1. What are the terms of the Contract?
  1. Parol Evidence Rule
  2. UCC §2-202: Final Written Expression: Parol or Extrinsic Evidence, Rs(2d)§209: Integrated Agreements, §210: Completely & Partially Integrated Agreements, §211: Standardized Agreements, §213: Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule), §214: Evidence of prior or contemporaneous agreements in negotiations, §215: Contradiction of Integrated Terms, §216: Consistent Additional Terms
  3. Parol Evidence Rule: A mechanism for excluding outside evidence to supplement an agreement b/c the agreement supersedes any preliminary negotiations, written documents, conversations, and verbal agreements. The one who does not want the evidence admitted uses the rule.
  4. The general purpose is to create a final agreement between the parties. If what's written is not a final agreement then you can bring in other evidence that shows what the final agreement is. However, if it is determined that the writing is a final agreement, then there is no need for any outside evidence and Parol Evidence bars the use of any outside evidence.
  5. Traditional trend is the 4-corner rule: If the instrument is complete on its face, the instrument is presumed to be a total integration. The court determines whether the writing is complete on its face solely by looking at the instrument.
  6. The modern trend is what we're supposed to use as the basic rule (Rs). (Judge decides whether or not the writing is an integration). Rs view: it's a two-step process.
  7. Look at the intent of the parties to determine whether the agreement is a final expression §209(1)
  8. If no, then Parol doesn't apply,
  9. If yes, then its called an "integrated agreement" then go to 2
  10. Is the integrated agreement a complete and exclusive statement of the terms of the agreement? §210
  11. If no, then it's a partially integrated agreement, and you can use outside evidence to supplement the agreement, as long as the evidence does not contradict a term in the agreement.
  12. If yes, then it's a completely integrated agreement, and you can't supplement or contradict. (Not even allowed to admit evidence that would explain a term §216)
  13. Merger Clause: tells you that the writing is a completely integrated writing. Harder to defeat the agreement, but not impossible. One way is to argue that the merger clause is unconscionable.
  14. Even if the writing is a complete integration, parol evidence is admissible to show fraud, mistake, or duress in the inducement of the contract. Most cts hold that a merger clause should not be held a bar to actions for fraud. Also admissible to show that the agreement was never formed or even if formed is void or voidable or to show grounds for granting or denying rescission, reformation, or specific performance.
  15. Parol testimony is admissible to prove a condition precedent to the legal effectiveness of a written contract if the condition does not contradict the express terms of such a writing.
  16. Evidence of subsequent agreements will not be barred by the parol evidence rule. The rule only applies to agreements made prior to the final contract.
  17. Does not prevent the admittance of evidence that contradicts implied at law terms.
  18. UCC: A writing intended to be a final expression of an agreement may not be contradicted by evidence of a prior written or oral agreement or of a contemporaneous oral agreement. §2-202.
  19. The writing may be explained or supplemented by course of dealing or trade usage even if it is a complete integration, unless the course of dealing or trade usage is carefully canceled by the contracts terms. §2-202(1).
  20. The writing may be explained or supplemented by evidence of consistent additional terms unless the ct finds the writing to be complete and exclusive. §2-202(2).
  21. §209(2): Judge makes all Parol Evidence decisions. There is concern that juries would be more sympathetic to oral testimony and not realize that written evidence is more accurate.
  22. Gianni v. R. Russell & Co. (1924) (p.556): If the two agreements were so interrelated it would be logical for them to be executed in the same contract.
  23. Collateral Agreement Rule - An oral agreement that is supported by separate consideration may be demonstrated, even though it occurred prior to what seem to be a completely integrated writing. §216(2)(a)
  24. If the term offered is dealt with at all in the writing, there is a total integration of both agreements. If the term offered relates to subject matter that is not covered by the writing, the writing is treated as a partial integration.
  25. Masterson v. Sine (1968) (p.560): "Contract among family members for a land sale". Since it's between family members it is likely that terms were not written down b/c they were understood. Family members are often inexperienced and may leave out terms. §216(2)(b): Q whether the oral agreement would've naturally have been left out
  26. Bolinger v. Central Pennsylvania Quarry Stripping & Construction Co. (1967) (p.567): "waste would be buried, forgot to include it in the contract" Both parties believed that the waste would be buried, but the contract failed to show that. Since they both believed it, their intent was for it to be in the contract.
