CONTRACTS II
PIZZIMENTI
SPRING 2011
1.) § 1-106 â Remedies are to be Liberally Construed
a.) Remedies shall be liberally administered so that the aggrieved party may be put in as
good a position as if the other party had fully performed
b.) NO consequential, special, or penal damages are allowed except as specifically provided
for in the Code (or by other rule of law)
2.) § 1-201(19) âgfâ = âhonesty in factâ
3.) § 1-203 There is an obligation of âgfâ (in performance and enforcement)
4.) § 1-205 CD: previous conduct between the parties; UT: customs and practices in the trade
5.) § 2-102 Article II applies to âtransactions in goodsâ
6.) § 2-104 âMerchantâ
a.) One who deals in goods of the kind; or
b.) One who hold himself out as having knowledge or skill peculiar to the practice or goods
involved in the transaction
7.) § 2-105 âGoodsâ are all things which are moveable at the identification of the K
8.) § 2-201 SOF
9.) § 2-208 CP: conduct between the parties w/I that particular K (CP trumps CD and UT)
INTERPRETATION: (1) PAROL EVIDENCE RULE
Can anything be added to the paper? (prior or contemporaneous)
1.) What is it?
a.) external/extrinsic evidence (i.e. things not on the face of the K)
2.) Goal: âprotect the dealâ by limiting what can be brought in
a.) protect against fraud and allows predictability
3.) Summary:
a.) integrationà the adoption of the writing as an agreement on at least 1 term (§ 209(1))
b.) partialĂ final expression of 1 or more terms to an agreement
c.) completeĂ adopted by the parties as a final expression on every term of the agreement
Common Law
UCC § 2-202
1.) Parol Evidence Rule:
a.) if partially integratedâŠthen the writing
is final on at least 1 term (§ 209(1))
1.) canât contradict w/ parol evidence
(prior written or oral or contempor-
aneous oral) (§ 215)
2.) can supplement though (§ 216(1))
a.) e.g. Lee v. Seagram
b.) if complete integrationâŠthen writing is
final on every term and PE inadmissible
for any reason (§ 210(1))
1.) canât contradict (§ 215)
2.) canât supplement (§ 216(1))
1.) Parol Evidence Rule:
a.) if terms are final (i.e. âpartialâ)âŠthen
1.) canât contradict w/ parol evidence
(prior written or oral or contempor-
aneous oral)(§ 2-202(1))
2.) can explain or supplement w/ the
âtrioâ (e.g. CP, CD, UT) or w/
âconsistentâ other terms
b.) if writing is complete (i.e. totally final)..
1.) canât contradict
2.) canât explain or supplement w/
consistent additional terms
3.) however, can explain or supplement
w/ âtrioâ (consistent)(§ 2-202(2))
a.) UNLESS âcarefully negatedâ
2.) General Rules: (for CL and UCC)
a.) A party can always bring in evidence to
to there was no deal. (§ 214(a))
b.) A statement or writing subsequent to
the original writing is not prohibited by
PER. (modification â PER)
c.) If parties are still negotiating, itâs not a
PER problem.
d.) In PER, âthe last paper winsâ
1.) Hint: Look at the dates!
e.) Condition Precedent can show â deal
1.) unless itâs contradictory to writing
2.) General: (UCC)
a.) The terms the parties âagreedâ to and
those in âwritingâ are the âdealâ
b.) What is âconsistentâ?
1.) Majority: Consistent just means
not contradictory
2.) Minority: Consistent means term
must be âconsistentâ additional term
a.) i.e. > than not contradictory, it
requires âR harmonyâ
Tests Whether Integration is Complete or Partial
Traditional Test (a.k.a. Four Corners Test)
Modern Test (a.k.a. Restatement Rule)
1.) Where the writing âon its faceâ appears to
be the complete expression of the rights and
obligations of both parties, it is a âtotal
integrationâ
a.) Unless the additional terms were such
that the parties would naturally enter
into a separate agreement regarding the
additional terms
2.) Only looks to document itself, not intent
1.) Looks at the âintention of the partiesâ in
light of writing and the surrounding
circumstances (§ 214(b))
a.) Not limited to the document itself.
2.) UCC rejects the Traditional Test.
a.) Concerns w/ what the parties intended
instead of what the judge thinks the
parties intended
Attacking a PER Problem
1.) Is the term prior (written or oral) or contemporaneous (oral)? (CL & UCC)
a.) Yes, potential PER problem. (i.e. evidence is potentially inadmissible per PER)
b.) No, itâs not a PER problem. (since evidence is subsequent (afterward), see NOM clause)
2.) If prior or contemporaneous, is it an integration? (i.e. intended to be a final expression on
at least 1 or > terms)(§ 209(1))(CL & UCC)
a.) Yes, continue to (3)
b.) No, STOP! (not PERâŠbecause the parties canât just be negotiating)
3.) If itâs an integration, is it complete ( i.e. âtotal integrationâ)? (CL & UCC)
a.) Yes, nothing comes in (because it is a final expression on all terms)
b.) No, then you can supplement only (since itâs partial â not final expression of all terms)
c.) How do you determine if it is complete?
