Contracts II
Downs
Spring 2011
Parol evidence rule: agreement made prior to or contemporaneously w/ the writing, but not reflected in it, is not part of K
Not limited to oral agreements – also excludes writings
Doesn’t apply to agreements made after written K
Not just evidentiary, but substantive
Exceptions: mistake and fraud
*If the purpose of the evidence is to introduce an obligation of D that P claims is part of k—parol evidence rule applicable
Gianni v. R. Russell & Co.
FACTS
Prior to signing k, R. Russell orally gave Gianni exclusive right to sell soda in building. Leased adjacent space to drug store that sold soda.
RULE
To determine whether parol evidence rule applies:
1) Written K must be an integrated agreement: final expression of one or more terms
2) Partially integrated, a.k.a. integrated [final]: (some things kinda left open)
Can only introduce evidence consistent w/ written K [not contradictory]
Completely integrated [final and exclusive]: (nothing was left open)
Can’t even introduce consistent evidence
HOLDING
Parol evidence inadmissible b/c completely integrated agreement.
*Judges call whether partial or complete; try to look at parties intent
Masterson v. Sine
FACTS
Masterson conveyed sister ranch w/ option to buy it back. Masterson went bankrupt. Bank tried to exercise option. Sister said there was oral agreement that ranch “stay in family.”
HOLDING
Parol evidence permitted. Not completely integrated agreement. Side agreement to “keep in family” was one that might naturally have been made separately, so need not have been in the written K.
Bollinger v. Central Pennsylvania Quarry Stripping & Construction Co.
FACTS
Bollinger signed agreement permitting Central Penn to deposit construction waste. Had made oral agreement that Central would put topsoil over waste. Written agreement didn’t contain such provision.
HOLDING
For Bollinger. Ct persuaded the oral agreement existed by evidence that company had started putting topsoil on top of waste and did so for neighbors
ie. company performed that way so there must have been an agreement
*Course of performance can show meaning of K
No-oral-modification [NOM] clauses
Parol evidence rule concerns agreements before writing – NOM clauses concern agreements made after
Not enforceable at common law
UCC 2-209: NOM clause enforceable
Exceptions:
Can be waived
Enforceable if there’s reliance
USE OF EXTRINSIC EVIDENCE OF INTENT
Plain meaning rule
1) Written agreement that’s complete, clear and unambiguous on its face enforced according to the plain meaning of its terms; can’t use extrinsic evidence
2) extrinsic evidence of intent considered only if agreement is ambiguous
Four corners rule: k means what it says (read only what’s w/in the 4 corners of the document)
Critical legal studies approach: words by themselves have little meaning
Pacific Gas & Electric v. G.W. Thomas (Cal)
FACTS
D signed indemnity clause. Damaged P’s turbine during repair work. Meaning of indemnity clause?
RULE
Words have little meaning; all words are ambiguous. If k is “reasonably susceptible” to more than one interpretation, extrinsic evidence is admissible.
CLASS NOTES
Majority doesn’t go this far in allowing extrinsic evidence.
Delta Dynamics v. Arioto (Cal)
HOLDING
Extrinsic evidence should be admitted b/c the clause is reasonably susceptible to more than one interpretation.
Greenfield v. Philles Records
FACTS
Ronettes signed record deal in ’60s. Sued in ’80s, saying k didn’t give Philles rights to recordings in new technological formats b/c wasn’t parties’ intent.
HOLDING
Extrinsic evidence excluded. K is unambiguous –gives Philles rights to recordings by “any method now or hereafter known.”
*used 4 corners rule and Pacific Gas rule
*Erie doctrine- use law of wherever event happened
W.W.W. Associates, Inc. v. Giancontieri
HOLDING
Court will look at the words and determine meaning at its face value- 4 corners rule (generally what is used)
Trident Center v. Connecticut General Life (9th Cir.)
FACTS
Trident got a loan from Connecticut General. Trident tried to pay off loan. Terms of k clearly said Trident could not pay loan off early.
HOLDING
Bound by Pacific Gas: extrinsic evidence is admissible no matter how clear the k.
Rules of interpretation
Where gra
nts, course of dealing and usage are admissible to supplement terms
Parol evidence rule does not exclude usage of trade, course of performance, course of dealing
HOLDING
For Columbia. Reasonable to construe evidence of course of dealing and usage as consistent w/ express terms.
Objective Interpretation & Its Limits
Raffles v. Wichelhaus (Eng)
FACTS
K to deliver cotton on ship “Peerless.” D thought k referred to Peerless which arrived in Oct. P put cotton on different Peerless which arrived in Dec. D refused to pay.
HOLDING
For D. K rescinded b/c parties didn’t mean same ship [latent ambiguity].
OTHER
Latent ambiguity: hidden – when you read term it seems clear [e.g. “Peerless” seemed clear but turned out ambiguous]
Patent ambiguity: term obviously ambiguous
Courts more likely to grant rescission for latent ambiguity
Oswald v. Allen
FACTS
Oswald arranged to buy Allen’s coin collection. Oswald spoke bad English and thought they’d made deal to buy whole collection. Allen thought deal was to buy only 1/2 of collection and called off deal
HOLDING
No k. When any terms of agreement are ambiguous and parties understand them differently, k rescinded unless one party should have been aware of other’s understanding.
OTHER
Rest. 20 broader than most case law
Colfax Envelope v. Local No. 458-3M (Posner)
FACTS
Colfax signed collective bargaining agreement and thought “4C 60 Press–3 Men” meant 3 men req’d to operate press larger than 60 inches. Union meant 3 men req’d to operate press up to 60 inches – for greater than 60 inches, 4 men req’d.
HOLDING
Rescission is legit for latent ambiguities; for patent ambiguities [like this one], parties are gambling on how term will be interpreted
Sent to arbitrator to determine meaning.
