· Avoidance of Contracts – Undue Influence
· Smith v. Ellison (mom deeds home to daughter)– when undue influence is exerted by one party to contract on the other, and that influence induces assent, the contract is voidable by the victim of influence
o When there is a confidential relationship btwn parties, only slight evidence is necessary to establ. Undue infl
o When a confidential relationship coupled with suspicious circumstances, an inference of undue infl arises
o Suspicious circumstances:
§ Whether the recipient of the gift participated in arranging or executing the deeds
§ Whether the alleged victim of the infl received indep advice
§ Whether the conveyances were conducted in secrecy and with haste
§ Whether there was a change in the donor’s disposing of the property
§ Whether the gift is unnatural and unjust, and finally
§ Whether the donor is susceptible to influence
o Emphasis on undue infl should be on the unfairness of the advantage which is reaped as a result of the wrongful conduct
· Public Policy
· Ct can refuse to enforce a contract if the contract violates public policy or may refuse to enforce one or more terms of a contract if the term violates public policy; could be violation of PP thru a statute
· Commission of Tort: Contract that requires the commission of a serious crime or tort – not enforceable – R2d §192
· Marriage and parent/child relationship – R2d § 189-191
· Right to be free from unreasonable restraint from trade – R2d § 193-194
· A clause exculpating one party from liability for harm caused by his or her INTENTIONAL OR RECKLESS CONDUCT is unenforceable – but if it is negligent conduct it is enforceable in some cases – R2d § 195
o Tunkl – unequal bargaining power b/c performing a service to the public
· Must balance the interests favoring enforcement against the interests against enforcement – R2d § 178
· Courts will likely not find RESTITUTION in favor of a party who has performed (and thereby rendered benefit to the other party) under or in return for, a promise unenforceable on the grounds of public policy – R2d § 197-199
· If agreement does not state PP – look to the circumstances of the case –
o Trotter v. Nelson (referral of the client from staffer to atty)
§ If not clear notation of what the public policy is…look to if the agreement “has a tendency to injure the public, or is against the public good, or is inconsistent with sound policy and good morals as to the consideration or as to the thing to be done or not be done” – question of law depends on the circumstances of the case
§ 3 situations where courts have refused to enforce private agreements on public policy grounds
ú agreements that contravene statute
ú agreements that clearly tend to injure the public in some way
ú agreements that are otherwise contrary to the declared public policy of Indiana
If you record an agreement, one party may say later that something not put in the record (said before or during the execution of the agreement) was also part of the agreement – P.E.R. lets you know whether such claims should be heard
P.E.R. vs. Interpretation – whether and when parties to a written K may use evidence of a prior oral or written agreement to add new, substantive terms that either contradict or supplement the writing
· Parol Evidence Rule: (evidence by word of mouth – literal meaning) the agreements prior to the record (written or/and oral) AND any contemporaneous oral agreement made at the time of the writing of the record – includes any additional writings signed at the same time as signing the other agreements (it is considered all one agreement) à Application of the P.E.R. determines whether or not the trier of fact may hear such evidence
· Provides that evidence of prior agreement
o 1) May never be admitted to contradict an integrated writing, AND
o 2) May furthermore not even supplement an integration that is intended to be complete
· Basic Issue: Is parol evidence (word of mouth) admissible to alter (change, vary, contradict) or add to (supplement) an agreement expressed in a record (e.g. writing)
· Can the evidence (the prior discussions and/or contemporaneous oral agreement and/or additional writings) be introduced to show that there is some term that is not in there, or is in addition to the record?
Ask:
1. Was the evidence (additional terms or conversation) prior to or contemporaneous to the agreement? (if not – likely a modification)?
a. TIP: Most exam ?s involve situations where the P.E.R. does NOT apply. 3 most often tests situations:
i. 1) Clarification of ambiguity: evidence of prior or contemporaneous negotiations is admissible to properly define an ambiguous term even one contained in a total integration (ambiguity may be apparent on the face of the K or derive from underlying circumstances)
1. Can’t change the meaning: offered for the purpose of interpreting the ambigious clause, not adding or changing an unambiguous one
§ Ambiguities are construed against the pty who prepared the K
o 2) Custom: several ways custom can be introduced to interpret K à when one applies there is no P.E. problem b/c the custom is being introduced for interpretation not to vary the interpretation. Look for:
§ Course of dealing: evidence about a pattern of performance btwn the 2 ptys under past contracts (diff from course of performance – how ptys have behaved under current K)
ú May be used to show how the ptys acted w/ re to the past Ks – to show how a term in current K should be interpreted
§ Usage of trade: evidence of a generally accepted practice or method of dealing in a given industry or field.
