Spring 2012 Contracts 2 Outline, Neustadter
Is it goods or services?
Extrinsic Evidence
I. CONTRACT CONSTRUCTION
i. Construed as a whole: specific clauses will be subordinated to the K's general intent
ii. Ordinary meaning of words: courts will construe words according to their “ordinary: meaning unless it is clearly shown that they were meant to be used in a technical sense
iii. Inconsistencies between provisions: written or typed provisions will prevail over otherwise
iv. Custom and Usage: courts generally look to see custom and usage §1-303
v. The preference it to construe K as valid and enforceable
vi. Ambiguities construed against party preparing the K
Parol Evidence
Parol Evidence: The parol evidence rule bars evidence of prior or contemporaneous agreements to contradict, or in some cases supplement a term of the writing [§2-202/§213].
First, the court must determine if the writing was meant to be a final expression of the agreement. The more complete the agreement appears to be on its face, the more likely it was meant to be a final expression. If the agreement was a final expression of the agreement, other terms cannot be added to it.
2) The next step is to ask if the parties are trying to add to, contradict, or to interpret what is already in the K. The evidence can never contradict the written agreement.
3) If the party is trying to add to the contract, the court then looks to see if the agreement is a final expression with respect to term dealing with the same subject as the parol evidence. If so, the term is excluded.
Next, the court must determine if the contract has been integrated.
Integration: When deciding if a contract has been integrated, the court is essentially determining if all of the terms that the parties agreed upon were included in the writing, or integrated into one document. If it is integrated, then presumably the writing contains everything the parties meant to include. There can be full integrations and partial integrations, in which a certain topic includes everything the parties considered in the contract, while other topics do not.
There are two different tests the courts use to determine if the integration is full or partial: the Williston Test, and the Corbin Test.
Williston Test: The contract must be incomplete on its face in order for the court to resort to extrinsic evidence. The parol evidence rule is reduced to a rebuttable presumption, and it is assumed that the prior and contemporaneous agreements have been included in an integrated writing. The focus of the test is on what reasonable parties would have done in the formation of the contract. The test looks to see the length, format and standardization of the contract, and if the term would have naturally been omitted from the contract had it been agreed to [§216].
Merger Clause: The court also considers merger clauses in determining integration. Merger clauses state that the writing has been fully integrated and that nothing agreed to has been left out. However courts hesitate to hold these determinative, especially when standard with the contract, as the parties may not understand or even notice the clause
Corbin Test: This test is a more liberal, contextual approach, which looks to extrinsic evidence to see if the parol evidence was likely part of the negotiations. The test takes into account all extrinsic evidence and all written documents to establish the intent of the parties.
If the court finds that the writing is not fully integrated, the evidence is permissible, granted it does not contradict the writing.
The court considers the relationship of the parties and the experience they have with this type of transaction. The focus here is on the intent of the parties. [[Evidence of a collateral agreement is likely to be excluded only when the court determines that the fact finder is likely to be misled by admitting the evidence.]]
The court will consider if the contract is formalized in nature, what the true intent of the contract was, and if the term was one that would have certainly been included in the contract if it were intended. If the contract was formalized and pre-typed, then it is less likely that terms agreed upon in negotiations would not have been added.
However, ________ can argue that all they had to do was to write the new term on the paper. As a policy consideration, the court considers the true intent of the parties. A determining factor in the Masterson case was that the parties likely didn't consider the possibility of assignment, but intended and assumed that the contract would be non-assignable.
3) If the parties are trying to use extrinsic evidence to interpret the contract, the court looks to see if what is being interpreted is subject to one or more interpretat
t interpretive parol evidence (unless it is so clear that any interpretation would be contradiction)
▪ An explicit statement that it is a complete agreement (merger clause)
ii. Partial Integration:
▪ Partial integration will be complete for the terms that are covered, so you can only add new evidence
▪ For a partial integration, you can admit additional or interpretive parol evidence
▪ if the evidence concerns an included term, it can only be interpretive
▪ If the evidence concerns issues not covered, it can add.
iii. Determination: Partial or Full
▪ Williston Test (MAJ and Conservative): First determine if the agreement is integrated
ñ The contract must be incomplete ON ITS FACE in order to resort to extrinsic evidence
I. PER is reduced to a rebuttable presumption that prior and contemporaneous agreements have been included in an integrated writing
ñ Would the term naturally and normally include the extrinsic matter in the writing?
I. If yes, the extrinsic evidence will not be admitted.
ñ The only evidence that is allowed under this test is those that are (3 elements) collateral in form:
I. Collateral agreement: a separate, contemporaneous agreement and often distinct agreement between the parties
ñ Collateral does not always mean that the two agreements must be supported but separate consideration
ñ §216: look at the distinct subject matter and the consideration.
▪ Corbin Test (MIN and Liberal): First determine if the evidence is credible
ñ The court will take into account ALL extrinsic evidence as well as written documents to establish the intent of the parties
ñ Only after the intent of the parties is clear will the court determine what should be excluded.
I. Evidence of collateral agreement is likely to be excluded ONLY what the court determines that the fact finder is likely to be misled if the evidence is admitted.