  27. WWW Associates, Inc. v. Gaincontieri (1990) (p.586): They were sophisticated businessmen and knew what they were doing. Plain Meaning Rule - extrinsic and Parol evidence cannot be used to create an ambiguity in a written agreement, which is complete and clear and unambiguous upon its face. (p.589).
  28. PG&E Co. v. GW Thomas Drayage & Rigging Co. (1968) (p.592): If the text is susceptible to two diff meanings then you can use extrinsic evidence to prove either meaning. The test is whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonable susceptible.
  29. Q's to ask when you have a fact pattern:
  30. Is there a writing?
  31. If no, you probably have Statute of Frauds problems.
  32. Is there evidence of prior or contemporaneous negotiation to prove something?
  33. Is it being offered to contradict the writing?
  34. If yes, then discuss if the writing is integrated.
  35. Is this evidence being offered to add to the writing
  36. The issue raised here is if it's a partial or complete integration?
  37. Parol Evidence Issues
  38. Offered to contradict the writing
  39. Offered to add to the writing
  40. Maybe we're trying to reform the writing. Then the parol evidence rule does not bar the evidence, but you have to make sure that the writing was intended to be in there.
  41. Maybe we want to admit this evidence to prove some basis for invalidating the contract.
  42. Since Parol Evidence assumes already that there is a valid contract there is no reason to bar the evidence.
  43. Maybe we're bringing in the evidence to interpret the writing
  44. Does the evidence interpret the writing? (the Plain Meaning Rule)
  45. If so, it is allowed
  46. If not, as long as it doesn't attempt to contradict the writing its allowed.
  47. 3 ways to combat misunderstanding:
  48. Get it in writing
  49. Good writing is always important
  50. If you have certain terms that you get over and over have a section that defines them.
  51. Common rules that help with interpretation:
  52. Contract has to be interpreted against the person who drafted it.
  53. Trade usage, course of dealing, and course of performance apply.
  54. Trade usage: what is common to the industry
  55. Course of dealing: what is common between the two parties in question. How have they contracted in the past?
  56. Course of performance: One deal, done in installments, what is common practice within that contract.
  1. Ambiguous Language
  2. Vague: A word is vague when its applicability in marginal situations is uncertain
  3. Ambiguous: A word is ambiguous when it has two entirely different connotations so that it may be at the same time both appropriate and inappropriate.
  4. Ambiguities of term: ambiguity in the meaning of the terms
  5. Ambiguities of syntax: an ambiguity of grammatical structure
  6. Rules in Aid of Interpretation
  7. The statutory analogy: there is an obvious similarity between the interpretation of contracts and that of statutes
  8. Purpose Interpretation
  9. Words and conduct are interpreted in light of all the surrounding circumstances. The principal purpose of the contract is given great weight if it is ascertainable in light of all the circumstances (§202(1))
  10. Heydon's case gave steps:
  11. Examination of the law before enactment of the statute
  12. Ascertainment of the "mischief or defect" for which the law did no provide
  13. Analysis of the remedy provided by the legislature to "cure the disease"
  14. Determination of the "true reason of the remedy"
  15. Application of the statute so as to "suppress the mischief, and advance the remedy"
  16. Cts have frequently repeated Lord Escher's 3 rules:
  17. If the recitals are clear and the operative part is ambiguous, the recitals govern the construction.
  18. If the recitals are ambiguous, and the operative part is clear, the operative part must prevail
  19. If both the recitals and the operative part are clear, but they are inconsistent with each other, the operative part is to be preferred.
  20. Public Interest: See whether it is in the public's interest to interpret the provision broadly or strictly.
  21. Maxims
  22. Ejsudem generis: of the same kind
  23. Expressio unius est exclusio alterius: the expression of one thing is the exclusion of another.
  24. Noscitur a sociis: it is known from its associates
  25. Contra proferentem: against its author or profferer
  26. Specific terms and separately negotiated terms are given greater weight than general language and standardized terms, respectively (§203(c-d))
  27. Interpret terms with the aid of any relevant course of performance, course of dealing and usage of trade. (§202(5) & §1-205, §2-208)
  28. §201:
  29. Where all parties have attached the same meaning to an agreement or a term, it is interpreted in accordance with that meaning
  30. Where the parties have attached diff meanings to an agreement, it is interpreted in accordance with the meaning attached by one of them if at the time of the agreement was made that party did not know or have reason to know of any diff meaning attached by the other and the other knew or had reason to know the meaning attached by the first party.
