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Contracts II
University of Mississippi School of Law
Bullard, Mercer E.

CONTRACTS II
Bullard Spring 2004
I)                   ASSENT
A)    Chapter 15: Parol Evidence Rule
1)      Black letter rule: (from Gilbert) parol evidence will not be admitted to vary, add to or contradict a written contract that constitutes an integration
(a)    PER keeps parol evidence from being considered in enforcement of contract
(i)                 jury decides: truth of oral agreement
(ii)               court decides: whether agreement is admitted as evidence that changes contract
(b)   3 conditions before an oral agrm’t can vary the written contract
(i)                 oral agrm’t must not contradict express or implied provisions of the written contract
(ii)               oral agrm’t must be collateral in form (related to written contract)
(iii)             oral agrm’t must not be too closely related to written K; e.g., it must not be one that parties would ordinarily be expected to embody in writing
·         in determining whether or not an oral term is one that naturally would have been included in the writing, the trial ct may consider surrounding circumstances, such as
*        business experience or relative bargaining strength
*        the apparent completeness and detail of the writing itself
rather than considering only the face of the document
2)      Integration
(a)    (From Gilbert) a written contract constitutes an integration if the parties to the contract intended the writing to be the final and complete expression of their agreement; i.e., if the parties intended to integrate their agreement into the writing.
(b)   Rest. § 209:
(i)                 An integrated agrm’t is a writing or writings constituting a final expression of one or more terms of an agrm’t.
(ii)               Whether there is an integrated agrm’t is to be determined by the ct as a question preliminary
·         to determination of a question of interpretation, or
·         to application of PER
(iii)             Where the parties reduce an agrm’t to a writing which in view of its completeness and specificity r’bly appears to be a complete agrm’t, it is taken to be an integrated agrm’t unless it is established by other evidence that the writing did not constitute a final expression.
(c)    Rest § 210: Completely and Partially Integrated Agrm’ts
(i)                 A completely integrated agrm’t is an integrated agrm’t adopted by the parties as a complete and exclusive statement of the terms of the agrm’t.
(ii)               A partially integrated agrm’t is an integrated agrm’t other than a completely integrated agrm’t.
(iii)             Whether an agrm’t is completely or partially integrated is to be determined by the ct as a question preliminary to determination of a question of interpretation or to application of PER
(iv)             Comment:
·         this is to be read w/ § 209 to reject the assumption that b/c a writing is final on some matters, it is to be taken as including all the matters agreed upon. Even though there is an integrated agrm’t, consistent add’l terms not reduced to writing may be shown, unless the ct finds that the writing was assented to by both parties as a complete and exclusive statement of all terms.
·         Whether there was integration may be proved by any relevant evidence. A written K, apparently complete on its face, may be decisive of the issue in the absence of credible contrary evidence. But a writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the parties’ intention.
(v)               § 210 takes Corbin’s side
(d)   Intent
(i)                 if the later agrm’t is oral and the earlier is in writing, jury determines whether parties intended second to supersede first.
(ii)               if the later agrm’t is in writing, trial judge determines intent of parties
(e)    Williston v. Corbin
(i)                 Williston
·          legal approach (ppl should plan according to laws or suffer the consequences, cts should stay out of it)
·         traditional, “formal intent” test
·         where the writing appears to be a complete instrument expressing the rights and obligations of both parties, it is deemed a total integration unless the alleged add’l terms were such as might naturally be made as a separate agrm’t by parties in a similar situation
·         Gilbert: writing deemed to be an integration if taken as a whole and on its face the writing appears to be an instrument that completely expresses the parties’ agrm’t.
