Contracts II Outline

Contracts II
Prof. George Kuney
University of Tennessee College of Law
Spring 2018
 
Parol Evidence Rule
Is the proffered parol evidence of a prior or contemporaneous agreement?
If so, is it offered to prove the terms of the K?
If so, is the agreement partially integrated or completely integrated? If partially integrated, the evidence is barred to the extent it would vary or contradict the terms, but may be explained or supplemented by consistent addition terms; to be inconsistent, a term must contradict or negate a term of the writing. If the agreement is completely integrated, the evidence is barred, even if it addresses issues not addressed in K.
If partially integrated, is filling in a void in K (something that K doesn't address) contradicting the void? Some courts say yes, others say no. Argue both sides.
Completely integrated agreement: when a K was intended by the parties to be a final and complete expression of all terms
Partially integrated agreement: when K was intended to be final expression of some, but not all, terms of K
Interpretation of Ks
Interpretation is about what the terms mean, not what the terms are (which is what PER bars)
4 Corners Rule (Majority Rule):
Look only at the document itself
Ask if a term is ambiguous on its face
If yes, bring interpretation evidence in. If no, interpretation evidence is not coming in.
Traynor Two-Step (CA Minority Rule):
Provisionally admit interpretation evidence
Judge looks at terms in K and determines whether they are reasonably susceptible of the meaning proffered by the interpretation evidence
If they are reasonably susceptible, the evidence comes in for real and goes to jury (doesn't establish the meaning automatically; it is only evidence of the meaning)
Warranty Liability
A warranty is a promise that certain facts are true
Breach of warranty damages: Difference between (a) value of product as warranted and (b) value of product as it actually exists. Buyer has the burden of establishing breach.
Express Warranties
Express warranties are warranties based on statements
UCC – 3 ways to make Express Warranties:
an affirmation of fact or promise made by the seller that (i) relates to the goods AND (ii) becomes part of the basis of the bargain makes an express warranty that the goods will conform to the affirmation or promise
a description of the goods that becomes part of the basis of the bargain
a sample or model that becomes part of the basis of the bargain
It is not necessary that the seller use the magic words “warranty” or “guarantee” or even have a specific intent to create a warranty to make one.
“Puffery,” a seller's opinion on his own goods, are not “affirmations of fact.” (Example of puffery: “My widgets are simply tremendous. The best. Believe me, they are possibly the best widgets in history. No one makes better widgets than I do.”)
“You will make a profit” is generally puffery, UNLESS it was made during negotiations for a franchise K (like someone buying a BK franchise)
Decisive test for whether a given representation is a warranty or puffery: Whether the seller asserts facts which the buyer is ignorant or merely states an opinion of which the seller has no special knowledge and on which the buyer may be expected to also have an opinion and exercise his own good judgment. (Royal Business Machines v. Lorraine Corp., United States Court of Appeals, 7th Cir. 1980)
Basis of the bargain: requires  a showing of (i) buyer's knowledge of the warranty and (ii) buyer's reliance on the warranty (there is a rebuttable presumption of reliance)
All affirmations of fact relating to the goods by the seller become part of the basis of the bargain, unless there is clear affirmative proof to the contrary
The time that warranty was made does not matter. (Example: A slip inside of a bag of fertilizer saying that it will not damage your crops is a warranty, even though buyer did not receive the warranty until after he bought the fertilizer and began to use it.)
Warranty liability is strict liability. If party makes a warranty, they are bound by it even if what was warranted is out of their control
PER bars evidence of express warranties that were made prior or contemporaneous to the deal IF the K is a completely integrated agreement
Implied Warranty of Merchantability
(i) Unless waived or excluded, (ii) when one  party is a merchant of the goods (iii) all goods must be AT LEAST: – only need one of these to have breach of warranty of merchantability
pass without objection in the trade under K description; AND
goods are of fair average quality if they are fungible (able to be replaced by identical item); AND
are fit for th