Approach to Fact Pattern
1. UCC or common law?
2. rights and duties (interpretation = intent)
3. performance / post-formation events
4. breach – partial / material / total
5. remedies
Common Law or UCC
I. Does the agreement involve the sale of a good? If so, UCC likely applies
A. good: all things movable
1. major exceptions: personal services, interests in real estate, landlord/tenant agreement
II. Does the agreement involve a mixed transaction?
A. apply predominant purpose test if both goods and services are involved
1. if predominant purpose of K is sale of goods, UCC applies
àanalyze K from BOTH parties’ perspectives
The Meaning of the Agreement: Principles of Interpretation and the Parol Evidence Rule
I. Principles of Interpretation
A. subjective theory of contracts: intent relevant to meeting of the minds; abandoned for
sake of ease of K since too many Ks could be found unenforceable if subjective intent relevant
àPOLICY – vindication of parties’ intention; individual will
B. objective theory of contracts: what meaning a reasonable person would ascribe to a
material term; could result in K meaning that neither party intended
àPOLICY – fairness; uniformity; consistency in results; efficiency
C. modified objective theory of contracts: agreement controls the K
àPOLICY – retains efficiency; fairness and responsibility of parties but tempers rigidity to allow facilitation of Ks; ease of trade
1. to interpret, ask whose meaning controls and what evidence may be taken into account
a) where parties agree, shared meaning controls
b) where parties attach different meanings, if one knew or had reason to know of
other’s meaning, the other’s meaning controls
c) where parties attach different meanings and neither knew or had reason to know,
neither party is bound and the K may fail
àlook at plain meaning if document is written; utilize linguistic canons to interpret if necessary
2. 3 approaches to interpreting adhesion
a) some courts give meaning to words based on reasonable expectation of non-
drafting party in limited circumstances
b) majority of courts apply reasonable expectation (of non-drafting party) test
after finding ambiguity
c) R.211 approach presumes standard form Ks enforceable; apply drafters’
expectation
3. courts typically will apply plain meaning rule and refuse to allow extrinsic evidence of
meaning UNLESS court first concludes there is an ambiguity
a) specific types of evidence of intent and weight afforded
(1) course of performance: repeated occasions for performance by parties
(2) trade usage: practice or method having regularity of observance in vocation or
trade
(3) course of dealing: previous Ks of parties
4. special case of interpreting adhesion Ks (INSURANCE)
a) if there is a conflict between the terms of an insurance policy and a term that an
insured would reasonably expect to be in the policy, then the court is to interpret in
accord with the reasonably expected term
àadhesion K requires (1) standard form, (2) absence of choice as to terms and (3)
party without choice has unequal bargaining power
II. Parol Evidence Rule
A. integration: the level to which the writing is intended to be a complete statement of the
agreement
1. complete integrated: complete, exclusive statement of all K terms
a) explanation permitted, but not supplementation or contradiction
2. partial integration: complete, exclusive statement of one or more K terms
a) supplementation permitted as to nonintegrated terms, but supplementation and
contradiction of integrated terms prohibited
àcan always explain, can never contradict
àsupplementary evidence ADDS; speaks to an item about which the K is silent
B. classic approach to integration issue
1. document must be found facially ambiguous before explanatory evidence will be
permitted (followed by a substantial number of jurisdictions)
2. preferred by party that wants evidence admitted
3. merger clause conclusive or nearly conclusive evidence of full integration
à4 corners approach
C. modern approach to integration issue
1. writing itself cannot prove completeness and wide latitude must be afforded for intent
inquiry
2. preferred by party that wants evidence excluded
3. merger clause relevant, but not conclusive evidence of full integration
D. factors for assessing integration
1. length and detail of agreement
2. formality or info
though possible it would cause extreme and unreasonable difficulty
àrelates to party’s ability to PERFORM
1. where, after a K is made, a party’s performance is made impractical without his fault by
the occurrence of an event the non-occurrence of which was a basic assumption of the agreement on which the K was made, his duty to render that performance is discharged, UNLESS the language or the circumstances indicate to the contrary
a) supervening event cannot be a change in the market circumstances OR be the
benefiting party’s financial inability
C. frustration of purpose: prevention or hindering of attainment of contractual performance
àrelates to party’s PURPOSE of performance
1. where, after a K is made, a party’s purpose is substantially frustrated without his fault by
the occurrence of an event the non-occurrence of which was a basic assumption on which the K was made, his remaining duties to render performance are discharged, UNLESS the language or the circumstances indicate to the contrary
àfrustration of purpose and impracticability are so similar that it’s often wise to argue them in the alternative
III. Modification
A. traditionally, modification allowed only if there is consideration for the new promise
B. performance of the preexisting duty of the original K is not consideration
1. exceptions to preexisting legal duty rule
a) unforeseen circumstances
b) mutual release
c) economic duress
C. party may in good faith seek a modification when unforeseen economic exigencies existed
which would prompt an ordinary merchant to seek a modification in order to avoid a loss on the K, HOWEVER even where circumstances do justify asking for a modification, it is nevertheless bad faith conduct to attempt to coerce on by threatening a breach
