Contracts II Outline

Contracts II Ford Spring 2016

Buyer v. Painter – CA resident and a IL resident, $10k dispute

What law governs?

State law usually governs Contract law.
State law for decision, Federal law for jurisdiction.

What Law Governs?

Is there a forum selection clause?
What State’s conflict of law rules apply?
What State’s substantive law rules apply?
Does the relevant state’s common law or UCC law apply?

UCC applies for contract for the sale of goods

Quake Construction v. American Airlines

Parol Evidence – facts outside the four corners of the contract.
Cancellation clause illusory? Or sign of an intent to be bound (Supreme Court says)

Brown Machines, Inc. v. Hercules, Inc.

UCC 2-207(1) – Mirror Image Rule. Court seems to think non-mirror image offer and acceptance situation.

Acceptance of an option contract is valid upon receipt.
Consideration is a bargained for exchange of promise for a promise or promise for performance. Benefit to promisor or detriment to promisee.

Contractual Interpretation

In interpreting and enforcing a contract, questions often arise as to whether the written instrument is the complete embodiment of the parties’ intention. Where the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an “integration.” Any other expressions—written or oral—made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.

Example: Buyer is interested in purchasing a new car from Dealer. He settles on a particular car, and Buyer and Dealer begin to negotiate the terms of the sale. During the negotiations, Dealer tells Buyer that if he agrees to buy the car “today,” Dealer will provide free car washes for as long as Buyer owns the car. The two parties finally come to an agreement on price and sign a written contract. The written contract contains a clause providing that it is the full agreement between the parties. However, it does not provide for free car washes. Absent an applicable exception, the parol evidence rule would prevent Buyer from introducing evidence in court of the oral agreement concerning car washing services that was made prior to the execution of the written contract.

Purpose

Its name notwithstanding, the parol evidence rule is not generally regarded as a rule of evidence, but rather as a rule of substantive contract law. It is designed to carry out the apparent intention of the parties and to facilitate judicial interpretation by having a single clean source of proof (the writing) on the terms of the bargain.

Is the Writing an “Integration”?

The question of whether a writing is an “integration” of all agreements between the parties can be broken down into two further subquestions:

Is the writing intended as a final expression?

Is the writing a complete or partial integration?

Is the Writing Intended as a Final Expression?

Writings that evidence a purported contract are not necessarily the “final” expression of that contract. Thus, for example, the parties might only have intended such writings to be preliminary to a final draft. If so, the parol evidence rule will not bar introduction of further evidence. Any relevant evidence is admissible to show that the parties did not intend the writing to be final. Note that the more complete the agreement appears to be on its face, the more likely it is that it was intended as an integration.

Is the Writing a Complete or Partial Integration?

After establishing that the writing was “final,” one should determine if the integration was “complete” or only “partial.”

If complete, the writing may not be contradicted or supplemented;

If partial, it cannot be contradicted, but it may be supplemented by proving up consistent additional terms.

As with the finality component, whether an integration is complete or partial depends on the intent of the parties. All relevant evidence is admissible for the purpose of making the determination, even the evidence whose admissibility is challenged. The UCC presumes all writings are partial integrations unless there is evidence that the parties intended a writing to be the complete agreement. [UCC §2-202(b)]

Effect of Merger Clause

A merger clause is a statement in a writing reciting that the agreement is the complete agreement between the parties. The presence of a merger clause is often determinative in large commercial contracts in which both parties are represented

Who Makes Decision?

The majority view is that the question as to whether an agreement is an integration is decided by the judge, not the jury.

If the judge decides that the writing was an integration of all agreements