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Contracts II
Southern Illinois University School of Law
Drennan, William A.

 
Contracts Outline Spring 2014
Professor Drennan
 
Parole Evidence Rule (PER) [MC] 1.     Complete Integration: final version of K in writing mutually created by both parties
a.       Best evidence of party’s agreement
b.      Should displace any earlier written/oral agreements or any proposals that came before integration.
2.     PER blocks EE of prior agreements or negotiations that contradicts or supplements the integration
3.     Policy: When parties have gone to trouble of putting their final agreement in writing, enforcement of deal should not be controlled by uncertain testimony of slippery memory
a.       to prevent written integration from being overturned by uncertain testimony based on slipper memory
b.      Could result in injustice
4.     Exceptions: extrinsic evidence to interpret or explain meaning or language of integration.
a.       Although can’t be used to contradict, party may try to admit EE to show parties intended special meaning of words (Humpty Dumpty)
Contract Interpretation:
1.      Subjective: Look at mindset of parties
2.      Objective: No probing of the mind, just look at what a reasonable person would think in that situation
3.      Modified objective approach:
(1) Probe minds of parties and see if they agree. If they do, end of the situation.
(2) See if one of parties knew or had reason to know what other party was thinking or intended. If so, enforce innocent party's interpretation.
(3) If we find out that neither knew or had reason to know of other party's intention, no contract.
 
PER: Fraud
1.      Sherrodd: subcontractor offered to provide oral testimony that GC had made fraudulent statement. Written K said SC was going to get paid 100,000. GC orally said they would pay 200,000. Court blocked “fraudulent oral statement” because it contradicted integration about 100,000.
2.      Policy: duty to read, commercial stability requires that parties can rely on written terms
3.      Policy behind USING oral testimony to show fraud: majority approach encourages fraud, you should be able to take a party at his or her word
4.      Tests:
a.       Traditional: words had to be ambiguous before court would admit EE to find special meaning of word (Current IL, except in UCC cases)
b.      Modern (Taylor): ambiguity test relies too heavily on judge’s conscious or unconscious opinions of what words mean. Instead, we should allow in EE to interpret an integration as long as language in K is reasonably susceptible to interpretation asserted by proponent.
When might a client ask you to draft a release in a K?
1.      Settlement of a lawsuit
2.      termination of employment
3.      Any sort of physical or athletic event.
Avoiding enforcement of a K: Minors (Generally, under 18)
1.      Generally, minor must return property, if possible, to rescind K.
2.      Majority: If minor enters into K, & K is bad for minor, K is void.
a.       If K is no

suffers personal injury & sues for negligence, if parties then reach a settlement, settlement will only be enforceable if approved by court
Avoiding Enforcement of K: Mental Incapacity
1.     Guardianship: legal proceeding to have someone deemed legally incompetent
a.       If under guardianship when signs K, K not enforceable
b.      Even if released from guardianship, and then signs K, may still not have mental capacity to sign K.
                                                               i.      Hauer: Bank has no duty to evaluate customer’s mental capacity to understand a transaction, but must act in good faith. But this specific Bank had reason to know she didn’t have mental capacity b/c financial advisor told them she had a head injury. Wasn’t under guardianship.
1.      Contracting party exposes itself to voidable K where put on notice or given a reason to suspect other party’s incompetence such as would indicate to a reasonably prudent person that inquiry should be made of party’s mental condition
2.      To get $ back, bank has to prove:
a.       K made in good faith
b.      Made for a fair consideration
c.       w/out knowledge of her incompetence