The Statute of Frauds Under the UCC

It seems to me that generally those preparing for the bar exam have a pretty good feel for the Statute of Frauds. In most instances, oral contracts are valid, but there are some types of contracts that require a writing to be enforceable. One type of contract that requires a writing is a contract for the sale of goods for a price of $500 or more.

A contract for the sale of goods for a price of $500 or more generally requires a writing to evidence that the agreement actually took place. The writing will be sufficient even if it omits terms or incorrectly states terms, but if quantity is incorrectly stated then the contract will only be enforceable as to the quantity stated. As a general point, it should be noted that quantity is an essential term under the UCC.

But it's not the rule itself that trips people up on these questions. There are times when even though a contract for the sale of goods is for a price of $500 or more, a writing is not required. The MBE is often a test of exceptions, and so knowing these exceptions may be more important than knowing the rule.

The first exception is for specially manufactured goods. If goods are to be specially manufactured for the buyer and are not suitable for sale to others by the seller in the ordinary course of business, the contract is enforceable even without a writing but only if the seller has made a substantial beginning in the manufacturer of the goods or commits for their purchase prior to the buyer repudiating.

Next, a party might claim that the contract should not be enforced because there is no writing but that party has already admitted in the pleading, testimony, or otherwise, that the contract for sale was made. Here, the contract will be enforceable without a writing but only for an amount that was previously admitted.

It's also possible that a buyer might accept and pay for goods, but then later claim that the contract for those goods is not enforceable because it wasn't in writing. The contract will be enforceable, but not beyond the quantity of goods accepted and paid for.

Lastly, and an exception that shows up often on the MBE, is the merchant's confirmatory memo rule. In contracts between merchants, if one party within a reasonable time after an oral agreement sends to the other party a written confirmation of the oral agreement and if the written confirmation satisfies the Statute of Frauds, then the contract will be enforceable even though the original agreement between the parties was not in writing. The party receiving the memo will now be bound by the contract if that party has reason to know of the confirmation's contents, and does not object to it within 10 days of receipt.