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Contracts II
South Texas College of Law Houston
Kelso, R. Randall

I. Interpretations of Contracts
            A. Parol Evidence Rule
– Prevents admission of oral or written evidence during negotiations before the written agreement was created
– NOT a rule of evidence or procedure, rather it is a substantive rule of law
– Three factors that trigger the PE Rule
1) Complete Agreement in Writing; OR
1) Is it only a partial/collateral agreement in writing; AND
2) Does Partial/Collateral Agrmt contradict writing? OR
2) Does partial/collateral agreement supplement the writing? AND
3) Would PE normally be included in writing?
3)Would PE not normally be included?
(Any would not allow PE in agrmt)                 (All 3 needed to let PE in agrmt)
 
– All 3 elements are questions of fact for a judge to decide, not a jury. The judge will decide if PE is allowed in assuming it happened. The jury will decide if PE actually happened or not.
– Modern trend is to be more willing to let PE in.
                        – Traditional courts only want to look at writing (TX)
                        – Elements 2 and 3 are the ones argued most to go either way.
 1) Complete Agreement in writing?
-Merger Clauses- statement in writing that says agreement is final. (Good evidence to say agreement is complete, but still arguable by modern trend “only that specific writing in final, but not everything”)
– Modern trend will look at PE and writing to determine if it was complete.
– Traditional courts will only look at writing to see it was a complete agrmt.
2) Partial/Collateral Contradict or Supplement?
– Hunt Foods Approach- is there direct contradiction? If YES, it is inconsistent and not allowable.
– Snyder Approach- is there reasonable harmony? IF NO, then inconsistent and not allowable
                        3) Would PE Normally be included in Writing?
 
            B. Exceptions to PE Rule
                        1) Separate K, PE is meant to be a separate K.
2) Fraud, Mistake, or Duress. If original writing made under those circumstances, no need to go through 3 step analysis to let PE in.
3) Deficiencies in the K like lack of consideration or illegal subject matter. No need to apply PE Rule. Only apply PE to valid K’s
– Also let PE in to determine Condition Precedents. Does it contradict the writing and therefore rule out PE? Should it have normally been included in writing (allowed in depending on traditional or modern approach)
4) Interpretation. If only trying to resolve a provisional ambiguity, then PE allowed to support the writing. No new provisions are being introduced here.
– Courts generally ask: “are there more than one reasonable meanings?”
* Modern courts look at PE AND written agrmt when analyzing whether to let it in or not, traditional courts ONLY look at writing (Plain Meaning Rule).
           
 
 
            C.Terms of Agreement
                        a. Intrinsic
                                    1) Terms
                                                Literal- actual terms of the k
Purpose- look to the purpose behind the clause of the k you are interpreting
                                    2) Maxims of construction
Verbal- standard rules of grammatical construction, ordinary interpretation of words. Or interpreted in light of technical meaning of word instead

ation- some courts impose a duty to look out for the other party. Special relationships between parties
 
– Traditional approach- no implied obligation of good faith unless it is imposed on the parties by the k. However, it does emphasize not hindering the other party’s performance. Very limited obligation, so interference, hindrance, or frustration must be very egregious
– Need (Subjective Intent) + (Actual Prevention) = breach of traditional good faith obligation
 
* Sales rentals-  there is an obligation to use “best efforts” to promote the success, since payment relies on sales.(gas station tenant buys own gas station across the street to drop sales and pay less to landlord)
will add this duty in addition to generic good faith obligation
 
                        b. Tortious Interferences
1) Intentional Interference with K (causes breach)
 
2) Intentional Interference with prospective K
 1. existence of contract or business relations;
2. defendant’s knowledge of the contract or business relation
3. intentional interference by the defendant with the contract or business relation; AND
                                                4. proximate damages
 
-There is no obligation to negotiate in good faith in the American system, aside from the defenses of duress, misrepresentation, or mistake.