Select Page

Contracts II
Stetson University School of Law
Zierdt, Candace

Parol Evidence Rule
Friday, May 07, 2010
11:54 AM
1.       The Parol Evidence Rule
A.      PER
·         Taking something like a promise outside of the contract and putting it into the contract
·         Always a written contract
·         Three stages of the PER
1.       Whether or not its integrated
a.       Is this final? (specific, definite, complete…Do both parties believe that this written document is the final say)
b.      When you have something in writing you presume its integrated unless you have another fact
2.       Whether its partially or completely integrated
a.       If totally integrated then the court is not permitted to add any other term and stops there (unless UCC)
b.      Masterson v sine has old minority test (4 corners), then goes to restatement, then UCC
3.       Does it contradict or supplement?
a.       Contradicts no good
b.      Supplement is ok
                                                                                        i.            When dealing with the UCC can skip all the way until this step. Only worried about whether it contradicts or supplements
4.       Don’t forget about exceptions!!!
a.       Fraud
b.      Accident
c.       mistake
B.      Cases
·         Gianni v. R. Russell & Co.
Plaintiff said that he was supposed to have the exclusive right to sell soft drinks in the building. Court used the restatement test and found that it was a complete integration therefore no outside evidence was allowed in
B.     Masterson v. Sine
Plaintiff sells house to some family with option to repurchase later. He goes bankrupt and trustee tries to take the property. Plaintiff says option was personal to the grantors and could not be exercised by the trustee. It was supposed to be kept in the Masterson family. 
§ Used the Restatement test and found that it was not something that naturally would have been put in the contract and therefore allowed it in.
§ Bollinger v. Central Pennsylvania Quarry Stripping and Construction Co.
Top solid supposed to be removed and put back after construction company dropped waste. They made an oral agreement however defendant started restore top soil and then stopped. Term was not in the contract however the overwhelming evidence showed that it should have been. Didn’t actually use PER. Was a mutual mistake problem(???)
C.      Merger Clause
                                  i.            Provision in a contract that contains language to the effect that the writing is intended to be the complete expression of the agreement between the parties or that there are no understandings or agreements between the parties other than those contained in this writing
                                ii.            Such provisions in the contract manifest the parties intent that all prior communications are “merged into the written agreement.
                              iii.            Differences on merger clauses
1.       Some take the position that such a clause is conclusive as to the issue of integration and must be enforced in the absence of fraud, mistake or other personal defense that would establish that the clause did not express the parties intent
2.       Some distinguish between merger clauses contained in writings negotiated by the parties which are ordinarily given full effect, and merger clauses contained in standard form or adhesion contracts where the clause is less likely to be given literal meaning.
a.       Courts less likely to hold a form contract to be a complete integration
3.       Also if trying to add in a term under TU,COP,COD merger clause won’t be the end all because when adding in terms under these it doesn’t matter if the K is partially or totally integrated
D.      For EXAM
                                  i.            Know what jurisdiction she puts you in. If your in California then it’s going to be the restatement test.
Friday, May 07, 2010
11:55 AM
1.       Interpretation Analysis
1.       Is the term ambiguous?
·         Is it susceptible to more than one interpretation
·         If yes then all jurisdictions will do the same thing. They will look at evidence
·         Two tests for ambiguity
a.       Plain Meaning Rule
§ Judge looks at the terms and decides himself from what he reads and from his own knowledge
b.      All circumstances (Restatement)
§ Includes the object, nature and subject matter of the writing so that the court can “place itself in the same situation in which the parties found themselves at the time of contracting”
§ Look at oral agreements, CoP, CoD, and trade usage, or any other evidence that shows a possible meaning to the term in question
2.       If ambiguous you look at all the evidence regardless of all circumstances or plain meaning
·         Do the parties attach the same meaning?
a.       If yes use that
b.      If No go to Peerless Rule
3.       Peerless Rule
2.       The Use of Extrinsic Evidence of the Parties’ intent
1.       Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co.
Defendant has indemnity clause in contract with plaintiff. Susceptible to two meanings. Common language for a third party indemnity provision and also on its face required defendant to indemnify plaintiff for injuries to plaintiff’s property.
·    Court Used the all circumstances rule
§ “if the court decides, after considering this evidence, that the language of a contract, in the light of all the circumstances, is “fairly susceptible of either one of the two interpretations contended for extrinsic evidence relevant to prove either of such meanings is admissible
§ Said the test of admissibility of extrinsic evidence is not whether it appears to the court to be plain and unambiguous but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible
2.       Delta Dynamics, Inc. v. Arioto
Delta sold trigger locks to Pixey. Pixey didn’t sell enough
·    Problem with two terms in the contract
1.       Failure to meet minimum, seller may terminate K
2.       In event of breach – prevailing party gets attorneys fees paid
·    Ambiguity is whether failure to meet minimum results in termination only or is also breach of contract
·    The will go to evidence and decide whether there was actual knowledge or should have known
·    Not all breaches give the right to terminate
·    If Delta had actual knowledge of what Pixie was thinking then you would go with Pixie’s interpretation
·         Greenfield v. Philles Records, Inc.
The Ronnettes have issues with two contracts that made. Court uses two different jurisdictions therefore two different test in interpreting the ambiguous terms. California uses all circumstances where New York uses plain meaning.
4.       W.W.W. Associates, Inc. v. Giancontieri
Involves a reciprocal cancelation provision. Because in New York they use the Plain meaning rule
·    Said court must give due weight to what was in the contract (plain meaning)
·         Trident Center v. Connecticut General Life Ins. Co.
Promissory note that says can’t prepay in whole or in part in the first 12 years. K stipulated this and district court said not ambiguous however ruling was reversed because Pacific Piping already established all circumstances rule so should be allowed to at least show evidence of how its susceptible.
3.       The Use of Extrinsic Evidence From Commercial Context (UCC)
·         Frigaliment Importing Co. v. B.N.S. International Sales Corp.
What does chicken mean?
·    Look at the terms of the contract because that’s what the buyer tries to use first
·    Look also at dept of Ag. Reg
·    Look at Parol evidence (cablegrams going back of forth)
·    Lo

