CONTRACTS II
SPRING 2013
PROF. KUNEY
THE PAROL EVIDENCE RULE
· If a written agreement is fully integrated and intended by the parties to be a complete statement of their agreement, then evidence of prior or contemporaneous agreements will not be admitted to change its terms
· Integration (R2d 209)
o A writing that is a final expression of one or more terms.
o A preliminary question for the
o Presumption of integration if by completeness and specificity it “reasonably appears to be a complete agreement”.
· Complete v. Partial Integration (R2d 210)
o Complete = adopted as complete & exclusive statement of the deal.
o Partial = not complete.
o A preliminary question for the court, not the jury.
· R2d 213
o Completely Integrated Agreement Discharges Prior and Contemporaneous Inconsistent Agreements.
o Partially Integrated Agmt. Discharges Prior and Contemporaneous Agreements w/in its Scope.
· The Parol Evidence Rule/Extrinsic Evidence
o What is evidence of prior and contemporaneous agreements and negotiations good for? R2d 214.
§ Questions of Integration and its Completeness
§ the Meaning of the Writing
§ Illegality
§ Fraud
§ Duress
§ Mistake
§ Lack of Consideration, or other Formation Defense
§ and Proper Remedy.
· R2d 215
o But, other than as stated in R2d 214, you can’t use evidence of prior or contemporaneous agreements to contradict a completely or partially integrated agreement!
· R2d 216
o Evidence of prior consistent terms can be used to supplement a partially, but not a completely, integrated agreement, but not to contradict its terms.
· The UCC Approach – 2-202.
o Basically the same as the Restatement, no contradiction of an integrated agreement, but we CAN supplement or explain terms using:
o Course of performance, course of dealing, or usage of trade; or
o Evidence of consistent additional terms unless the agreement was completely integrated.
INTERPRETATION
· Traditional Four Corners of the Document Rule
o look for an ambiguity to justify going outside the four corners of the document; no ambiguity, you are stuck with the words of the document.
· The Traynor 2-Step
o We all have a different dictionary in our heads.
o So, provisionally admit the evidence to determine if the meaning is one to which the contract is reasonably susceptible. If so, it comes in “for real.”
WARRANTY LIABILITY
· General
o A warranty is a statement made about certain facts whereby the warrantor promises to ensure that those facts are as stated.
o A breached or incorrect warranty will support an action for damages sounding in contract; standard = strict liability.
o Warranties are risk shifting devices – that is their whole point. Fault is irrelevant to warranty liability.
· UCC Warranties
o Express Warranties – UCC sec. 2-313
§ You don’t have to say “warrant” or any other magic words.
§ A mere description of the goods will do it; the warranty to conform to the description is implied.
§ Showing a sample or a model is a warranty that the goods will conform to it.
§ UCC 2-313 Issues
· When is the statement an affirmation of fact and not just mere “puffing.”
· Whether it is part of the “basis of the bargain” – something short of actual reliance – perhaps knowledge of the warranty and rebuttable presumption of reliance.
· Cases: Royal Business Machines & Bayliner
o Implied Warranty of Merchantability
§ UCC 2-314
ccrued to the non-breaching party under the contract in reality;
WITH
§ The net benefits of the contract that would have accrued to the non-breaching party if the breaching party had not breached;
AND
§ The difference – the delta (Δ) – is the measure of damages.
· Incidental damages
o additional costs incurred on account of a breach in a reasonable attempt to avoid loss and mitigate damages.
· Consequential damages
o include losses caused by the breach – damages to persons or property, for example, those that naturally flow from the breach or are or should have been reasonably within the contemplation of the parties at the time of contracting. Hadley v. Baxendale. Similar to the “proximate cause” limitation of the tort of negligence.
· UCC §2-706 Seller’s Resale Including Contract for Resale
o Seller may resell in good faith and a commercially reasonable manner and then recover the difference between the contract price and the resale price.
o Public or Private Sale Permitted – Watch Requirements as Failure to Meet them will Result in Loss of the Resale Price as the Measure of Market Price.
o LOST VOLUME SELLER
§ If, upon breach by a buyer of goods, the seller sells to another and has a practically unlimited amount of inventory and no additional costs, then the seller has really lost one sale (could have had two, now has only one), so award profit on the one lost sale.
§ Locks v. Wade juke box example.
