Contracts II / Denicola / Spring 2011
Parol Evidence Rule- Applies to oral agreements, discussions, and writings made prior to integration. (WHAT SUBJECT-MATTER CAN THE COURT INTERPRET?)
1. Is there a final expression of agreement (Integration)?
· No- then no need to analyze further
· Yes- then continue
2. Is it a partial or total integration?
· 2 Methods courts may use to decide whether total or partial
1. Four Corners
· Looks only at document
· Doesn’t allow introduction of outside evidence to explain terms, provisions, etc. unless exception as will be stated later.
2. “Corbin View:
· Look at all available evidence including testimony to determine the actual intention of the parties.
· Partial Integration
1. Final expression of agreement however, not intended to include all details of the parties agreement.
2. No evidence of prior or contemporaneous agreements or negotiations (oral or written) may be admitted which would CONTRADICT a term in the writing.
3. Brief Statement of Rule: Cant introduce any agreements prior to contract formation that contradicts the what is contained in the writing.
· Total Integration- Look for Meger Clause
1. Document that is not only a final expression of agreement but that is also intended to include all details of the agreement.
2. No evidence of prior or contemporaneous agreements or negotions may be admitted which either CONTRADICT or ADD to the writing.
3. Is the evidence party is trying to introduce attempting to ADD to the contract?
· If yes, then
1. Partial Integration- Can be admitted as long as does not contradict.
2. Total Integration- Will not allow.
4. Is a party attempting to Contradict the contract?
· IF yes, then look to exceptions.
· If no, then done.
5. Interpretation- Most courts allow evidence to be introduced that to aid in the interpretation of a contract, even if the writing is an integration.
· How to decide which interpretation of a clause to use?
1. Primary Purpose- Purpose of the parties in making the contract.
2.Terms made reasonable, lawful, and effective
· Interpret them to have reasonable, lawful, and effective meaning.
3. Ambiguous Terms- Construed against the drafter
4. Negotiated terms control standard terms
· Negotiated terms control over boiler plate fine print terms.
· TYPE Written “RIDER” controls over preprinted form contract.
· HANDWRITTEN clause onto a type written agreement has priority.
6. Exceptions that Allow New Evidence to be Added.
· EXPRESS TERMS NEVER CONTRADICTED BY THESE EXCEPTIONS UNDER UCC §2-208(2).
· HIERARCHY= Course of Performance over Course of Dealing over Trade Usage.
1. Collateral Agreement- Oral agreement supported by separate consideration, even though it occurred prior to what seems to be a total integration.
2.Course of Performance- Way parties have conducted themselves in performing the contract at hand up until this point.
3. Course of Dealing- Evidence showing how parties have acted with respect to past contracts.
4.Trade Usage- UCC §1-205. Allows evidence that shows the customs of the industry.
5.Fraud/Mistake/Duress/Lack of Consideration- Parties always allowed to bring in evidence of prior agreements that show illegality, fraud, duress, mistake, lack of consideration, or any other fact that would make the contract void or voidable.
· Is there a disclaimer?
1. If so, (Seller has made no representation to the profitability of this property and Buyer has relied solely on his own investigation
1. Employment Agreements
§ In 2001 Supreme Court held that mandatory arbitration agreements in employment agreements are generally enforceable under the Federal Arbitration Act (FAA), “save for upon such grounds as exist at law or in equity for the revocation of any contract.” Circuit City Stores v. Adams.
2. Consumer Transactions
· Armendariz v. Foundation Health Psychcare Service, Inc.
o Both Employees signed arbitration clause when filled out and signed employment application.
o Fired and claimed they were victims of sexual harassment.
o Employ attempts to bind under arbitration clause.
o If there is a lack of mutuality in arbitration agreements between employers and employees, one side held to arbitrate and not the other, is the agreement unconscionable?
o Employer can seek refuge under arbitration clause but Employee may not. Only held one party to use arbitration employer could sue employee in ct.
· Eastern Air Lines Inc. v. Gulf Oil Corporation
o UCC §1-304-Every contract or duty within the UCC imposes an obligation of good faith in its performance and enforcement.
o UCC § 2-103(1)(B)- Good faith for merchants- honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
§ Has Eastern been acting in this manner the whole time? Should Gulf have reasonably expected this?
§ If Eastern loads up on fuel and then sells excess to United, that would not be acting in “good faith.”