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Contracts II
Stetson University School of Law
Jimenez, Marco J.

I. Written Manifestations of Assent

A. Parol evidence rule
· Q: May inconsistent extrinsic evidence be admitted?
· A: It depends on whether the written agreement was intended by the parties to be the finalexpression of their agreement?
i. If so, they have an “integrated agreement,” and inconsistent extrinsic evidence of prior agreements is inadmissible.
ii. If not, their agreement is not integrated, and inconsistent extrinsic evidence of prior agreements is admissible
· Q: If the written agreement was intended by the parties to be final, may extrinsic evidence consistent with their agreement be admitted?
· A: It depends on whether the final agreement was also intended by the parties to be complete and exclusive.
i. If so, the parties have a “completely integrated agreement,” and no evidence, including consistent extrinsic evidence, is admissible to prove additional terms.
ii. If not, the agreement is not completely integrated, and consistent extrinsic evidence may be admitted to prove additional terms.
· We must ascertain the intent of the parties to determine whether an agreement has been completely integrated or not, and we can do this in one of two ways:
i. First, we can look only to the writing itself (Williston’s “four-corners” approach), or
ii. Second, we can look beyond the writing and accept extrinsic evidence where it is “reasonably susceptible” to the meaning of the written agreement (“Wigmore-Corbin” approach, as exemplified by Traynor in Pacific Gas & Electric)

Oral and written agreement made prior to an integrated written contract will be inadmissible as terms of the contract unless the agreement:
– is collateral to the integrated contract
– doesn’t contradict the terms of the integrated contract, and
– is one the parties wouldn’t ordinarily expect to be included in the integrated contract

· Parol evidence will always be allowed to show fraud, duress, or mistake during formation of the contract
· a way to get around the parol evidence rule is to argue that you are seeking to introduce evidence about a subsequent agreement or modification

**If a document is only partially integrated, parol evidence is allowed in so long as it does not contradict the writings. If it is fully integrated, even non-contradictory parol evidence is barred if it adds anything new to the contract.

Issues to consider –
Is the dispute over a widely used term of trade?
Is there a difference between a general and a specific meaning?
Have the parties dealt with one another previously?
strict parol evidence rule – will have channeling effect, eliminate fraud, and have consistent adjudication
broad parol evidence rule – will more accurately reflect intent of parties

§210: Completely and Partially Integrated Agreements Pg. 472
(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.

§214: Evidence of Prior or Contemporaneous Agreements and Negotiations
allows admission of evidence to determine whether or not agreement is integrated
Effect – allows evidence to determine whether evidence should be heard, undermines parol evidence rule

§215: contradiction of integrated terms
Evidence that contradicts any integrated term will not be allowed

§216: consistent additional terms
(1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated;
(2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is
(a) agreed to for separate consrderation;
(b) Such a term as in the circumstances might naturally be omitted from the writing.

§2-202(U): final written expression: parol or extrinsic evidence (Wigmore Corbin)
Terms of contract may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:
(a) by course of dealing or usage of trade (§1-205) or by performance (§2-208), and
(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms and agreement

Merger Clause

This agreement signed by both parties and so initialed by both parties constitutes a FINAL written expression of all the terms of this agreement and is a COMPLETE and EXCLUSIVE statement of those terms.

Agency Clause

If agent’s acts differ from terms of written agreement, they shall be given no force or effect.

Summary of Parol Evidence Rule
Is the written agreement intended by the parties to be the “final expression” of their agreement?

Yes – anything inconsistent is not admissible

Is the written agreement that is intended by the parties to be their “final expression of their agreement” also intended to be a “complete and exclusive” agreement?

Yes – extrinsic evidence not admissible
No – consistent extrinsic evidence can be used

How do we know if document is completely integrated or not?

Ascertain the intent of parties

How do we ascertain intent of parties?

“four corners” approach: look at document itself

Default would be . . . Merger clause implied in K

“Wigmore-Corbin”: accept extrinsic evidence on this issue

Adopted by UCC §2-202

A contract is considered “fully integrated” when it is adopted by the parties as a complete and exclusive statement of the terms of the agreement. §210.

