4) contracts related to an interest in land. According to the Uniform Commercial Code, contracts for the sale of goods totaling more than $500 must also be in writing.)
From an ethical standpoint, even though the parties have entered into an oral agreement, is it permissible for one of the parties to deny liability based on the statute of frauds or Uniform Commercial Code writing requirement? In your reasoned opinion, should a party honor an oral contract, even though the law technically requires the agreement to be in writing?
Explanation / Answer
As per Parole Evidence Rule of Common Law, oral evidence of agreement made earlier or contemporaneousy with a written agreement is not admissible when the parties intended to have the written agreement to be the complete and final version of agreement. However, from an ethical standpoint, we may reason that if a party acts and performs the contract fully or partially in good fatih based on oral agreement trusting the other party, and whereas such partial or complete performance of the contract by one party is in knowledge of the other party (beneficiary), then it becomes an ethical responsibility for the other party (beneficiary) to honor the oral commitments/contract, even though the law technically requires an agreement to be in writing. And the party should formalise the contract by entering into a written agreement, and the beneficiary party should compensate the performing party for the partial or complete fulfilment of the contract as per oral agreement.