WINTER 2015 POSNER CONTRACTS
PAROL EVIDENCE
Parol Evidence Rule: In order for an oral agreement to increase the obligation imposed by the written agreement (ONLY COMES INTO PLAY WHEN THERE IS A WRITING)
1) The agreement must in form be a collateral one;
2) It must not contradict express or implied provisions of the written contract,
3) It must be one that parties wouldn’t ordinarily be expected to embody in the writing…it must not be so clearly connected with the principal transaction as to be part and parcel of it.
· Parties cannot offer extrinsic evidence about the meaning of the contract if the writing is clear, even if the extrinsic evidence says something different.
o If a written contract is a complete and final expression (integrated), then you cannot consider any evidence that contradicts the agreement.
o Even if a contract is not complete, the extrinsic evidence cannot contradict.
EXCEPTIONS: Fraud (Lipsit), No enforceable agreement, Lack of consideration, No mutual assent, Ambiguity, collateral exception, conditional precedent (LI Trust)
Test for Exceptions:
(1) Agreement must in form be a collateral one (no one knows what this means)
(2) Must not contradict express or implied provisions of the written contract
(3) Must be one that the parties would not ordinarily be expected to embody in
the writing (“Naturalness”)
Plain Meaning Rule:
Judges decide if a contract is clear based on plain language and industry custom
· Distinguished from PER because all the terms are in the writing and ambiguity exists in the writing
o PER: some of the terms in the writing and gaps exist in the writing
UCC 2-202:
· Course of dealings (including previous dealings by the parties) or usage of trade or by course of performance
· Evidence of consistent additional terms unless court finds writing to have been intended also as a complete and exclusive statement of terms of agreement (meaning, Hatley—anything)
Can contract around PER with a merger clause (LaFazia)
· Parties frequently employ merger clauses to prevent judges from admitting extrinsic evidence. An underlying reason might be because judges may not interpret them as in a sophisticated way that the parties would.
· If merger/disclaimer clause is too vague/general, extrinsic evidence may be admitted
· CA approach: less deference to merger clauses
COMPLETE AGREEMENTS
If a complete agreement, PER does not apply, and we’re sure there’s a contract, so no “meeting of the minds” concern
1) Is it ambiguous?
o Extrinsic evidence only matters when agreement is ambiguous. Giacontieri
o Four corners rule, Gives text a magical quality
o Consistent rule is good…but fear of drastically increasing stakes every time an agreement is put into writing
o Would decide most cases on summary judgment
o CA approach: “plain meaning” based on judge’s own extrinsic evidence, relies on “primitive faith in the inherent potency and meaning of words”, so instead look to whether evidence is relevant to proving a meaning to which the language is reasonable susceptible
o Trade Usage/Custom: Modern courts generous with respect to proving. Columbia Nitrogen
o UCC: to contract around, carefully disclaim all custom, course of dealing, that could be used to interpret the conflict
o New York: judges using limited facts – agreement and surrounding circumstances, not negotiations. California: all evidence, including prior negotiations
2) If so, consider extrinsic evidence
o Additional term must be consistent
New York/“Four Corners” Rule: Before looking to evidence of what was in the parties’ minds, a court must give due weight to what was in their contract; when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms
· Can introduce extrinsic evidence to resolve an ambiguity, not create ambiguity
· If the court thinks the document is clear, the court believes the jury won’t feel differently; but if there is ambiguity, then jury would feel differently
· Restatement § 201: One inspects the writing for clues as to completeness
Cases: Giancontieri, Frigaliment
California/Traynor (PG&E) Rule: The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible
· Can always use extrinsic evidence unless it is irrelevant.
· Words do not have absolute and constant referents.
· The judge to whom the words
tion damages but even then the market price might not be an accurate representation.
· The danger with implied contracts is that if people don't expressly say what is going back and forth it is hard to figure out damages.
Collins A true implied contract can only exist where there is no express one.
· It is one which is inferred from the conduct of the parties though not expressed in words.
o Such a contract arises where a plaintiff, w/o being requested to do so, renders services under circumstances indicating that he expects to be paid therefore, and the defendant, knowing such circumstances, avails himself of the benefit of those services.
· Does it matter for calculating damages if there is implied contract or quasi-contract?
o Yes – implied is expectation damages, quasi-contract is restitution.
§ It’s less clear what the latter would be b/c that is the benefit conferred on the owner. The court says it doesn't matter and they will give reasonable cost (expectation damages).
Seaview Implied contract b/c nothing explicit b/t the two parties who won’t join the ass’n…their purchases impliedly accepted the conditions accompanying owning properties.
· You can't make an implied contract when there's a benefit. It has to be the manifestation of intention.
· Maybe they are getting value from the streets and the sidewalks?
o Problem: The fact that they benefit doesn't imply a contract. In an implied contract there must be mutual intent to enter in!
INFANCY AND INCOMPETENCE
Halbman Infancy doctrine: Want to protect minors and assume they do not know what they’re doing therefore they are allowed to disaffirm the contract
· Don’t let the minor keep the consideration because then no one ever will sell to minors and we do not want to penalize the seller more than anything.
o We still want kids to contract with sellers for necessities/necessaries