  31. UCC §2-202: Should the buyer be bound to the trade usage if he doesn't know about it? Typically yes if he is in the trade. If you're outside the trade you're bound if you should have known about it.
  32. Hurst v. WJ Lake & Co. (1932) (p.601): "horsemeat" Trade usage case. Need to use the industry-adopted definition for terms.
  33. Raffles v. Wichelhaus (1864) (p.582): "2 ships named Peerless" If there are two meanings attached to a latent ambiguity then neither party is bound for lack of mutual assent. If one party has knowledge, then that party, if best situated to clear the misunderstanding takes the brunt. In this case, neither was in the best position. Rs(2d)§201
  34. Oswald v. Allen (1969) (p.584): "coin collection" Both understood the coins to be from diff collections. No mutual assent. When a term is ambiguous and the parties understand the contract in diff ways there can be no binding contract.
  35. Frigaliment Importing Co. v. BNS International Sales Corp (1960) (p.574): "chicken case" Rs(2d)§201(3): One party is not bound by the other parties definition of a word. Even if the result is a failure of mutual assent. The party that seeks to have a contract term interpreted in a narrow sense that is more favorable to him bears a substantial burden of proof.
  36. Gap Fillers
  37. UCC§1-203, §1-205, §2-208, §2-305, §2-306
  38. When the parties to a bargain have sufficiently defined to be a contract have not agreed with respect to a term that is essential to a determination of their rights and duties, a term that is reasonable in the circumstances is supplied by the cts
  39. The reasonably omitted term may be supplied even if the writing is completely integrated (Parol Evidence Rule)
  40. Although extrinsic evidence may be inadmissible to supply the omitted term, it may be used to determine what is "reasonable"
  41. Implied terms: terms that are "implied in law" rather than "implied in fact"
  42. Default Rules: Most implied terms are subject to agreement by both parties. Rules that the parties are powerless to alter by agreement are often called "mandatory rules" or sometimes "immutable rules"
  43. §2-305: If there has been no price term agreed upon, the ct will determine a reasonable price.
  44. §2-306(2): A lawful agreement for exclusive dealing, unless otherwise agreed, imposes a return obligation to use best efforts to promote the product.
  45. Nanakuli Paving & Rock Co. v. Shell Oil (1981) (p.651): "asphalt price protection" Trade usage case. In the past they had given then price protection. Evidence of custom and trade usage can be used and the jury can find that the parties knew or should have known of the practice at the time of the making the contract. Put forth 2 theories: Interpretation of contracts based on course of performance and good faith requirements.
  46. Columbia Nitrogen Corp v. Royster Co. (1971) (p.660): "contracted to order large quantities of mixed fertilizers but ordered less after prices dropped." Even though there might be a stated term in the contract, course of dealing and trade usage can be used to show that it has a diff meaning. Contract was silent about adjusting price and therefore neither permits or concedes anything. If the ct finds that the writing was intended to be a complete and exclusive statement of the terms of the agreement, then evidence of additional terms must be excluded.
  47. Can use trade usage, course of dealing, and course of performance even when there is a merger clause or a boiler-plate clause.
  48. Good Faith §1-203
  49. Negotiations: American law does not require good faith in negotiations. But you are limited by other mechanisms, e.g. duress, dishonesty, etc.