·         intent a matter of form—whether writing has the form of a complete instrument
·         standardized and objective test based on the terms of the written K as understood by a r’bly intelligent person
·         leads to a broad application of the PER and consequently to the frequent exclusion of parol evidence
(ii)               Corbin
·         equitable approach (tries to bend black letter rules to ensure “fair” rulings)
·         modern, “actual intent” test
·         Gilbert: writing deemed to be an integration only if the parties actually intended it to be one; the ct will consider any relevant evidence to determine the parties’ intent
·         individualized test that requires judge to determine the legal relations of the parties in accordance with their actual intentions, even when the form/writing they employed suggests otherwise
·         leads to a narrower application of the PER and consequently to the more frequent admission of parol evidence
3)      Rest. § 213: Effect of Integrated Agrm’t on Prior Agrm’ts (PER)
(a)    A binding integrated agrm’t discharges prior agrm’ts to the extent that it is inconsistent with them
(b)   A binding completely integrated agrm’t discharges prior agrm’ts to the extent that they are within its scope
(c)    An integrated agrm’t that is not binding or that is voidable and avoided does not discharge a prior agrm’t. But an integrated agrm’t, even though not binding, may be effective to render inoperative a term which would have been part of the agrm’t if it had not been integrated.
4)      Rest. § 215: Contradiction of Integrated Terms: Where there is a binding agrm’t, either completely or partially integrated, evidence of prior or contemporaneous agrm’ts or negotiations is not admissible in evidence to contradict a term of the writing.
5)      Rest. § 216: Consistent Additional Terms
(a)    Evidence of a consistent add’l term is admissible to supplement an integrated agrm’t unless the ct finds that the agrm’t was completely integrated
(b)   An agrm’t is not completely integrated if the writing omits a consistent add’l term which is
(i)                 agreed to for separate consideration, or
(ii)               such a term as in the circumstances might naturally be omitted from the writing.
6)      PER and presumption
(a)    the fact that there is a written contract does not necessarily preclude parol evidence rebutting a term that the law would otherwise presume
(b)   a statute may preclude parol evidence to rebut a statutory presumption
7)      UCC § 2-202: Final Written Expression: Parol or Extrinsic Evidence
(a)    § 2-202: Terms w/ respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agrm’t w/ respect to such terms as are included therein may not be contradicted by evidence of any prior agrm’t or of a contemporaneous oral agrm’t but may be explained or supplemented
(i)                 by course of performance, course of dealing, or usage of trade
(ii)               by evidence of consistent add’l terms unless the ct finds the writing to have been intended also as a complete and exclusive statement of the terms of the agrm’t.
(iii)             see § 1-303: Course of Performance, Course of Dealing, and Usage of Trade
(b)   3 presumptions 2-202 rejects
(i)                 any assumption that b/c a writing has been worked out which is final on some matters, it is to be taken as including all the matters agreed upon
(ii)               the premise that the language used has the meaning attributable to such language by the commercial context in which it was used
(iii)             the requirement that a condition precedent to the admissibility of the type of evidence specified in paragraph (a) is an original determination by the ct that the language used is ambiguous
(c)    Consistency v. Contradiction – spectrum/continuum
(i)                 Hunt Foods argument
·         to be admissible, must be consistent w/ writing (inadmissible only when contradictory)
·         to be inconsistent, a term must contradict or negate a term of the writing; a term that has a lesser effect is provable
·         in a sense, any oral provision that would prevent the ripening of the obligations of a writing is inconsistent with the writing
·         “it is not sufficient that the existence of the condition is implausible; it must be impossible”
(ii)               Alaska Northern argument
·         rejects Hunt’s narrow view of consistency
·         defines inconsistency as “the absence of r’ble harmony in terms of the language and respective obligations of the parties”
8)      Merger Clauses/Integration Clauses: typically “boilerplate” provisions (standardized provisions routinely inserted by drafting attys) that state that the written contract is the entire contract btwn the parties
(a)    the law on what effect should be given to merger clauses is messy, as illustrated by comment e
(b)   Rest § 216, Comment e
(i)                 such a clause may negate the apparent authority of an agent to vary orally the written terms, and if agreed to is likely to conclude the issue whether the agrm’t is completely integrated
(ii)               consistent add’l terms may then be excluded even though their omission would have been natural in the absence of such a clause
(iii)             but such a clause does not control the question whether the writing was assented to as an integrated agrm’t, the scope of the writing if completely integrated, or the interpretation of the written terms.