1.) Determine which test applies: Traditional Test or Modern Test
2.) Look for:
a.) Merger Clause (a.k.a. âIntegration Clauseâ)
1.) This is evidence which supports a finding that the writing is intended as being
the final expression of the agreement. (Betaco v. Cessna)
b.) If no merger clause, consider: (§ 214 allows you to look at everything)
1.) K itself (writing)
2.) CP, CD, UT (§ 1-205: CD and UT; § 2-208: CP)
3.) Relationship between parties (fiduciary: trust)
4.) Nature of the transaction
5.) Oral agreement collateral or not (i.e. closely related)
6.) Negotiations
d.) UCC-If âcomplete,â is it CP, CD, UT?
(Note: CP: during that K; CD: parties past K; UT: general customs in the trade)
1.) If yes, was it âcarefully negatedâ?
a.) If yes, itâs out.
b.) If no, itâs in.
2.) If no, itâs out. (since the K is complete, nothing is allowed to come in â trio exception)
3.) Summary: If âcompleteââŠthe âtrioâ still might be allowed as evidence.
4.) Note: To âcarefully negateâ the party should write in express terms that it is not going
to recognize the UCC. (e.g. âWe no longer recognize that the time of delivery is a R
time if not specified, instead when no time is specified it is always w/I 30 days.â)
4.) If partial (i.e. not complete), does the additional term(s) contradict? (CL & UCC)
a.) Yes, PER prohibits admission. (oral term â conflict w/ stated term in writing)[p. 319 #3]
b.) No, term is in.
c.) What about oral terms that are not consistent w/ terms of law?
1.) Rule: Oral terms usually trump a default rule. (i.e. beats âgap-fillerâ) [p. 320 #4]
a.) e.g. If X and Y have a K and it doesnât say a delivery date in writing, but X and Y
orally agree to âw/I 60 daysââŠthe oral agreement of âw/I 60 daysâ will trump the
âgap-fillerâ of a R time.
5.) Do any âExceptionsâ apply? (âexceptionâ only means the evidence can be submitted despite
being inconsistent, not that the party automatically wins)(CL & UCC)
a.) Sham (party can show no deal)
b.) Bilateral Mistake (party can show by actions)
c.) Condition Precedent to K (admissible to show no K)
d.) Collateral (can show totally separate agreement; unrelated)
INTERPREATION: (2) NO ORAL MODIFICATIONS (NOM)
Can anything be added to the paper? (subsequent/afterwards)
Common Law
UCC § 2-209(2)
1.) No Oral Modifications:
a.) Unenforceable, unless you can show
âCâ and reliance (i.e. can modify)
b.) Even if there is a âmerger clauseâ, the
parties can have oral modifications
c.) In order for oral modifications to be
prohibited, you must have
going on w/ that K (usually installment K)
b.) If K involvesâŠ
1.) repeated occasions of performance it must be an installment K (§ 2-612); and
2.) party w/ knowledge; and
3.) opportunity to reject; and
4.) âAâ or âacquiescedâ w/o objectionâŠ
c.) ThenâŠCP is relevant to determine the meaning of the agreement
3.) CD (§ 1-205(4)):
a.) Deals w/ past K and performance of K, the conduct between parties; it establishes a
common basis of understanding
4.) UT (§ 1-205(4)):
a.) Usage or practice w/ such regularity of observances in a place, vocation, or trade as to
justify an expectation it will be observed
1.) Merchants are charged w/ âknowledgeâ
a.) It does not matter if you are a ânewâ merchant.
b.) âActual knowledgeâ is not required.
b.) E.g. UT experts to provide interpretation, trade journal information, govât regulations
5.) Where ambiguous between CP and waiver, must choose waiver. (Nanakuli)
a.) If the court finds CP, then it must remain a term for the rest of the K. If the court finds
waiver, term is in for the time being, but it doesnât have to be in for remainder of the K.
6.) Course of Negotiations
7.) Market and Surrounding Circumstances
8.) Maxims:
a.) contra proferentum: âagainst the drafterâ
b.) expression unius est exclusio alterius: âexpression of one = exclusion of othersâ
1.) be clear or vague in your expression depending on the result desired
c.) ejusdem generis: âof the same kind, class, or natureâ
1.) where general words follow an enumeration of specifics, you may not use the widest
interpretation of the general words, instead you would be limited to the things of the
same general kind or class
a.) general terms: leave interpretation open
b.) specific terms: leave little open for discussion
d.) Interpret terms most consistent w/ public policy and fairness
e.) Put ârecitalsâ in the document â best way to show âintentionâ
1.) E.g. âThe parties want A, B, and C.â
INTERPRETATION: (5) MISUNDERSTANDING
Note: There are no UCC §âs on misunderstanding, so use Restatements §§ 20, 201.
Misunderstanding
1.) No assent if⊠(i.e. neither are âmeeting of the mindsâ)
a.) materially different meaning; and
b.) § 20(1)(a) neither party knows or has reason to know the meaning attached by the other
party [i.e. both are clueless]; OR
c.) § 20(1)(b) either party knows or each party has reason to know the meaning attached by
the other party [i.e. both know the otherâs intent]
2.) If both parties agree to 1 interpretation, then the term is interpreted according to that meaning
(§ 201(1))
a.) In this case, subjective intentions of the parties will beat a judgeâs objective interpretation.
3.) If one party knows and the other doesnât know the meaning of a particular term, the meaning
of the party who doesnât know is used. (§ 20(2)(a); § 201(2)(a))
4.) If one party has reason to know and he other does not know, the meaning of the one who has
no reason to know is used. (§ 20(2)(b); § 201(2)(b))
5.) Note: When no sensible basis as to whose term is right, the court will find no assent (i.e. â K)
CONDITIONS
What is a condition? What impact does it have on a K?