Under the “four corners,” Willistonian approach, a contract is not final when it appears from the “four corners” of the contract that certain essential terms were omitted from the contract. The opposing party will argue that the omitted terms are not essential to the contract because any reasonable person would omit them. Thus, the court will look at the “four corners” of the contract, the contract in its entirety, to determine whether any essential terms were omitted. If it decides that the contract in its entirety is sufficient, and finds no evidence that additional terms were negotiated or meant to be in the contract, the court will determine that the contract is fully integrated and will not allow parol evidence to be admitted.

Determining applicability of Parol evidence
1. Is the written agreement between parties intended to be final?
YES – PE inadmissible No – PE admissible

2. If agreement is complete or exclusive?
YES – PE inadmissible NO – PE can be used that does not go against written agreement

3. If parties intended to at least partially integrate/finalize the agreement – no contradictory PE admissible
4. If parties fully integrated – no PE of any additional terms

Case 1: Thompson v. Libbey, verbal warranty as to quality of purchased logs Pg. 468
I: Can a verbal warranty be admissible as evidence when whole of contract is in writing?
R: No, PE not allowed because the written contract seems complete – fully integrated – therefore any PE evidence that alters or adds to contract is inadmissible.

Case 2: Brown v. Oliver, sale of hotel, fight over furniture Pg. 469
F: Parties discussed sale of hotel to include furniture but final contract did not include it.
I: Should furniture term be considered part of the agreement even though it was not written into actual contract?
R: If parties intended the K to “house” all of the terms, you can’t go outside. If they meant for it to be “completely integrated” (admittedly impossible, but have to use it for efficiency), you can’t go outside the contract to supply terms. But, you can go outside contract to extrinsic parol evidence to determine if they intended the K to be completely integrated (Wigmore).

Case 3: Pacific Gas and Electric Co. v. G.W. Thomas Drayage & Rigging Co. Pg. 474
I: When written agreement unambi

he Requirements of a Writing

Case 7: Schwedes v. Romain, agreement for sale of property breached and sold to 3rd party Pg. 500
F: Ps communicated acceptance of D’s offer by telephone after D sent letter laying out agreement. D then sold to 3rd party. P sues.
I: Is there a binding sale of land contract when there is no written agreement signed by parties, when P had not yet taken possession of land, erected no improvements on land and paid no taxes or other assessments on property or paid anything to D?
H: – no enforceable contract (no consideration, oral promise to pay not enough, detriment?)
– no basis for SP (no valid contract exist)
– Distinguish between acts undertaken in contemplation of eventual performance, and acts which truly constitute part performance of a contract.
R: The SOF requires that a contract for the sale of real estate is invalid unless it, or some written note or memorandum, is subscribed to by the parties to be charged.
**Allows for the creation of an option K by the seller, where the seller may partially perform, the buyer does not perform, and the seller is not bound, while the buyer is…

Case 8: In re Realnetworks Pg. 511
F: P, brought suit against D, Realnetworks claiming License Agreement is not a valid K because it is not in writing.
R: A contract required to be in “writing” or “written” may include electronic writings.
I: Is license agreement a valid K? Is license agreement in “writing”?
H: Yes, Yes. License agreement is stored on computer and can be printed. Thus, made into a written form.

3. Satisfying the Requirement of a Signature

Case 9: Parma Tile Mosaic & Marble Co. v. Estate of Fred Short Pg. 514
F: Plaintiff contracted with MRLS and Sime Construction Co. for the delivery of tile from plaintiff and sent a electronic facsimile stating that MRLS would guarantee payment for goods delivered to the project in the event that Sime Construction would not pay.
R: Electronic subscription may validate a written contract so long as the intent to be bound is demonstrated. (Signature)

II. The Doctrine of Consideration

A. The Historical Origins of the Doctrine

Two-step process to determine whether there was consideration:

First, you must find a bargain on both sides of the exchange
Second, you must find that the bargain resulted in a legal benefit to the promisor, or a legal detriment to the promisee.

Putting these steps together: to find an enforceable promise (a contract), there must be EITHER a bargained-for legal benefit to the promisor OR a bargained-for legal detriment to the promisee.

– Consideration is something that motivates an act
– Most contracts must be supported by consideration to be binding
– Two basic aspects of consideration:
(1)Promisee must suffer a legal detriment, i.e. promises must give up something of value, or circumscribe his liberty in some way;
(2)Promise must be bargained for, i.e. promise motivated by the legal detriment suffered by the promisee
– Detriment for purposes of consideration means giving up anything you have a legal right to do regardless of its moral or health implications