Acevedo-Contracts II-Spring 2012
Chapter 5-Determining the Parties’ Obligations under the Contract:
Ascertaining, Interpreting, and Supplementing the Agreement.
1. Parol Evidence Rule
K does not have to be in writing unless it is required by the statute of frauds.
Why written?-better evidence, cautionary that Ks are serious, clearer manifestation of intent.
PE applies only to written K.
Basic fact pattern. Oral K and then written K. Alleged oral K is usually a supplement to the written K. Then a dispute about the Oral K.
1. Determine whether the oral K is encompassed by the written K.
Exceptions-fraud, mistake
RULES
1924 PA-Strict Approach-PE not allowed.
All preliminary negotiations, conversations and verbal agreements are merged in and superseded by the subsequent written contract…and ‘unless fraud, accident, or mistake be averred, the writing constitutes the agreement b/n the parties, and its terms cannot be added to nor subtracted from by parol evidence.
If they relate to the same subject-matter, and are so interrelated that both would be executed at the same time and in the same K, the scope of the subsidiary agreement must be taken to be covered by the writing.
No, a valid oral contract cannot raise a separate cause of action if it is within the scope of an accompanying written contract
EXCEPTIONS-fraud, accident, or mistake, are the foundation upon which any basis for admitting parol evidence to set up an entirely separate agreement w/n the scope of a written K must be built.
1968 CA-Liberal Approach-PE is allowed.
When the parties to a written K have agreed to it as a complete integration parol evidence cannot be used to add to or vary its terms…When only part of the agreement is integrated, the same rule applies to that part, but parol evidence may be used to prove elements of the agreement not reduced to writing.
Parol evidence has been admitted “to prove the existence of a separate oral agreement as to any matter on which the document is silent and which is not inconsistent with its terms”-even though the instrument appeared to state a complete agreement.
Evidence of oral collateral agreements should be excluded only when the fact finder is likely to be misled.
No, extrinsic evidence that explains the meaning of terms in a written agreement is not to be excluded by the parol evidence rule.
No, extrinsic evidence that adds to the terms in a written agreement is not to be excluded by the parol evidence rule if it would naturally be omitted by parties involved in such a transaction.
A court of equity has the power to reform the written evidence of a K and make it correspond to the understanding of the parties…However; the mistake must be mutual to the parties to the K. Denial by one party of a mistake does not prevent a finding of mutual mistake.
A person cannot get out of a K by asserting that he did not read or understand it.
Equity can allow a person a remedy however if there was a mutual mistake, real and actual.
Parol evidence of a mutual mistake is allowed under the parol evidence rule.
Integrated Agreements-process of incorporating terms into a K.
Threshold question is whether is one of intention. Did the parties intend that writing to be the final say?
1st step to see if a “writing has been adopted as the final expression of one or more terms of an agreement.” Consequence is evidence of prior agreement or negotiations is not admissible in evidence to contradict a term of the writing.
2nd step is to determine whether the writing has been adopted by the parties as a complete and exclusive statement of the terms of the agreement. No, then partially integrated agreement (not admissible as evidence to contradict. Yes, completely integrated agreement (not admissible as evidence to supplement.)
§ 210 says that writing itself cannot prove its own completeness.
Merger Clauses-stating that K is fully integrated. Given effect but not dispositive if basic transaction details like price, quantity, etc. are left out.
No Oral Modification Clauses- not effective b/c any agreement can be modified later (assent to modify can be shown by oral evidence.) If jurisdiction allows can still be invalidated if person can show reliance on the oral modification. (UCC § 2-209(2)-what may fail as a modification can be a waiver; material change in position in reliance on that waiver may prevent retraction of the waiver.)
Contemporaneous Oral Agreement-(1) must be “in form” collateral to written; (2) it must not contradict express or implied provisions of the written K; (3) it must be one that parties would not ordinarily be expected to embody in the writing.”
Not excluded. Parol evidence that is to prove the written agreement is invalid b/c it is a sham, not intended to be enforced, or that a recital of a perf as consideration is false. Parol evidence that is to prove fraud in the inducement of the K.
Plain Meaning Rule-used only for completely integrated agreements.
NY type
1st Stage-judge determines whether the language in the written agreement, w/ respect to the dispute in question, admits of only one plausible meaning or, rather, is ambiguous. If the language is not ambiguous, extrinsic evidence as to its meaning will be excluded.
2nd Stage- court determines meaning of contract language based on what is written and if it is found to be ambiguous in the 1st stage then the extrinsic evidence presented.
What is allowed as evidence to determine if the language is ambiguous differs w/ Cali and NY being exemplars of opposite views.
The best evidence of intent is written agreement.
A writing that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.
Extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide.
A K is unambiguous if the language it uses has “a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion.
If the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.
Policy: stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses…infirmity of memory…and the fear that the jury will improperly evaluate the extrinsic evidence.
Extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face.
No, extrinsic evidence should not be considered
led with the express terms. They must be construed as consistent if they can be. If they cannot be reconciled then Express terms are higher than Course of dealing which is higher than usage of trade.
It says unless carefully negated (expressly saying they do not want the UCC to apply) trade usage, course of dealings, course of performance are admissible to supplement the terms of a writing. They are admissible to supplement the terms of any writing, and that contracts are to be read on the assumption that these elements were taken for granted when the document was phrased.
1. Did parties intend for that writing to be a complete and exclusive representation of their agreement? (Integration) Completely integrated then no add’l evidence is admitted. Partially integrated then only consistent add’l terms are admitted. Consistent add’l means a term that does not contradict the writing. Judge determines integration.
2. Is there a merger clause?
California Approach
1. Examine the instrument.
2. Look for ambiguity on its face.
3. If it is clear still look to extrinsic evidence to see if evidence can shed light to meaning of the terms
New York Approach
1. Examine the instrument.
2. Look for ambiguity on its face. (4 corners)
3. If it is clear then extrinsic evidence is excluded.
4. If it is ambiguous then extrinsic evidence that can clear the ambiguity.
RULES
No, parol evidence as to the meaning of which ship is meant to be used to transport the contracted for goods when two ships have the same name should not be permitted
Latent ambiguity-neither party new that the contract was ambiguous. When neither party are blamable for the mistake, or both are equally blamable, neither party can be assigned the greater blame for the misunderstanding and there is non-arbitrary basis for deciding which party’s understanding to enforce, so the parties are allowed to abandon the contract w/o liability.
Rule of Raffles v Wichelhaus-when any of the terms used to express an agreement is ambivalent, and the parties understand it in different ways, there cannot be a contract unless one of them should have been aware of the other’s understanding.
No, a misunderstanding as to whether a sale was for the “Swiss coin collection” or “all Swiss coins in the collection” does not result in a contract that means one or the other, therefore there is no contract.
When parties have attached different meanings to their language in a contract an objective standard should determine which meaning will prevail. It is argued that even if they attach the same meaning an objective standard could determine a different meaning and that meaning should prevail. § 201.
