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Contracts II
University of Dayton School of Law
Morris, Jeffrey B.

Parol Evidence Rule (PER) – rule that restricts the admission of negotiation history as evidence to vary the terms of a written agreement intended to be the final expression of the parties’ deal. 
i.e. Negotiation history is NOT admissible to contradict the terms of the final written agreement.
à If a writing is made, then that is the FINAL agreement!
·         To vary a written agreement, 3 conditions must exist     (CB 389)
o   (1) agreement must be in form be a collateral one (exchanging A for B)
o   (2) must not contradict express or implied provisions of the written K
o   (3) must be one that parties would not ordinarily be expected to embody in the writing
§  Mitchell v. Lath – removal of icehouse from property after purchase would be expected in the writing
UCC § 2-201 (pg 97) Formal Requirements; Statute of Frauds –
Application of the Parol Evidence Rule
1)      Is there a WRITING?                                              à  Writing/writings
2)      Is it a FINAL EXPRESSION?                                   à  Final expression of some or all
3)       Is this a final expression of ALL the terms?    à  All terms included in written agreement?
                Yes, then evidence is excluded
                No, then ask does proposed evidence contradict the K?
5)      Is the proposed evidence already covered in the agreement?
Parol evidence rule applies only to those aspects of an agreement that the parties intend to memorialize in the writing. (CB 395)
                i.e. If the parties put it in writing, then PER blocks parol evidence from contradicting the writing
Rest. of Contracts, 2nd
Section 213. Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)  (CB 401)
1)      A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.
2)      A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.
3)      An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated.
** PER does NOT apply to conversations made AFTER the contract has been made; those are considered as modifications to the initial contract and are just offers until they are accepted or rejected.
PER is due to the fact that sales people make promises that the actual dealer does not warrant.
I.e. Salesman promising a product will ____ when the final contract offers no guaranties or warranties on it.
·         PER = UCC 2-202 (CB 404); see also CB 427
·         Parol evidence & Fraud = only admissible where it relates to some independent fact, some fraud in the procurement of the instrument or some breach of confidence concerning its use (CB 416)
o   PE NOT admissible where the promise is directly at variance with the written agreement
o   UCC 2-202 expressly allows evidence of course of dealing or usage of trade to explain or supplement terms intended by the parties as a final expression of their agreement
§  May be done to show the terms but not to contradict the terms
Equity reforms an instrument … simply to enforce the actual agreement of the parties to prevent an injustice which would ensue if this were not done. Court will never, by assuming to rectify an instrument, add to it a term or provision which had not been agreed upon.
·         Tort damages (deceit) vs. rescission (undo contract) – Person who has an induced by fraud to enter into a contract has 2 REMEDIES: (a) rescind the contract, or (b) affirm the K & sue for damages.  (CB 420)
·         Doctrines of mistake & impracticability ADD TERMS to address low-probability contingencies; duty of good faith imposes general duty  (CB 429)
·         Clear, complete writings should generally be enforced according to their terms (431)
o   Whether or not a writing is ambiguous is a question of law
·         Deviant acceptance rule – introduction of “new” or “variant” terms means that the offer dead and the process of contract formation must start over again  (CB 449)
o   Acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition
·         2-606 (1)(b) – a buyer accepts goods when, after an opportunity to inspect, he fails to make an effective rejection under § 2-602 (1)
Restat. of K, 2nd – Section 212. Interpretation of Integrated Agreement
(2) A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.
·         π buyer suing Δ seller seeking specific performance for the sale of land
o   1) Δ seller offered land at $1800 w/ terms            à OFFER
o   2)  π buyer offered $1600                                             à COUNTEROFFER
o   3) Δ said can’t reduce                                                     à COUNTEROFFER & rejection of #2
o   4) Δ sells to 3rd party                                                       à ACCEPTANCE of another offer
o   5) π tells Δ he’ll take it for $1800 w/ terms            à ACCEPTANCE of #3
“Deviant Acceptance” at Common Law   CB 449
·         “Deviant acceptance” rule = the introduction of “new” or “variant” terms defeats the offer & the process of K formation must restart
o   Alleviated by several doctrines
§  Immaterial variances usually disregarded
§  If offeree’s acceptance seeks to make implicit terms explicitly contained
§  Suggesting a new term w/o its inclusion
§  “Grumbling acceptance” (it sucks, but I accept)
ALL of the above are permitted without defeating the initial offer
·         Jackson v. Seymour (483-487)
o   Sister sues brother over mistake
o   Reasoning: Deed constituted constructive fraud
o   Elements:
§  Confidential relation of the parties
§  Reliance by π upon the advice and judgment of the Δ in π’s business affairs
§  Gross inadequacy of price paid
§  π's offer to restore the purchase price & rescind the transaction, & Δ ‘s rejection of that offer
·         Exam will be: Can you solve the problem presented?
o   What is the

t is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that the avoidance would be unjust.
In other words, any benefits still retained by the incompetent must be restored or paid for.  If the other party knew of the incompetence at the time of contracting and took advantage then consideration not received by the incompetent without benefit to him need be restored.
Competence is something more than a transient surge of lucidity.
Undue Influence
General Themes of undue influence pattern (Ganging up themes)
A K is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will
Threaten to breach by withholding AND
The threatened party could not get the goods from another supplier AND
An action for breach would not be adequate.
Alaska Packers
Consent to such demand, under such circumstances, if given, was, in our opinion, without consideration, b/c it was based on fishermen’s agreement to render the exact services, and none other than they were already under K.
When a party merely does what he has already obligated himself to do, he cannot demand an additional compensation by taking advantage of his adversary and obtain a promise for more, the law will regard it as a bare agreement, and it will not help the wrong.
Parties to a mutual K can rescind it by mutual consent.  They can proceed to make a new K in which their mutual promises are consideration for each other.
When a subsequent agreement imposes upon the one seeking greater compensation, an additional obligation, or burden not previously assumed, the agreement, supported by consideration is valid.
When a K has not anticipated burdens, and promisor offers to pay more, it is a new K and enforceable.
Contractual Duty owed to a third person
The performance of a condition containing a provision requiring modification to be in writing may be excused by an oral agreement of the promisor that the condition need not be performed, if the agreement is given while the performance of the condition is possible, and in reliance on the agreement the promisee  materially changes his position
Thus the effectiveness of a non-written modification in spite of a K provision that modifications must be written depends upon whether enforcement of the condition or is not barred by equitable consideration.