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Contracts II
South Texas College of Law Houston
Powers, Jean Fleming

A combined outline for K2-Powers
I.                     THE PAROL EVIDENCE RULE
When two parties have made a K and have and have express in a writing to which they have both assented as the complete and accurate integration of that K, evidence whether parol or otherwise of prior understandings or negotiations will not be admitted for the purpose of varying or contradicting the writing.
·         Even if PER excludes evidence, may have a cause of action for fraud or other K action that may make the writing worthless
·         The person who is trying to exclude the evidence that is not in the writing will raise the parol evidence rule, he then must prove that the writing was created with mutual intention to be final and complete
·         The judge will then evaluate all relevant evidence to establish the intent of the parties and see if they intended the writing to be final and whether the evidence should came in or not
1.        is the K written-
YESà go to 2
NOà PRE does not apply
2.        is the K final-
YESà go to 3
NOà parol does not apply
3.        does the outside agreement contradict the writing
YES à evidence out
NO à go to 4
4.        is the K complete- see approaches
YES à evidence out
NO à evidence in
·         Contemporaneous Agreements-if another document is executed at the same time the formal document was signed then that document is treated as part of the K and will not be subject to the PER but if an oral agreement is made before or at the time the formal document is signed then the it must meet the elements of PRE in order to be admitted into evidence. Contemporaneous oral agreements are NEVER allowed in.
Approaches to decide whether a K is complete
1.        Four corners- look at the document in writing itself and see the intent f parties
2.        Traditional-MAJORITY—looks at the parties objective intent- what would parties naturally do
3.        Modern- MINORITY— subjective intent- more likely to allow evidence in
4.        UCC 2-202-requires that the K be in writing, that it be final and that the evidence of the prior agreement does not contradict the written K but only explain or supplement it by:
(a)     by course of dealing /or usage of trade /or by course of performance
(b)     By evidence of consistent additional terms unless the K is complete- to decide whether the K is complete the UCC looks at whether the parties would certainly put it on writing. This lets a lot of stuff in, b/c we must be CERTAIN that they people would have put it on writing
(A)   DEFINITION- a clause stating that the writing constitutes the sole and final agreement b/en the parties
(B)    Although merger clause may make the court more likely to say the K is final- or totally integrated- if the court finds that there is a disparity of bargaining power or the clause was hidden, or if there was a condition* to the entire K the merger clause may not preclude the evidence from being admitted.
·                     *R2K §217- where parties agreed orally that te performance of the agreement is subject to a condition the agreement is not final/integrated with respect to that condition UNLESS the oral evidence SPECIFICALLY contradicts the writing- Williams v. Johnson
Implied warranties- to exclude or modify the implied warranty of merchantability the language must mention merchantability by using specific language
Warranties v Disclaimers- if k gives both disclaimer and warranty, then the disclaimer is invalid. This applies when the disclaimer is in writing or given orally BUT if the disclaimer in is in the K and the warranty is oral the warranty contradicts the K and the disclaimer stands b/c parol evidence bars the oral warranty
1)       Basic rule. If the agreement is ambiguous on its face, or becomes ambig­uous in performance parol evidence is admissible to clarify the parties’ intent. But, if the ambiguity is so fundamental that there is no way that the court could determine what the parties intended, there may be no enforceable contract at

now both meanings and B only knew one then B’s interpretation will prevail. If A can show that B should have known through trade usage or common knowlegde then A can rebut presumption in favor of B
3.        When neither party knows nor had reason to know what the other party meant then there is no K b/c there was never a meeting of the minds
R2K §202- Rules in Aid for Interpretation
(1)     The intent of the parties is giving great weight
(2)     Words and conduct are to be interpreted in light of all the circumstances- (course dealings and course performance, trade usage.)
(3)     the K should be interpreted w/ PP in mind
(4)     a writing interpreted as a whole and all writing are interpreted together
(5)     unless a different intention is manifested
(a)     words are interpreted w/in their prevailing meanings
(b)     technical words or words of art are given their technical meaning
(6)     interpretation is usually against the drafter, b/c the drafter has more advantage
(7)     interpretation should favor specific over general terms
Gray Insurance Co.à insurance policy- cover intentional sbi or not
·         The court will interpret the k to mean what a reasonable buyer would expect it to mean, and thus protect the weakest party’s expectations. We expect insurance to defend us against claims made against us
The court will not enforce exclusionary clauses in an insurance clause that are unclear basically if the insurer deals with the public upon a mass basis the notice of non coverage in a situation in which the public may reasonably expect coverage, must be