  50. Contracts: Every contract carries an implied duty of good faith and dealing
  51. Act in good faith as you perform your duty
  52. Act in good faith as you enforce your rights in a contract.
  53. Bad Faith & Performance in duties:
  54. Evading the spirit of the deal
  55. Lack of diligence and slacking off
  56. Deliberately rendering imperfect performance
  57. Abusing your power to specify
  58. Interfering with the other party when he tries to perform.
  59. Bad Faith enforcement:
  60. Conjuring up a dispute
  61. Deliberately failing to mitigate damages
  62. Perhaps contract gives you options and you abuse them, i.e. abusing your power to terminate
  63. Dalton v. Educational Testing Service (1995) (p.605): "SAT test scores" Didn't use a good faith std in applying their own rules. The ct will not order the release of his score, b/c its not the cts job to determine whether he actually took the test. But ETS does have to make a good faith effort to consider his appeal.
  64. Burger King Corp v.Weaver (1999) (p.609): Unless there is an express term in the contract that says no competition there is no case. You don't have to be nice but you can't be mean. Cts have refused to allow a c/a for breach of the implied covenant of good faith and fair dealing in 2 circumstances:
  65. Where the party alleged to have breached the implied covenant has in good faith performed all of the express contractual provisions.
  66. Where the implied duty of good faith alleged to have been breached would have varied the terms of the contract.
  67. Market Street Associates v. Frey (1991)(p.613): "JC Penny's case." There is no good faith requirement to point out and flag important paragraphs in an agreement, but you can't take advantage of them.
  68. Eastern Air Lines, Inc.v. Gulf Oil Corporation (1975) (610): "Gulf accused Eastern of manipulating prices, Eastern said everyone is doing it" §2-103 course of performance and course of dealing is important. Gulf had never complained about it in the past. §2-306 prevents manipulation by saying that output must be in good faith.
  69. Dickey v. Philadelphia Minit-Man Corp. (1954)(p.617): "lease specified the business to be done on the land" there is nothing in the contract that discontinuance is not allowed. The discontinuance was done in good faith b/c otherwise he would've lost money. The LL already adopted his own measures to minimize the negative impact so the court doesn't have to do it for him. D can change his business practices as he deems fit as long as he intends to continue the contract. D had no intention of discontinuing the lease, he simply made adjustments that he thought were sound business decisions.
  70. Bloor v. Falstaff Brewing Corp. (1979)(p.619): "hired to promote beer sales" obligation is to use a good faith and best efforts to promote high volume of sales. D was not expected to go bankrupt trying, but needed to try his hardest. Best efforts are determined in terms of the trade practice and usage.
  71. Article II Warranties
  72. 2 types of Warranties:
  73. Warranty of Title
  74. Warranty of Quality
  75. Express
  76. Implied
  77. Title
  78. §2-312:
  79. Warranty by the seller that:
  80. The title conveyed shall be good and rightful transfer
  81. Goods free from any security interest or other lien or encumbrance
  82. Warranty can be waived, excluded, or modified, only by specific language, or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a 3rd person may have.
  83. Warranty of title also includes:
  84. A warranty that there are no security interests (or other liens) on the goods other than those of which the buyer knows and
  85. A warranty given by merchant sellers against claims based on patent infringement of the like
  86. It doesn't matter whether or not the owner thought he had a good title, he has to actually have it. Can't have good title if someone who doesn't have good title gave it to you
  87. Principle of derivative title: A purchaser of goods acquires all title which his transferor had
  88. Express
  89. When the seller does something affirmative to create buyer expectations about the characteristics or performance of the goods.
  90. Oral & written representations. Have to be more than "puffing" and must "relate to" and become part of the "basis of the bargain." Need to be aware of trade usage terms.
  91. Affirmation of fact v. Opinion
  92. §2-313: Any of the following will make an express warranty:
  93. Affirmation
  94. Promise
  95. Description
  96. Sample
  97. Implied
  98. Automatically a part of the contract unless the seller (or the circumstances) does something affirmative to get rid of them.
  99. Merchantability
  100. §2-314: Implied warranty of merchantability: item must be saleable and conform to the normal expectations of the parties.
  101. (2)(c): to be merchantable the goods must be "fit for the ordinary purpose for which such goods are used"
  102. (2)(e): Goods are adequately contained, packaged, and labeled as the agreement may require
  103. (2)(a) - (2)(f) must all be satisfied
  104. Shaffer v. Victoria Station, Inc. (1978): "Glass of wine broke in ptf's hand." The drink sold includes the wine and the container both of which must be fit for the ordinary purpose for which used.
  105. Daniell v.