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Contracts II
University of Toledo School of Law
Eisler, Beth A.

CONTRACTS II
Professor Eisler
Spring 2010
 
Restatements we have to know:
201: Misunderstanding
139: Reliance (gets you around statute of frauds)
229: Forfeiture
241: Material Breach
 
 
Gap Filler
2-327: within a reasonable time/price
 
 
 
What Law Applies?
In this case, UCC does not/does apply because an agreement for a class/computer is not/is a good. Goods are all things moveable at the time of transaction. UCC 2-102 and UCC 2-105.
 
Second Semester:
What law Applies
Do we have agreement (going to be spelled out on test problem)
Statute of Frauds??
Terms:
Express
Interpret:
i.         Usage of Trade/Course of Dealings
ii.       PER
iii.     Modification
???
Performance & Breach
Remedy
Response
Damages
 
CH. 5 THE PAROL EVIDENCE AND INTERPRETATION
 
SECTION 1. THE PAROL EVIDENCE RULE
Parol Evidence: The parol evidence rule applies where an agreement is recorded in writing and one of the parties proffers evidence to prove a term that is not contained in the writing or to explain on a term in the writing.
 
Black’s Definition
Parol: “the spoken word” referring covers all alleged terms (written and spoken) not incorporated into the written memorial of agreement, but claimed by one of the parties to have been agreed to either in writing or orally, at some point before its execution.
Parol-Evidence Rule: the principle that a writing intended by the parties to be a final embodiment of their agreement cannot be modified by evidence that adds to, varies, or contradicts the writing.
 
EISLER: It should be called the extrinsic evidence rule! Can I plead and prove agreements that were made BEFORE the writing.
 
Parol Evidence Analysis:
1)       Integration (do we have a final written expression of the agreement?)
a.       R.2d 209: expression of (1/more) terms of agreement; reasonably appears final in view of completeness/specificity
2)       Extrinsic Agreement (a term agreed to at the time of or before the writing)
a.       An integration (final written agreement) ® UCC §2-202
b.       2-202- Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
                                                                                                                                       i.      (a) by course of performance, course of dealing, or usage of trade (Section 1-303);  and
                                                                                                                                      ii.      (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement .
c.        Prior or contemporaneous agreements/terms (oral or written)
 
3)       Do these agreements/terms supplement or contradict the integration?
1.       If they contradict the integration, then not allowed
2.       If they don’t contradict, then continue to next step
 
4)       Is this a fully or partially integrated agreement?
1.       Rule
a.       If completely integrated, then no parol evidence allowed
b.       If partially integrated, then may explain or supplement the agreement with parol evidence
2.       Test for determining integration
a.       Common Law Test = written agreement + extrinsic evidence
                                                                                                                                       i.      Would the parties naturally and normally have included the parol evidence agreements/terms in the integration?
1.       IF YES = (assuming term isn’t there) then you CANNOT include extrinsic evidence—court will construe as intention of parties to be complete and not allow Parol Evidence
2.       IF NO = (assuming term isn’t there) then you CAN include extrinsic evidence—courts will construe intention of parties to not be complete and ALLOW parol evidence.
 
                                                                                                                                      ii.      Merger clause: usually establishes intent for a complete agreement; a clause in a contract merging all the terms into the writing. For example, stating in a memo that “this is the entire agreement between the parties. No representations or promises have been made save for those set out of this memo.”
 
b.       2-202 Parol Evidence UCC  Test
                                                                                                                                       i.      Would the parties have CERTAINLY included the parol evidence agreements/terms in the integration?
1.       IF YES = then supplementing not allowed
2.       IF NO = then supplementing is allowed
                                                                                                                                      ii.      It is unlikely that the court will find certainty absent a merger clause, because it’s such a high standard
 
5)       Exceptions & when Parol Evidence is admissible
a.       Not intended as K (not intended to not be binding)
                                                                                                                                       i.      Ex: if we intended the writing to not be binding, we can plead and prove that.
b.       Only intended to be operative on happening of event.
                                                                                                                                       i.      So you can plead and prove if something exists “ex. If we raise a million dollars, then its binding”
c.        Fraud
d.       Mistake
                                                                                                                                       i.      We both thought this was in the writing, but it was not.
Big Picture:
Common law standard: makes it harder to admit extrinsic/parol evidence.
UCC standard: makes it easy to admit extrinsic/parol evidence. **Under UCC, you almost always can open up to parol evidence because what term is completely certain to have to be included in there???
 
