Objective

• Describe ethical standards in contract law

Assignment Overview

This analysis exercise provides an opportunity to describe ethical standards in contract law, specifically related to the Statute of Frauds.

Deliverables

ETHICS SPOTLIGHT STATUTE OF FRAUDS

Bronco Wine Company (Bronco) crushed grapes and sold them for use in bulk wines. It purchased the grapes it needed from various grape growers. In 1981, Bronco entered into an oral contract with Allied Grape Growers (Allied), a cooperative corporation of many grape growers, to purchase 850 tons of Carnelian grapes for delivery in 1982. Allied had originally contracted to sell these grapes to United Vintners but received special permission to sell the grapes to Bronco instead. The 1982 grape crop was the largest to date in California history, and there was a glut of foreign wines on the market. Thus, the price of grapes and wines decreased substantially. Bronco accepted and paid for one shipment of Carnelian grapes from Allied but refused to accept the rest. By the time Bronco started to reject the highly perishable goods, it was too late for Allied to resell the grapes to United Vintners or others.

Allied sued for breach of contract, and Bronco alleged the Statute of Frauds as its defense. In essence, Bronco argued that it did not have to perform because the contract was not in writing. The appellate court applied the doctrine of promissory estoppel and prohibited Bronco from raising the Statute of Frauds against enforcement of its oral promise to buy the grapes from Allied. The court stated, "In California, the doctrine of estoppel is proven where one party suffers an unconscionable injury if the Statute of Frauds is asserted to prevent enforcement of oral contracts. There is substantial evidence that Allied's loss was unconscionable given these facts. The Statute of Frauds should not be used in this instance to defeat the oral agreement reached by the parties in this case." The appellate court affirmed the trial court's verdict awarding damages to Allied. Allied Grape Growers v. Bronco Wine Company, 203 Cal. App.3d 432 (1988).

Step 2

Answer the questions.

Create a document and record answers to the following questions.

• Is it ever ethical to raise the Statute of Frauds against the enforcement of an oral contract? Why or why not?
• Should courts apply the equitable doctrine of estoppel to save contracting parties from the Statute of Frauds? Why or why not?