(c)    ARB, Inc.
(i)                 prior cases looked at intent to enter oral agrm’t; this case looks at intent to allow intent re: whether oral agrm’t is to be considered
(ii)               says integration clauses are generally to be given effect, if not susceptible to any other r’ble interpretation
(iii)             consider the circumstances surrounding the making of the contract to discover whether the integration clause in fact expresses the genuine intention of t

deals with extrinsic evidence other than agrm’ts
·         interpretive issue; words in written K need interpreting
·         substantive
·         may preclude even evidence concerning circumstances
(b)   Black Letter rule
(i)                 Gilbert: if:
·         there is no ambiguity in a written K on its face, and
·         no special meaning attached to the words of a written K by custom or usage,
then:
·         the terms of the contract are to be interpreted only according to their “plain meaning,” and
·         extrinsic evidence is inadmissible to either interpret the contract or to establish that the contract is ambiguous so that extrinsic evidence should be admitted to clarify its meaning
(ii)               Steuart
·         the intent of the parties to a written contract is to be regarded as being embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agrm’t
·         when a written K is clear and unequivocal, its meaning must be determined by its contents alone; it speaks for itself and a meaning cannot be given to it other than expressed.
·         where the intention of the parties is clear, there is no need to resort to extrinsic evidence
·         hence, where language is clear and unambiguous, the focus of the interpretation is upon the terms of the agrm’t as manifestly expressed, rather than as, perhaps, silently intended.
(c)    Rationale
(i)                 parties have the right to make their own contract, and it is not the function of the ct to rewrite it, or to give it a construction in conflict with the accepted and plain meaning of the language used
(ii)               where a K evidences care in its preparation, it’s presumed that its words were employed deliberately and w/intention
(iii)             PMR enhances the extent to which contracts may be relied upon by contributing to the security of the belief that the final expression of the agrm’t will not later be construed to mean something other than what is clearly expressed
(iv)             hinders parties dissatisfied w/ their agrm’t from creating a myth as to the true meaning of the agrm’t thru subsequently exposed extrinsic evidence
(d)   Criticisms
(i)                 Mellon Bank
·         under “4 corners” approach, judge’s experience determines whether written words are ambiguous
·         an alternative approach is for the judge to decide whether there is a r’ble alternative interpretation, and if so, objective evidence in support of that interpretation should be considered by the fact finder
(ii)               Amoco Production Co.
·         under UCC § 2-202, there is an assumption that the parties did not intend the contract to be completely integrated
·         a judge should first consider the circumstances and purposes surrounding the making of the written K before determining whether it is in fact ambiguous
(iii)             Pacific Gas
·         test of admissibility not whether written instrument appears to ct to be clear and unambiguous on its face, but whether the offered evidence is relevant to prove a r’ble alternative meaning
·         if meaning ltd to “4 corners” approach, it would either deny the relevance of the intention of the parties or presuppose a degree of verbal precision and stability our language has not yet attained
·         “fairly susceptible” test:
*        rational interpretation requires at least a preliminary consideration of all evidence
*        such evidence includes testimony as to the circumstances surrounding the making of the agrm’t, including the object, nature and subject matter of the writing
*        if the ct decides, after considering this evidence, that the language of a K, in light of all circumstances, is fairly susceptible of either of the interpretations contended for, extrinsic evidence relevant to prove either of such meanings is admissible.
(iv)             Garden State  
·         extreme position; total rejection of 4-corners approach
“experience teaches that language is so poor an instrument for communication or expression of intent that ordinarily all surrounding circumstances and conditions must be examined before there is any