CONTRACTS – SP’ 09 FINAL OUTLINE
CONTRACT TERMS
Source of terms
Parol Evidence Rule (UCC 2-202)
i. Limits extent to which a party may establish that discussion or writings prior to the signed written K should be taken as part of the agreement
1. Sometimes PER bars factfinder from considering evidence of certain preliminary agreements not contained in final writing
ii. Factfinder may not hear parol evidence that ADDS to/CONTRADICTS a complete integration and may not hear parol evidence that CONTRADICTS a partial integration [See flow chart]
iii. Things NOT subject to exclusion by PER
1. Evidence of circumstances under which K made
2. Custom in industry
3. Prior course of dealing btw parties
4. Course of performance of agreement in question
5. Evidence K was product of mistake, misrep, duress, undue influence
iv. Definitions:
1. Parol evidence
a. Evidence/testimony of parties’oral agreements, prior to or contemporaneous w/ execution of a record, to term(s) not included in the record, and evidence (a document) of parties’ written agrm’t, prior to execution of a record, to term(s) not included in the record
b. Cal. Code Civ. Pro. 1856(a): Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement/contemporaneous oral agreement.
2. Record
a. Information that is inscribed on a tangible medium or which stored in an electronic or other medium and is retrievable in perceivable form
3. Partially integrated agreement
a. A final recordà contains SOME but not all of agreed terms
i. “final” and “complete” are not synonymous terms
1. may be final but that does not mean all the terms have been agreed on yetà can be final but not complete
4. Completely integrated agreement
a. Record that contains ALL agreed upon terms and is final
b. Factors for determining complete integration (Masterson v. Sine):
i. Look at record for intentions (merger clause)
1. Don’t look at just face of the agreement
2. Formalized structure of doc?
3. Look at length/# of terms /handwritten changes
ii. Look at circumstances at time of writing
1. Sophisticated parties/lawyers present?
2. Specific negotiation meeting?
3. Amt of $ involved
4. Duration of K
iii. Policy discussion
1. Written evidence more accurate than human memory
2. Fraud/unintentional invention by witness will mislead
iv. If term in question naturally would’ve been separate, then NOT completely integrated à R.2d 209-210
5. Merger clause aka integration clause
a. Record where parties assert to express their intention regarding finality/completeness of record à is a factor, but NOT conclusive
b. Ex: “This record expresses the final and complete agreement of the parties w/ respect to the…”
v. FOR EXAM:
1. IDENTIFY the record and the parol evidence
2. What is the parol evidence offered to prove?
a. PE offered to contradict something in record or supplement record?
i. If to contradict→ is the agreement partially integrated?
1. If partially integrated, then PE inadmissible
2. If not integrated at all, then PE admissible
ii. If to supplement→ is the agreement completely integrated?
1. If completely integrated, then PE inadmissible
2. If not, then PE admissible
3. If PE is ADMISSIBLE, does the factfinder believe it?
a. Just because the PE is admissible doesn’t mean that it actually happened à someone’s claim may not be correct
b. If factfinder does not believe the PE, then it is NOT a term
c. If factfinder believes the PE, then it IS a term
COMPARISON BTW U.S. AND INTERNATIONAL USE OF PAROL EVIDENCE RULES
US
CISG
Parol Evidence
2 conditions met:
1) the agreement is in writing.
2) one of the parties seeks to present extrinsic evidence to the fact finder.
Courts then ask whether the writing was integrated (intended to represent final expression of terms)
o If integrated, neither party can introduce evidence to CONTRADICT terms in writing.
o If completely integrated then parol evidence may not be introduced to contradict OR to supplement the writings terms.
NO version of Parol Evidence Rule
Use Article 8 and 11 to interpret facts outside written contracts
Article 11 provides that a party may seek to prove that a statement has become a term of the contract by any means including the statement of witnesses
Article 8 provides that contracts are to be interpreted according to actual intent, or if not found, by the point of view of a reasonable person.
Merger Clause
Provides that writing contains the entire agreement, and neither may rely on representations made outside writing.
NO merger clauses.
Generally does not exclude extrinsic evidence for contract interpretation
Plain Meaning Rule
Bars extrinsic evidence for interpreting a contract unless the term in question has first been found to be ambiguous
i. Created by ANY affirmation of fact or promise which relates to goods and becomes part of basis of bargain
ii. Seller creates express warranty by ANY description of goods which is made part of basis for bargain, except for puffing
iii. If buyer is shown sample/model, this normally IS an express warranty that rest of goods will conform to sample/model
b. Implied warranty of merchantability: UCC 2-314 à see 2-316 for disclaimer
i. Always implied unless expressly excluded (disclaimer)
1. “as is,” “with all faults”
2. Conspicuous term = when it is so written that reasonable person would notice/understand
ii. Seller must be merchant w/ respect to goods of that kind (UCC 2-104 merchant definition)
iii. Goods to be merchantable must:
1. Pass description
2. Be of fair and average quality
3. Be fit for ordinary purposes for which such goods are used
4. Run w/ variations permitted w/in agreement
5. Be adequately packaged
6. Conform to affirmations made by container
iv. Second-hand goods
1. Involves only such obligation as is appropriate to such goods for that is their contract description.
c. Implied warranty of fitness for particular purpose: UCC 2-315
i. Elements to recover for breach:
1. Buyer must show particular purpose, seller must know or have reason to know of particular purpose at time of contracting
2. Seller must know or have reason to know if buyer is relying on seller’s skill/judgment
3. Buyer must prove that he did in fact rely on seller’s skill/judgment
