Contracts Outline

I.          WHAT ARE THE TERMS OF THE CONTRACT
            A.        PAROL EVIDENCE RULE
1.         Uses (Make sure to explain why we are using PER on exam)
a.                   Add terms to contract
b.                  Define ambiguous terms
c.                   Reformulate contract
1.         Deals with language of contract
            2.         Focus is on the intention of the parties
3.         Assumes that there was a valid prior agreement (issue is if it was properly written)
            4.         PER does not bar evidence of subsequent agreements
                        5.         PER permits evidence of express pre-conditions (required to make                                                  contract operative)
                        6.         Process
a.         Is contract final (integrated) or partial (final expression of some terms)
1.         Writing is an intended final expression of at least some terms
2.         Is contract complete
3.         If writing is complete and integrated, no extrinsic evidence allowed for anything in the scope of the contract
            7.         When it applies
a.         Adding terms to existing contract
1.         Generally you cannot contradict a final expression, but you can supplement a partial expression
2.         Four Corners Rule (NY)
a.         If writing appears to be integrated/complete on its face, then extrinsic evidence not allowed (Gianni)
b.         Gianni could have argued that the oral agreement was a separate/collateral agreement not within scope of original agreement and thus could have entered evidence
3.         Modern Test (RS and CA approach)
a.         Cannot determine intent just by looking at writing
b.         Need to determine if prior agreement was collateral or not
4.         RS 214
a.         Permits extrinsic evidence to show that writing is not integrated/complete, was based on fraud, duress, mistake, lack of consideration, to reform the contract, to clarify meaning of writing if language is ambiguous
5.         UCC 2-202
a.         Cannot contradict final expression with anything that comes before or with contemporaneous oral statements, but you can use contemporaneous writings
b.         UCC permits use of implied terms
6.         Merger Clauses
a.         State that an agreement is fully integrated and complete
b.         Four Corners Approach honors merger clauses (conclusive proof)
c.         Modern approach would likely honor Merger Clauses because they are strong evidence
d.         Merger clauses can be challenged (adhesion, unconscionability)
7.         Bollinger
a.         Court permitted extrinsic evidence because there was stronger corroborative evidence that both parties believed the writing included the omitted term (putting topsoil over construction waste)
b.         CPQ was initially performing as if topsoil term was in contract and such a term was in contracts CPQ had with other landowners
                        b.         Clarifying ambiguous language in existing contract
1.         Plain Meaning Rule (NY)
a.         If court believes contract has clear plain meaning, no extrinsic evidence or need to interpret (Philles Records)
2.         Modern Rule (CA)
a.         Court looks at all the evidence (including extrinsic) to determine if language is reasonably susceptible to more than 1 interpretation
b.         If more than 1 interpretation is reasonable, then extrinsic evidence is permitted
            B.        AMBIGUOUS LANGUAGE
1.         Language is imprecise, always room for misunderstandings especially in oral agreements
                        2.         Tools to prevent misunderstanding
a.                   Get contract in writing (even if not required by SOF)
b.                  Define your terms
3.         Consequences for ambiguity
a.                   Ambiguities in the contract are construed against the drafter
4.         At time of contracting each party has a different understanding of a term
a.                   This does not involve mistake, but ambiguity
b.                  RS 201: No party is bound by the meaning of the other unless one party was best situated to clarify the ambiguity and did not or one party knew/should have known of other party’s meaning and the other did not know/should not have known
c.         Raffles v. Wichelhaus (Peerless ship): When any term is ambiguous and the parties understand it differently, the contract is not binding unless one was aware of the other’s misunderstanding
d.         Oswald v. Allen (Coin collection): No contract if parties understand a term differently unless one should have known of the other’s understanding
            C.        IMPLIED TERMS
1.         Can be used to supplement or interpret a contract (including one that is ambiguous)
2.                  Merger clauses do not block Trade Usage/Course of Performance/Course of Dealing
3.                  Parol Evidence Rule does not block Trade Usage/Course of Performance/Course of Dealing
4.                  TU/COP/COD can only be blocked by expre