The Effect of Misunderstanding on Contract Formation and Reformation Under the Restatement of Contracts Second

The presence of misunderstanding at the time of an apparent agreement creates difficult problems in the law of contract formation and equally difficult problems when the apparent agreement is in ·writing and reformation is sought. The rules formulated in the original Restatement of Contracts are unsatisfactory in both areas. The preparation of the Restatement Second, which is now under way for contracts, includes changes in the rules of contract formation but the changes emerging are no more satisfactory than the original rules. The current version of the Restatement Second, contained in Tentative Draft No. 1, accepts the objective theory of contract formation, as did the original Restatement, but the attempt to formulate general rules based on that theory contains two principal shortcomings that seem almost at cross purposes. In one aspect it limits doctrine too narrowly, so as to lead to the conclusion that there is no contract in some situations in which a contract should and almost certainly will be found. In another aspect it extends doctrine beyond permissible limits, so as to lead to a finding of contract in instances where there should be none

TESTAMENTARY DISPOSITION TO THE TRUSTEE OF AN INTER VIVOS TRUST

The problem of this paper is narrow but important in connection with testamentary dispositions. A man establishes an inter vivos trust, in writing, and later attempts by will to add to the corpus of the trust without repeating in the will the terms of the trust. In some instances he thereafter amends the trust with the expectation that the property bequeathed to the trustee will be held in accordance with the amended terms. This is a simple and convenient method of disposing of property at death and most people probably would take for granted that the disposition is effective. Yet in some situations it is almost certainly not effective as intended and in others the risk of invalidity is serious. Without adequate reason the law has departed too far from the common understanding of those whose activities it regulates. It is time to remedy the situation and a remedy will be suggested. First, however, the present state of the law needs to be reviewed

NEGOTIABLE INSTRUMENTS UNDER THE UNIFORM COMMERCIAL CODE

The ambitious undertaking of the American Law Institute and the National Conference of Commissioners on Uniform State Laws to draft a Uniform Commercial Code includes a proposed revision of the Negotiable Instruments Law. This is not merely an attempt to patch up the present statute. It is virtually a complete rewriting. It includes many changes and additions in substance as well as a radical reorganization and rephrasing of language where no change in substance is designed. · It includes the much needed separation of the provisions relating to investment instruments such as corporate bonds from those relating to bills, checks, notes and other like instruments. The latter class of instruments is covered in Article 3 ( Commercial Paper ), the former, in Article 8 ( Investment Securities ). Article 3 also includes a division on bank collections, a subject not heretofore treated in any uniform act of the Commissioners on Uniform State Laws

Private Trusts for Indefinite Beneficiaries

Recently, in McPhail v. Doulton (In re Baden\u27s Deed Trusts), the House of Lords reached a decision that marks an important change in the English law of trusts which could be important also for American law. It held that there is a single test of validity for private trusts and for powers of appointment where the issue is whether the beneficiaries of the trust or the objects of the power are sufficiently definite, and that this single test is that applicable to powers of appointment. For nearly 170 years, since the decision in Morice v. Bishop of Durham, English law has had a stricter test of validity for a trust than for a power, and the same has been true in virtually all American jurisdictions. For private trusts in which the beneficiaries are designated by some group description, the settled rule has been that the trust fails unless the entire class of beneficiaries is capable of ascertainment. This has been true even though the trustee is given a power of selection from within the group, so that through the exercise of the power the beneficiaries would in fact be defined or identified. This test was thought to be settled for English law by the decision of the Court of Appeal in Inland Revenue Commissioners v. Broadway Cottages Trust, where the court said that a trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment ...

Reformation and the Statute of Frauds

There is unnecessary confusion and difference of opinion over the effect of the statute of frauds as a bar to reformation that would otherwise be available in connection with bargain transactions. Both the confusion and the conflict could be eliminated if it were clearly perceived that a decree of reformation is not the enforcement of an oral contract. Instead, it is a correction of the writing in question, or more basically a recognition that the legally significant agreement is the one the parties intended to express or describe in the writing. It is a separate question whether the writing as corrected complies with the statute of frauds so as to make the agreement enforceable

Edgar Durfee: Teacher and Scholar

A tribute to Edgar Noble Durfe

Reformation and the Parol Evidence Rule

The parol evidence rule of itself is never an obstacle to reformation, provided there is satisfactory evidence of a mistake in integration. If the parties intend to express the terms of a transaction in a writing, which is then to be looked to as the sole repository of those terms, the longstanding tradition of the law courts, described as the parol evidence rule, has been that the writing is controlling. If through mistake the writing failed to express correctly what the parties meant to express, the law courts still regarded the written word as decisive, but it has been recognized for a long time that equity will give relief through correction of the writing. Certainly by 1801, if not earlier, it was settled in English law that the parol evidence rule did not bar reformation in equity. Nonetheless, there remains a certain amount of confusion due to the occasional failure to distinguish between the parol evidence rule and the statute of frauds. There are cases refusing reformation through the use of parol evidence which might be thought to rest on an application of the parol evidence rule when in fact the reason for denying relief was the statute of frauds