Contracts II
Professor Berry
Topics Covered in Contracts II:
Parol Evidence Rule & Interpretation (1 week)
Conditions (4 weeks)
Third party contracts (4 weeks)
Avoidance doctrines (4 weeks)
PAROL EVIDENCE RULE
Parol Evidence: evidence of oral or written agreements or negotiations that are prior to or contemporaneous with a writing intended to be the complete or partial integration of the parties’ final agreement. (Parol means “oral,” but the PER includes written).
P.E. Rule: A writing intended by the parties to be the final written expression of their agreement (i.e. it is integrated), may not be contradicted by prior or contemporaneous statements, agreements, negotiations (i.e. extrinsic evidence), whether oral or written.
Purpose: To protect the sanctity of a contract, by preventing purjury and lieing. Once parties put their intent in writing, we won’t disturb it, unless there are significant reasons to do so.
Three possibilities for writings:
Unintegrated – The writing is not the final expression of the parties, but merely reflects preliminary negotiations, e.g. a “draft” document.
i. Result? The PER does not apply at all.
Partial Integration – The writing is the final expression of the parties relating to the terms included in the writing, but not to the other terms not included in the writing.
i. Result: The writing can’t be contradicted, but may be supplemented by CATS (consistent, additional terms).
Total Integrations – The writing is the total and complete written statement of the parties.
i. Result: The writing can’t be contradicted by extrinsic evidence; neither can it be supplemented by “CATS”.
Four Basic Assumptions of PER:
We have a written contract
There are problems that arise in connection with that contract
i. Is the writing the contract by itself? OR
ii. Is the writing + something else = the contract.
Issue: When can a term that is outside the writing be aded into the writing to become part of the contract?
The PER is a rule of EXCLUSION: if the PER does NOT apply, then the evidence is admissable.
PER vs. Statute of Frauds
SoF requires certain contracts to be in writing
PER is similar in that it puts a gate around the courthouse. It excludes certain evidence that is outside of the contract. (Puts a gate around the courthouse).
Six Tests of Total or Partial Integration: (For this class, only need to know Williston’s view, and UCC for goods.)
“Williston’s view:
i. Definition: If a merger/integration clause exists (e.g. “This writing contains all the terms of the agreement of the parties”), presume integration is TOTAL, unless merger/integration clause obtained by fraud, mistake, etc.
ii. If there is no merger/integration clause, ask:
1. Would it have been “natural” for the parties to have included the term in the writing? If yes = total integration; if no = partial integration.
2. Ask this question for each proffered consistent, additional term.
iii. Not looking for actual intent of the partie
a. If goods, apply the UCC test.
b. If not goods, apply the Williston test.
2. Total: Cannot contradict; Cannot supplement with CATS.
3. Partial: Cannot contradict; CAN supplement with CATS.
INTERPRETATION:
Interpretation: Determining the meaning of the expressions in a contract themselves.
Interp vs. PER:
PER: trying to add a term to the written contract.
Interp: already have a term in the contract, but trying to determine meaning.
Three Tests: If interpretation of an integrated writing requires the introduction of evidence, there are at least three approaches to determine whether the evidence will be admitted (only need to know Two-Step and UCC for finals).
The Two-Step Approach:
i. Steps are:
1. Step 1: Proffer evidence to the Judge to demonstrate that the writing (Ior a term) is unambiguous;
2. Step 2: If the Judge agrees that there is an ambiguity, introduce evidence into the record to explain the ambiguity.
3. Most popular view.
UCC (2-202):
i. Terms in an integrated writing (dealing with GOODS) may be explained/ supplemented (but not contradicted) by, inter alia, course of dealing, course of performance, and/or trade usage.
Eleven Rules of Interpretation:
