Story Case

The sales manager of the United Railway Supplies Company agreed orally with the purchasing agent of the Northeastern and Southern Railway Company to sell the company a lot of switch signals for $600. After this contract was made, the purchasing agent learned of a newly patented signal which was far superior to that of the United Railway Supply Company. Desiring, therefore, to free himself of the contract made with the United company, he consulted the railway's attorney regarding a method of evasion. When the attorney learned that the contract was oral, he advised the purchasing agent that it was not binding, since it was not in writing. Thereupon, the agent informed the sales manager that the railway company would not take the signals, as originally ordered. The .United company immediately consulted its attorney, who advised that negotiations be continued with the railway company, but that the business should be done entirely by correspondence.

The supply company wrote a letter to the purchasing agent of the railroad, which aroused his ire, and he answered in a letter as follows: "We frankly admit that an oral contract was made for $600 worth of your signals, but our attorney advises that the contract was never binding, and we refuse to abide by it." The letter was signed by the purchasing agent. Immediately upon receipt of this letter, suit was started upon the contract of the United company. It produced this letter as sufficient to comply with the Statue. Does the letter prevent the defense of the Statute?

Ruling Court Case. Bird Vs. Monroe, Volume 66 Maine Reports, Page 337; Volume 22 American Reports, Page 571

On March 2, Monroe verbally contracted with Bird for the purchase of 5,000 tons of ice at four dollars per ton. On March 10, Monroe was unprepared to receive the ice and prevented Bird from delivering it. On March 24, they met, and the terms of the contract were reduced to writing. Monroe, thereafter, refused to accept the ice, and Bird brings this action for damages.

Monroe contends that the action is barred by the Statute of Frauds, because a memorandum was not made and signed when the contract was first entered into.

Mr. Justice Peters said: "It must be borne in mind that verbal bargains for the sale of personal property are good at Common Law; nor are they made illegal by the Statute. Parties can execute them if they mutually please to do so. The object of the Statute is to prevent perjury and fraud. Of course, perjury and fraud cannot be wholly prevented, but, as said by Justice Bigelow, 'A memorandum in writing will be as effectual against perjury, although signed subsequently to the making of a verbal contract, as if it had been executed at the moment when the parties consummated their agreement by word of word. A person would be likely to commit himself in writing with more care and caution after time to take a second thought." It was held that this paper was a sufficient memorandum, and judgment was given for Bird.

Ruling Law. Story Case Answer

The note or memorandum by the Statute of Frauds may be made at the time, or after the making of the contract. It need not be of a formal character; it may be in the form of a letter, note, receipt, entries in a book, or telegram. The memorandum must, however, state all the material terms; it must state the names or describe the parties; it must state the price agreed upon, and must describe the subject matter sufficiently to plainly identify it. It must be signed by the party to be charged, or his agent, and need not be signed by the other party.

The letter, in the Story Case, complied with all of these requirements, and, therefore, was sufficient to take the contract out of the Statute, and permit recovery by the supply company.