ú Can be introduced to clarify an otherwise ambiguous term
o 3) Existence of a condition and/or formulation defect: P.E. can be introduced as proof of a condition not included in the writing, as well as proof that the K never legally came into existence
2. If yes, what is the evidence trying to do? Add, Alter/Contradict, or Explain?
· Rule: Trier of fact may NOT hear P.E. that:
o adds to or contradicts a complete integration and may NOT hear parol evidence that contradicts a partial integration
3. Is the contract fully integrated or partially integrated?
· Analyze in a strict and relaxed sense:
o Strict: Only look at the contract itself to ascertain if PE is admissible
§ Four Corners Rule: Look at everything w/in the 4 corners of the K (analyze per below)
ú Merger clause (only persuasive)
ú Handwritten modifications? (could go either way)
ú No oral modification clause ( might not be a factor cause that’s for after the fact)
ú Look at whole record:
· Boilerplate
· Fill in blank
· Length of agreement
o Relaxed: Look at everything (see below)
§ Circumstances surrounding creation of contract
ú Bargaining power
ú G. Knowledge and Sophistication of drafters lawyers
ú Pre-contractual negotiations?
ú Written notes
ú Would the term naturally be included in the contract by examining the intent of the parties
· Did parties INTEND the document to represent the final expression of their agreement (integration contain all of the details of the agmt, or sonly some of the details) then the document is said to be an integration of their agreement?
o Masterson v. Sines – Discusses the need to look at intent
§ (Deed of real property to family member; P states only able to assign to family member, but not stated in K; look to parol evidence to determine)
§ Majority: evidence used to add an additional term that it is not assignable, whereas the dissent says, No, it alters it, not adding
§ Completely integrated amt – may NOT alter or add
§ Partially integrated amt – may NOT alter, but may add to
ú Look to the Intent…examine:
o To examine Intent look at:
§ 1) instrument, writing, record; 2) Collateral agreement, (aka. The parol evidence); 3) Circumstances
o Was the writing intended to be a draft?
o Would the evidence have been naturally separate?
§ reasonable (natural) to keep the PE out of the original record?
ú if natural to keep it out, then contract is a complete integration
ú To decide if naturally separate, look at:
· 1) Instrument; 2) Parol Evid.; 3) Circumstances
§ when determining whether complete writing – §2-202(3) or the R2d §213 – and naturally in Masterson – it woul
à See Interpretation section (§2-202(a))
· Extra Notes:
· If evidence is admitted…
o it doesn’t mean it’s a term… just evidence that can allow the court/trier of fact to determine whether the evidence proves it is actually a term or not
· Strict application of P.E.R. – bar the trier of fact from considering all evidence from certain preliminary agreements that are not contained in the final writing
· (1) An agreement modifying a contract within this Article needs no consideration to be binding.
· (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
· (3) The requirements of the statute of frauds section of this Article (Section 2–201) must be satisfied if the contract as modified is within its provisions.
· (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
Definitions:
· Record: information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form
· Parol Evidence: evidence (testimony) of the parties’ oral agreement, prior to or contemporaneous with execution of a record, to a term or terms that are not included in the record, and evidence (a document) of the parties’ written agreement, prior to execution of a record, to a term or terms that are not included in the record.
· Final Record: a partially integrated agreement {not the same as complete}
o A record may be final but not complete when the parties have put in the record some but not all of the terms as to which they have finally agreed
· Merger Clause: term in the record by which the parties purport to express their intention regarding the finality or completeness, or both, of the record
· Extrinsic Evidence: outside of the record; not subject to exclusion by the parol evidence rule
EXAM APPROACH:
Issue: The issue presented is whether _____ would be admissible b/c of the parol evidence rule.
Rule: PE is evidence of the parties’ oral or written agreements formed prior to or contemporaneously with the execution of a record. In this case the parol evidence is _______.
· P.E.R.: final and complete embodiment of an agreement cannot be modified or supplemented by parol evidence
o Admission depends on the purpose of the PE and the form of the record; does the evidence add, alter or explain the terms of the K?
§ If to explain, evidence allowed in some cases
§ If to add, evidence allowed only for partially integrated records
§ If to alter, not allowed for either partial or full integrations
o Application of PER determines if the evidence will go to the trier of fact to decide whether an oral agreement was made
o Analysis
§ Discussed before or contemporaneously with record?
§ Is the record a partial or full integration? Merger Clause?
ú If judge finds record is final and complete integration of agmt, then PE that adds to the record is not admissible.
· Examine record to determine integration — Merger clause? General Form (doesn’t include specific needs of the signers)? Look at record, PE itself, and surrounding circumstances
· Circumstances relating to the formation of the K
