Getting around the statute: estoppel, admissions and the Article Two exceptions

California, nineteen twenty six. Natale and Carmela Castiglia have moved from Colorado and put their savings, about four thousand dollars, into a half interest in farm land. Carmela's son Christie, eighteen, decides to leave home and make his own way. His mother and stepfather want him to stay.
They make him an oral proposal. If he stays home and works, they will keep their property in joint tenancy so that it passes to the survivor, who will leave it to Christie by will, apart from small gifts to his brother and sister.
Christie stays. For twenty years he works the family venture for his room and board and spending money. He gives up any education and any chance to build property of his own.
When he marries and asks about some present interest for his wife, Natale tells him his wife should move in with the family and that he need not worry, for he would receive all the property when Natale and Carmela died. In nineteen forty one both parents make wills leaving everything to Christie, apart from the small gifts. The venture grows to be worth about one hundred thousand dollars.
Shortly before his death Natale changes his mind. Without telling Christie or Carmela, he breaks the joint tenancies and makes a new will leaving his half to his grandson from a previous marriage, Carmen Monarco, who has stayed in Colorado all along. The will is probated. Monarco sues to partition the property. Carmela counterclaims to have him declared a trustee of what he received.
So here is the question. There was an oral contract to leave land by will, in exchange for twenty years of a young man's labour. A contract to leave land by will is inside the statute of frauds twice over, land and a promise not performable within a year. Nothing was ever written. Can Monarco use the statute to keep the property? Think about it before I go on.
And now the question I keep asking. What exactly did these people promise each other? Christie promised to stay and work. He did, for twenty years. Natale promised that the property would come to Christie. He kept that promise for twenty years and broke it at the end. The statute of frauds does not care that Christie performed. Today is about the doctrines that do.
Here is the first line for the board. A party may be estopped to plead the statute of frauds. The doctrine has two grounds, and either is enough. Unconscionable injury, where one party has been induced by the other seriously to change his position in reliance on the contract. And unjust enrichment, where the party pleading the statute has received the benefits of the other's performance. Restatement section one thirty nine puts it in terms of reliance and injustice.
Second line. Article Two has its own list of exceptions, in section two two oh one. Between merchants, a written confirmation sufficient against the sender, received within a reasonable time, binds the recipient unless he objects in writing within ten days.
Goods specially manufactured for the buyer and not suitable for sale to others, once the seller has substantially begun. An admission by the party to be charged, in pleading, testimony or otherwise in court, that a contract was made, enforceable to the quantity admitted. And goods paid for and accepted, or received and accepted.
Third line. The admission exception has a limit. Once the defendant has denied the contract under oath, the plaintiff may not go on with discovery in the hope of extracting an admission. A sworn denial closes the door.
Now the case. Monarco against Lo Greco, Supreme Court of California, nineteen fifty, Justice Traynor. The controlling question is whether plaintiff is estopped from relying upon the statute of frauds to defeat the enforcement of the oral contract. The doctrine of estoppel to assert the statute of frauds has been consistently applied by the courts of this state to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances.
Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract, or in the unjust enrichment that would result if a party who has received the benefits of the other's performance were allowed to rely upon the statute. In many cases both elements are present. In this case both elements are present.
Here is the injury. In reliance on Natale's repeated assurances that he would receive the property when Natale and Carmela died, Christie gave up any opportunity to accumulate property of his own and devoted his life to making the family venture a success. Had he invested money instead of labor in the venture on the same oral understanding, a resulting trust would have arisen in his favor.
His twenty years of labor should have equal effect. And the enrichment. Natale reaped the benefits of the contract. He and his devisees would be unjustly enriched if the statute of frauds could be invoked to relieve him from performance of his own obligations thereunder.
Monarco had one more argument, and Traynor's answer to it is the reason the case is the leading one. Older cases had said estoppel needed a representation about the writing itself, a promise that a writing would be made, or that the statute would not be pleaded. Not so.
In reality it is not the representation that the contract will be put in writing or that the statute will not be invoked, but the promise that the contract will be performed that a party relies upon when he changes his position because of it. Reliance on the promise is enough. Judgment for Carmela affirmed. Monarco held the property as trustee.
Now the Code, with the grain mill from last lecture. St. Ansgar Mills against Streit, Supreme Court of Iowa, two thousand. Sixty thousand bushels of corn, twice over, ordered by telephone on the first of July nineteen ninety six by the farmer's father, at three dollars fifty three and three dollars seventy three a bushel.
The mill hedged the sale on the Chicago Board of Trade the same day. It wrote up the confirmation and set it aside for the father to sign on his monthly visit. He did not come until the tenth of August. Corn had fallen. The farmer refused delivery. The mill sued for one hundred and fifty two thousand dollars.
