I. Parol Evidence Rule – evidence of PRIOR negotiations or agreements is inadmissible to contradict or vary terms of a written agreement
A.Summary–To extent parties execute writing that is & intended to be final expression of agreement, no parol evidence may be admitted to supplement, explain, or contradict it; however, to extent that writing isn’t final & complete expression of agreement, consistent, but not contradictory parol evidence may be admitted to supplement or explain those parts of it not been finally expressed
B.Policy:
i.1) Gives primary effect to the final written agreement
ii.2) Restricts information given to jury by shielding it from unreliable/irrelevant matter
iii.3) Efficient use of court time
iv.4) Encourages more efficient transactions (considering all the terms)
C.Drawback: serves useful role in excluding of likely unreliable or dishonest evidence, but also potential of producing injustice by preventing party from proving what actually agreed
D.Key Facts
i.Applies to both prior oral and written terms before (or at the time of) execution of the agreement
ii.Applies where agreement is recorded in writing & one party proffers evidence to prove a term not contained in writing or to explain or expand on a term in the writing
iii.Imposes restrictions on extent to which context of writing may establish what parties agreed
iv.Important Features
1. Applies only when a written agreement has been executed
2. Writing must have been adopted by both parties
3. Primarily concerned with oral communications, but also applies to written
4. Two-stage process:
a. (1) question of law determination for judge on admissibility
b. (2) credibility of evidence determination for judge
v.Principle:When parties reduce agreement to writingàoften intend it final version of agreement
1. Written doc intended to supersede earlier negotiations & communications to extent that its terms depart from or do not include what was formerly agreed
2. Evidence of any earlier agreement is irrelevant & should be kept from factfinder
E.Types of Integration
i.Total Integration –written memo is complete, final & certain record of parties agrmt, meaning it unambiguously express every term in agrmt & intend exclusive statem of every term in agrmt
ii.Partially Integrated–1 or more terms of agrmt been fully, finally, & clearly expressed in writing
iii.Unintegrated – writing does not set out any term in full and certain form
F. Analysis
i.1) Is the written agreement final? (integrated SEE §209)
1. If no, then PER doesn’t apply
2. Still in negotiation or reached agreement on certain points
3. §209 – Integrated Agreements
a. (1) An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement
b. (2) Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the PER
c. (3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless established by other evidence that writing didn’t constitute final expression
ii.2) If yes, is it complete? (complete integration SEE §210(1))
1. If completeàcan’t be contradicted OR supplemented (consistent additional term)
2. If not completeàpartial integration, can’t contradict, but can supplement
3. §210 – Completely and Partially Integrated Agreements
a. (1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement
b. (2) A partially integrated agrmt is an integrated agrmt other than a completely integrated agrmt
c. (3) Whether an agreement is completely integrated is to be determined by the court as a questio preliminary to a determination of a question of interpretation or to application of the PER
4. Four Corners Approach – Classical Approach
a. Drawback: Judge’s interpretation may differ & may not reflect parties intent
b. Ct only look to face of doc to determine if full integration of parties agreement
i. Does it appear to be full and complete?
ii. Does it omit material generally embodied in an agreement?
iii. Does it contain a merger clause? States writing intended to be final & complete; all prior understandings “merged” into final writing
1. i.e. “This doc is entire agreement & no representations, warranties, or agreements other than contained in this doc”
2. Effect of merger clause
a. Four Corners (Classical) à Conclusive
b. Modern Approach à factor taken into consideration
5. “All Evidence” or “Corbin” Approach – Modern Approach
a. Court considers all available evidence (including the disputed extrinsic evidence) to determine whether the writing appears to be integrated
b. Court will look to parties intent as to whether they intended it to be complete
c. Ct makes determination before parties may present such extrinsic evide to jury
d. §210 Comment b–A writing can’t of itself prove own completeness, so wide latitude must be allowed for inquiry into circum bearing on intention of parties
iii.§213 – Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)
1. (1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them
2. (2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope
3. (3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated
iv.EXCEPTIONS to PER(always allowed in) – Derived from §214 and §216
1. Evidence to explain or interpret (Taylor v. State Farm)
2. Does not apply to oral or written agreements made AFTER the writing
3. Allowed to show oral evidence that agreement is invalid b/c fraud (such as when misrepresentations of fact induce a party to enter into an agreement), duress, mistake
4. Reformation–applies when term is inadvertently omitted based on clerical error
5. Collateral agreement (generally, separate consideration) – When collateral agreement is sufficiently distinct from scope of writing that it was not integrated into it, & the subject matter of collateral agreement is consistent with writing
a. §216 – Consistent Additional Terms
i. (1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless ct finds the agreement was completely integrated
ii. (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is:
1. (a) agreed to for separate consideration, or
2. (b) such a term as in circumstances might naturally be omit from writing
6. Agreement was subject to a condition
G.Taylor v. State Farm Mutual Automobile Insurance Co.
