Contracts II Outline

Contracts II- Spring 2010 (Cook)
Parole Evidence
I.                     Purpose
a.        Limits the extent that a party can establish that discussions or writings prior to the signed written K can be taken as part of the agreement
b.       The parole evidence rule provides that evidence of a prior agreement may never be admitted to contradict an integrated writing and can’t supplement an integration that is intended to be complete
c.         
II.                   Total and Partial Integrations
a.        Definitions
                                                   i.      Integration: document that is intended to be the final expression of the agreement
                                                 ii.      Partial integration: document that it is intended to be final but is not intended to include all the details of the agreement
                                               iii.      Total integration: document that is not only a final expression of the agreement but is also intended to include all details of the agreement
b.       Statement of the Rule: parole evidence rule is 2 sub-rules:
                                                   i.      Partial integration: no evidence of prior or contemporaneous agreements or negotiations (written or oral) may be admitted if it contradicts a term in the writing
                                                 ii.      Total integration: no evidence of prior or contemporaneous agreements or negotiations may be admitted which would either contradict or adds to the writing
1.       Prior writings and oral agreements: the PER applies to oral agreements and discussions that occur prior to a signing of an integration and also to writings created prior to an integration
2.       Contemporaneous writing: if an ancillary writing is signed at the same time a formal document is signed, the ancillary document is treated as part of the writing and not subject to PER
3.       Subsequent agreements: the PER never bars consideration of subsequent oral agreements (a written L may always be modified after its execution by an oral agreement)
c.        UCC §2-202 follows that common-law PER
III.                 When Parole Evidence Rule Doesn’t Apply
a.        Voidability
                                                   i.      Fraud, Mistake, etc: PER doesn’t prevent evidence that would show that no valid K exists- even if a writing is a total integration, party may always introduce evidence of earlier oral agreements to illegality, fraud, duress, mistake, or lack of consideration
b.       Existence of a Condition
                                                   i.      If the parties orally agree on a condition to the enforceability of the K but it is not included in the writing, cts generally allow proof of this condition
c.        Collateral Agreements
                                                   i.      An oral agreement that is supported by separate consideration may be brought in, even though it occurred prior to total integration
d.       Subsequent Transactions
                                                   i.      PER never bars evidence that the parties orally or in writing agreed to modify after the signing of the writing
IV.                 Interpretation
a.        Modern View: most cts allow parties to introduce evidence to aid interpretation of a K but vary on how and when evidence is allowed
                                                   i.      Ambiguous terms: all cts agree that if a term is ambiguous, extrinsic evidence is allowed
1.       Evaluated by jury: extrinsic evidence is to be evaluated by a jury, not a judge
2.       Pre-contract negotiations: evidence about what the parties’ pre-K negotiations indicated to be the meaning of the ambiguous terms
                                                 ii.      Unambiguous terms: it is for the judge, not the jury, to say what the term means
                                               iii.      3 Approaches to Determine Existence of Ambiguity
1.       Four corners rule: judge can’t consult extrinsic evidence- determined solely by looking within the 4 corners of the K
2.       Plain meaning rule: the ct will not hear evidence about the prelim negotiations but will hear evidence about the context surrounding the making of the K
3.       Liberal rule: evidence of statements during pre-K negotiations is admissible
b.       Maxims of Interpretation
                                                   i.      Primary purpose: if the primary purpose of the parties can be ascertained, given great weight
                                                 ii.      All terms made reasonable, lawful, and effective: all terms are interpreted so they have a reasonable, lawful, and effective meaning
                                               iii.      Construed against drafter
                                               iv.      Negotiated terms control standard terms: a term that has been negotiated will control over one that is part of a standardized portion of agreement
V.                   Trade Usage, Course of Performance, and Course of Dealing
a.        Definitions
                                                   i.      Course of performance: way the parties have conducted themselves in performing the particular K at hand
                                                 ii.      Course of dealing: how the parties have acted with respect to past Ks
                                               iii.      Usage of trade: any practice of dealing having such regularity as to justify an expectation that it will be observed with respect to the transaction in question
b.       Application to Complete Integration
                                                   i.      Trade usage, etc. may be admitted to interpret the meaning of a writing that is a complete integration b/c these sources are not affected by PER
                                                 ii.      But, trade usage, etc. can’t be used to contradict the express terms of a K
c.        Hierarchy
                                                   i.      Express > Course of performance > Course of dealing > Trade usage
 
Conditions
I.                     Conditions Generally
a.        Definitions
                                                               i.      Condition: an event which must occur before a particular performance is due
                                                             ii.      Concurrent condition: exists only when the parties are to exchange performances at the same time- found commonly in Ks for sale of goods and conveyance of land
                                                           iii.      Express condition: parties explicitly agree that a duty is conditional upon the happening of some event
1.       Implied in fact condition: when conditions are created by conduct instead of language
                                                           iv.      Constructive condition: happening of an event is made a condition of a duty bc a ct determines it to be
b.       Conditions v. Promises
                                                               i.      Condition: if the act is a condition on the other party’s duty and act doesn’t happen, other party won’t have to perform
                                                             ii.      Promise: if the act is a promise and it doesn’t occur, the other party can sue for damages