The farmer's defence was the statute, and his argument was the merchant exception's own words. The confirmation had to be received within a reasonable time. Forty days, on a large order in a volatile market, with no excuse for the delay, was not reasonable, and the trial court agreed and gave him summary judgment. The Iowa Supreme Court reversed. Whether the farmer was a merchant was for the jury. And so was the time.
The Code, the court said, defines a reasonable time by the nature, purpose and circumstances of the action, and it relies upon course of dealings between the parties to help interpret their conduct. Thus, all relevant circumstances, including custom and practice of the parties, must be considered in determining what constitutes a reasonable time.
The reasonableness of time between an oral contract and a subsequent written confirmation is ordinarily a question of fact for the jury. Seven years of orders confirmed late or never, and always honoured, was a course of dealing a jury could weigh.
The last case is about the admission exception, and a chair. DF Activities against Brown, Seventh Circuit, nineteen eighty eight, Judge Posner. The company that owned the Domino's pizza chain was controlled by a collector of Frank Lloyd Wright.
Dorothy Brown owned the Willits Chair, designed by Wright for a house she had lived in for years. The company's art director negotiated with her, and the company claimed that in a telephone call on the twenty sixth of November nineteen eighty six she agreed to sell it for sixty thousand dollars.
The art director wrote to confirm and sent a cheque for thirty thousand. Two weeks later Mrs. Brown returned both with a note. Since I did not hear from you until December and I spoke with you the middle of November, I have made other arrangements for the chair.
She sold it to someone else for one hundred and ninety eight thousand dollars. The company sued for the difference, and she moved to dismiss under the statute of frauds, with an affidavit swearing that she had never agreed to sell.
The company's only route was the admission exception. It argued that if it could depose her, maybe she would admit in her deposition that the affidavit was in error. Posner refused. Where as in this case the defendant swears in an affidavit that there was no contract, we see no point in keeping the lawsuit alive.
Of course the defendant may blurt out an admission in a deposition, but this is hardly likely, especially since by doing so he may be admitting to having perjured himself in his affidavit.
Then the sentence to keep. Once the defendant has denied the contract under oath, the safety valve of section two two oh one, subsection three, paragraph b, is closed. And a line for anyone who will ever practise. If Dorothy Brown did agree to sell the chair to DF at a bargain price, it behooved Briggs to get Brown's signature on the dotted line, posthaste. One judge dissented, and would have left discovery to the trial court's discretion. The majority rule is Posner's.
Now let's change one fact. Christie had left home at eighteen after all, worked elsewhere for wages, and only visited. Natale still promised him the farm and then left it to Monarco. Choose an answer before I go on.
Most people say Christie still wins, because the promise was still broken. But look at the two grounds. No change of position in reliance, because he built his own life and kept his wages. No unjust enrichment, because Natale received nothing from him. A broken promise, and a statute that bars it, and no estoppel to lift the bar. The doctrine protects the twenty years of labour, not the disappointment.
Change one fact again. The grain confirmation reached the farmer on the tenth of August and he wrote to the mill objecting to it on the twenty first. Choose.
Eleven days. The merchant exception gives ten. Written notice of objection to its contents must be given within ten days after it is received. His objection is a day late, and if the confirmation arrived within a reasonable time and he is a merchant, the writing binds him as if he had signed it.
The exception is a trap for the recipient who files a confirmation and forgets it, and that is its purpose. It puts the burden of speaking up on the party who received the paper.
Change one fact a third time. At her deposition Mrs. Brown, asked directly, says yes, I agreed to sell it to them for sixty thousand. Choose.
Now the exception works. She has admitted in testimony that a contract for sale was made, and the statute no longer bars enforcement, up to the quantity admitted, one chair. Posner's rule was about whether a plaintiff gets to ask the question after a sworn denial. It was never about what happens if the answer is yes. An admission in court satisfies the statute, because the statute exists to guard against invented contracts, and this one is no longer invented.
Here is what people get wrong here, and why it is tempting. The first mistake is treating estoppel as automatic whenever someone relied. Monarco needs a serious change of position or a real enrichment, and courts hold the line, because otherwise the statute would mean nothing. The second mistake is forgetting that the confirmation rule needs merchants on both sides. A private seller who receives a confirmation and says nothing is not bound by it.
The third mistake is thinking the admission exception lets a plaintiff fish. It lets a plaintiff use an admission the defendant has made. After a sworn denial, in most federal courts, there is nothing left to fish for.
Here is the rule, in one breath.
The statute of frauds yields where the party pleading it would be unjustly enriched or the other party would suffer unconscionable injury from a serious change of position in reliance on the contract, and for goods it yields to a timely merchant's confirmation not objected to within ten days, to specially manufactured goods, to an admission in court up to the quantity admitted, and to goods paid for or accepted, but a sworn denial ends the search for an admission. Now, five questions.