Contracts II Outline

Vacca
Contracts II
Spring 2011
 
1.      The 4 Questions
a.       Have the parties created a contract?
b.      If so, what are the terms of the contract?
c.       Have the parties carried out their obligations under the terms?
d.      If not, what, if anything, should the law do about it?
2.      Contract defenses (continued)
a.       Unconscionability (question of law)
                                                               i.      dragnet clause/cross collateralization clause:  nothing is paid off until everything is paid off
                                                             ii.      UCC 2-302:  Unconscionability recognized
                                                           iii.      R.2d § 208:  Unconscionability
1.      remedies available by court that finds a contract unconscionalbe
a.       refuse to enforce
b.      sever offending clause
c.       alter term so unconsionability is avoided
                                                           iv.      general test
1.      absence of meaningful choice (procedural)
a.       gross inequality of bargaining power/little choice
b.      manner k was entered into
c.       reasonable opportunity to understand the terms
d.      hidden terms/deceptive sales practices
2.      terms unreasonably favorable (substantive)
a.       in light of circumstances existing when k was made
b.      in light of general needs to the particular trade/case (mores and business practices of the time and place)
b.      Mistake
                                                               i.      R.d § 151:  a mistake is belief that is not in accord with facts
                                                             ii.      defense:  a mutual mistake as to a material fact
                                                           iii.      material fact:  something that goes to the substance of the thing bargained for
c.       modern mistake rule
                                                               i.      R.2d §152 (Mutual Mistake)
1.      mistake on a basic assumption upon which the contract was made (motivation of parties)
2.      material effect on the agreed exchange (impact on the balance of the exchange)
3.      risk of mistake not allocated to the party that is trying to get the relief
d.      Unilateral mistake (Donovan v. RRL Corp.)
                                                               i.      R.2d § 153
1.      basic assumption
2.      material effect
3.      party does not bear the risk
4.      would be unconscionable
5.      other party had reason to know of the mistake or other party’s fault caused the mistake
                                                             ii.      R.2d § 154:  When a party bears the risk of a mistake
1.      by agreement
2.      awareness of limited knowledge
3.      judicial allocation (most common)
a.       court considers what’s reasonable considering the circumstances
3.      Contract Meaning
a.       if there is a contract, what are the terms (largely what practicing attorneys do)
b.      the law of the contract
                                                               i.      what rules/terms have the parties established themselves
c.       contract interpretation
                                                               i.      not captured (perhaps not written down–parol evidence)
                                                             ii.      not clear (ambiguous/vague)
                                                           iii.      not fully considered (issues not resolved, gaps left in contract)
1.      implied terms
d.      Parol Evidence
                                                               i.      keep in mind the two following questions(anticipation of these types of issues is the role of the lawyer) 
1.      what’s the relationship between the written word and the extrinsic evidence?
a.       everything that has been said, done, thought, but not in the written contract
b.      what do we follow
2.      how could the problem have been avoided?
                                                             ii.      need to be able to distinguish between intentional omissions vs. sloppiness–this is where the parol evidence rule comes into play
                                                           iii.      R.2d § 213 (1) & (2)
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.      what’s the integrated agreement?
4.      what’s the parol evidence at issue?
5.      R.2d § 210 (1) & (2)
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
                                                                                                                                       i.      evidence related to a prior agreement is excluded
                                                                                                                                     ii.      if the prior agreement exists, it is totally extinguished
b.      (2) a partially integrated agreement is an integrated agreement other than a completely integrated agreement
                                                           iv.      majority approach:  all circumstances surrounding interaction of the parties is relevant
1.      R.2d § 209 (majority approach)
a.       contextual evidence to the intent of the parties should be considered
                                                             v.      minority approach:  four corners rule (what’s in the agreement)
                                                           vi.      merger clause:  all information contained in the contract completely integrates the contract
1.      evidence of complete