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Contracts II
University of Toledo School of Law
Klein, James M.

Contracts Outline II

Terms: What Performance is Due?

I. Parol Evidence in Interpretation
a. Writing final expression of agreement (integration)?
i. If draft or shows assent to a contract when parties have a least part of their agreement in writing
1. Final expression/agreement on 1 or more terms (§ 209(1))
2. Can admit any evidence to show that the writing is not intended to be final
ii. Must be a contract
b. One party seeks to use evidence of prior agreements to add or modify terms of the writing
i. If term prior (written or oral) or contemporaneous (oral) with the signing of the instrument
c. Partial or complete integration?
i. Determine intent of the parties
ii. Partial: final expression but not a complete agreement (part in document and part must be found from other sources); may allow outside evidence if supplements
iii. Complete: intended writing to be a complete statement of terms; cannot admit outside evidence
iv. Test:
1. Traditional (look only within the four corners of the document); or
a. If document appears complete on fact, will be construed as complete unless the parties would reasonably have put it in a separate document
2. Modern (look at everything)
v. Consider:
1. The document: the language
a. Merger/integration clause
i. Language saying that writing is intended to be a complete expression of agreement
ii. Likely will find it complete
iii. May make a difference if drafted specifically or if standard form in a contract
iv. Can overcome merger clause, but need exceptional evidence
b. Natural/normal:
i. Would parties naturally and normally have included it if agreed upon?
1. If yes, should have been there and document complete; if no, not necessarily complete
ii. Would similarly situated parties have included term had they agreed to it?
c. Type: easy to amend, standard form, formal, specific
2. Parties: relationship (family, friends), sophistication (businessmen, old men)
3. Purpose of contract
4. Negotiations
5. Course of dealings, usage of trade, course of performance (§ 1-205; 2-208)
d. Does the term supplement or does it contradict?
i. Contradict: prohibits admission
ii. Not contradict: may supplement or explain the agreement
1. If oral term conflicts with a stated term: usually arguable
2. If oral term conflicts with an implied term of law (a default rule: gap filler) then it is usually not a “conflict”
3. Some easy to determine and some are not (ex: chicken case)
a. Is the contract silent on the matter; anything directly on point?
e. UCC: § 2-202
i. Follow common law rule
ii. Difference:
1. When determining if the document is complete, ask it the term would certainly have been included
a. Hard to be certain about anything, so will rarely be found complete
2. Even if the document is complete,
a. Terms may supplement or explain if:
i. Course of dealing, course of performance, usage of trade; unless
1. Not very carefully negated
2. Not contradictory
f. Exceptions to the Parol Evidence Rule:
i. Evidence to show that the parties did not intend a contract
ii. Evidence to show the parties only intended the contract to be enforceable on the happening of a condition (precedent)
iii. Evidence to fraud/shame
iv. Evidence to show a mistake
v. Collateral evidence (something not naturally and normally included)

II. Filling Gaps:
a. Is there an omission in the contract after Parol Evidence analysis (something that the parties did not foresee or did not put in because it was a CD/UT/CP)?
b. Use:
i. Course of dealing, usage of trade, course of performance
ii. Gap Fillers

III. Interpretation:
a. How arises:
i. Vague: limits unclear (eg: periodic rental payment at reasonable price)
ii. Ambiguity:
1. More than 1 meaning (eg: chicken; ton: long, short)
2. Syntax:
a. Ex: is a fibroid tumor of the uterus a “disease of organs of the body not common to both sexes” (ambiguity: disease not common, or organ not common?)
b. Tools for interpretation:
i. Traditional: Plain Meaning Rule/ Four Corners Rule: will look at document and a

e “we don’t like these
c. Misunderstanding: is there a contract at all?
i. There is no contract if there is such a huge misunderstanding (attach materially different meanings) that there was no mutual assent to create a binding contract
ii. No contract: if parties attach materially different meanings and
1. Neither party knows or has reason to know (both clueless), OR
2. Each party knows or has reason to know (both aware) § 20(1)
3. ei: if equally innocent or guilty: no assent, so no contract.
iii. Contract interpreted to the innocent party: if one party knows or has reason to know, other does not, the meaning of the party who does not know is used § 201 (2)(a),(b); § 20 (2)(a),(b)
iv. If they both agree to one interpretation, it will be interpreted to that meaning (§ 201)

Modification

IV. Modification:
a. Parties generally can modify any agreement orally, unless there is a NOM clause
b. Common Law:
i. To modify
1. Must show consideration; unless § 89
a. Contract not fully performed on either side
b. Fair and equitable in light of
c. Circumstances not anticipated
2. Must show the plaintiff had reliance
3. By waiver (intentional relinquishment of a known right)
a. Waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived
b. Cannot be waived once there is reliance
4. To exclude oral modifications: parties must make a separate no oral modification clause in the contract
5. NOM clauses: enforceable unless:
a. Majority: both waiver and reliance
b. Minority: just waiver