i.App. of 1st exception – evidence to explain/interp K admissible even w/ completely integrated K
ii.Uses the liberal/modern approach to the PER
iii.Ct held evidence should be admit b/c language of release could reasonable be interp Π asserts
II. Supplementing the Agreement: Implied Obligation of Good Faith
A.Implied Terms – terms which parties haven’t “agreed” to, but ct finds to be implied in K (Wood)
B.§205 – Duty of Good Faith and Fair Dealing
i.Every K imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement
C.UCC §1-203 – Obligation of Good Faith
i.Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement
1. Common law has similar requirements
D.Good Fai
n for diminished value absent a showing of willful misrepresentation of age or willful destruction of property
2. Newer (minority) Approach (Dodson) – minor’s recovery from adult may be reduced by value of benefit minor received or depreciation of property
D.Mental Incapacity – K is voidable when person’s mental capacity is so deficient that she is incapable of understanding nature and significance of K
i.Does not excuse people that are of below average intelligence
ii.Must have mental incapacity at time of contracting
iii.Burden relies on incapacitated party to prove a disabling mental condition
iv.ALWAYS liable for necessities
v.Intoxicated People (§16) – a person who is so intoxicated as not to understand transaction or act in a reasonable manner can void the K if other party had reason to know of the intoxication
E.Dodson v. Shrader (minor bought car that became inoperable and returned to car dealer (Δ))
i.Holding: Even if minor’s K is rescinded, merchant may keep amount equal to decrease in value of items returned rather than refund full purchase price
V. Unconscionability – Ct can refuse to enforce K provision or entire K to avoid unconscionable terms
A.Commonly Applications:(1)Consumer transaction involving std K’s, which a dominant party supplies std form K signed by consumer w/o opportunity to negotiate terms; (2)One-sided bargain where party has substantially superior bargaining power & can dictate terms of K to party w/ inferi bargain power
B.Unconscionability Balancing Test–Cts general require both, but more of one may require less of other
i.1) Procedural Unconscionability – bargaining unfairness; two types (Williams)
1. 1) Exploitation of “lack of knowledge” – a party is not afforded “a reasonable opportunity to understand the terms of the contract”
a. i.e. lack edu to understand K term/term presented unlikely to come to attention
2. 2) Exploitation of “lack of voluntariness”–result of gross inequality of bargain power
a. i.e. party has no meaningful opportunity to negotiate terms of K
3. Prevent oppress/unfair surpri, but not disturb allocation of risks b/c of superi barg pow
4. Depends on degree of deception or compulsion & awareness by a dominant party of ignorance or lack of understanding on the part of the other
5. Mere disparity of bargaining power is not enough to constitute unconscionability
ii.2) Substantive Unconscionability – unfair or oppressive terms in K
1. Harsh, unfair, or unduly favorable terms favoring one party
2. In light of general commercial b/g & commercial needs of particular trade/case, clauses are so one-sided as to be unconscionable under circumstances at the time of K
C.UCC 2-302 – Unconscionability provision–Cts may refuse to enforce unconscionable K’s(or clauses)
i.Doesn’t define Unconscionability, but comment 1 gives TEST:
1. Whether in light of general commercial background and commercial needs of the particular trade or case, the clauses involved are so one-sided as the be unconscionable under the circumstances existing at the time of the making of the contract
2. Principle is one of the prevention of oppression and unfair surprise