narrow exception then it is fine
a.       You can add in anything as long as it doesn’t totally negate something in the contract
§ Means they can then add price protection
·         PP can stand because it is a small exception and just on those contracts that were bid out with the government
o    Could jury have found good faith obliged shell to at least give advance notice of increase?
·         Court went out of its way to get this in the contract
o    Columbia Nitrogen Corp. v. Royster Co.
·         Merger clause involved
o    Says total integration
·         They are trying to add a term in from TU and C of Dealing
·         They think that the state price per ton was not really the price per ton because of the fluctuating market
o    It was merely a projection of what they think the price will be. Price will vary according to market forces
·         When looking at trade usage must look at
o    Was there trade usage?
o    Does it apply?
o    Only get to actual or should have known if new to the trade
o    Whether it contradicts or supplements
·         When looking at course of dealing must look at
o    Look at facts
o    Previous dealings mostly dealt with nitrogen but since its in the similar fertilizer trade it falls under the same course of dealing
·         District court looked at it under 4 corners but this is wrong because its under UCC
o    Because under UCC it doesn’t matter if its totally or partially integrated
5.       Objective Interpretation and Its Limits
Sets up the Peerless Rule
o    If parties do not attach the same meaning there will be no K unless the party had actual knowledge or should have know the meaning
o    Raffles v. Wichelhaus
Two ships with same name shipped from same port. Defendant says wrong ship delivered goods.
·    Peerless was ambiguous because there were two ships
·    When looking at the peerless rule of actual knowledge or should have known courts have adopted a subjective view
o    Oswald v. Allen
Plaintiff tries to buy coins from defendant . Both had different interpretations of the swiss Coin Collection.
·    Seller says just collection. Buyer says all swiss coins.
·    Interpretation problem
·    When any of the terms used to express an agreement is ambivalent, and the parties understand it in different ways, there cannot be a contract unless one of them should have been aware of the other’s understanding. (peerless)
·         Colfax Envelop Corp. v. Local No. 458-3M
·         Different interpretations of the collective bargaining agreements and manning printers
·         Colfax sued for declaratory judgment because he said there is no contract
·         If neither party can be assigned the greater blame for the misunderstanding, there is no nonarbitrary basis for deciding which party’s understanding to enforce, so the parties are allowed to abandon the contract without liability
·         If both parties are equal to blame then no contract
·         If both parties are to blame but NOT equal the court will choose which is more blameworthy
o    Elaborates on the peerless rule