Trade Usage//Course of Dealing
–          The court should not exclude the evidence of trade usage, course of dealing, and course of performance.
–          Testimony of a course of dealing or performance or of trade usage is not parol evidence at all. It therefore, should be admitted without restriction and evaluated by the jury to determine if it is part of the contract.
 
Usage of trade: what other parties in the trade have done in similar circumstances (i.e. price protection)
 
Course of dealing: is what these two parties have done in prior contracts in similar circumstances.
 
Course of performance: sequence of conduct in this contract. What these parties have done before delivery in this contract. (ex. Price protection)
 
 
2-201 Analysis
Step 1: 2-201(1)
2-201(1): if we have an agreement for the SOG for $500 or more, THEN that agreement is not enforceable by way of action or defense. The agreement is not enforceable UNLESS we have a Memo. The memo doesn’t have to be formal; it can be on a napkin, tablecloth, bar bill, etc. So we need a memo sufficient to show that Contract for sale has been made.
1) Memo
2) Indicates
3) Quantity
4) Signed by Defendant
 
2-201 tells us that if we don’t have a writing signed by the Defendant, there are other circumstances that allow the agreement to be enforceable
 
Step 2: 2-201(2)
à elements of 2-201(2) MUST BE BETWEEN MERCHANTS
1)       Merchants are people who deal in kind of goods that are subject matter of the contract
2)       If we end up w/ agreement, and one of the merchants SENDS a confirmation of the agreement, sender sends a writing to confirm agreement, and that writing is sufficient ag

al agreement as modified. Whether this is for the sale of goods of $500 or more. If it is for more than $500, you have to go back to 2-201(1) to satisfy the S/F with respect to the agreement.
§  Example: If we change delivery date, and we orally modify, and the oral agreement ends up being SOG’s for $500 or more, the modification of agreement must be signed in writing. You need the memo. So you start at 2-209(3), and you can satisfy any element of 2-201
 
Step 3: GO BACK TO 2-201(1)
Conduct a 2-201 analysis. If you find one of the 2-201’s to suffice the S/F. Then STOP. However, if you still can’t suffice the S/F after running a 2-201 Analysis, GO BACK TO 2-209.
 
Step 4: 2-209(4)(5)
(4): That attempt at modification acts as a waiver if there has been a material change in position of reliance on the waiver.
 So for example, Seller orders the additional 1000 pens from his supplier and starts to ship to Buyer.
(5): A party can retract that waiver, but must be in a reasonable time, and the other party could not have relied on the modification.
 
Step 5: 2-209(2)
But if no reliance, the party that makes a waiver, can retract the waiver, unless the other party has materially relied on the modification; or you don’t give reasonable notice.
 
2-209(2): Before comma: A signed agreement that contains a NOMC can only be modified when signed in writing by both parties. What the clause needs to be enforceable, we need a writing signed by both parties that contains a NOMC. For the Clause to be enforceable, meaning you can only enforce NOMC, if the clause is contained in a writing signed by both parties. We are wondering if the clause is enforceable.
 
 If you are between merchants don’t read any further, the original clause applies. So Merchant buyer, merchant seller, this clause is enforceable.
 
After comma: merchant and non-merchant. Merchants form contains a NOMC. Is it enough for the Merchant seller to sign at the bottom for the non-merchant buyer sign at the bottom? So you need this little line for a non-merchant to sign. To make the NOMC binding, the non-merchant must separately sign the NOMC clause.
àIf there is a  non-merchant, s/he has to sign twice, the original agreement and the NOMC.
à If between merchants, if they both sign the original agreement that has a NOMC, the NOMC is enforceable. No need to sign the Separate NOMC clause.
 
Can’t contradict express term, you can only supplement and explain with U/T and C/D
 
Note: When interpreting, you cannot contradict, you can only supplement and explain with C/P, C/D, and U/T. However, if there is a merger clause, you can include C/P U/T and C/D to explain or supplement, but not contradict it. However, you cannot include these terms if usage of trade or course of dealings is carefully negated.
 
You may contradict an express term with Course of Performance—this acts as a waiver. Take note, you must have
 
INTERPRETATION
 
Two ways of interpretation: 1) plain meaning rule; 2) Fairly susceptible
à We are using the fairly susceptible Rule.
 
Ex: Chicken case: Seller said that chicken is more specific, boilers, fryers, etc. Buyer should have known this. Thus, the party who should have known, and didn’t, the term is interpreted in favored of the other party.