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Contracts II
WMU-Cooley Law School
Martin-Scott, Mable

K II: Martin- Scott
H08

I. Parol Evidence Rule (PER)

DEF: a writing, intended to be by the parties the FINAL STATEMENT of their intentions, may not be contradicted by prior or contemporaneous statements, agreements, negotiations, etc. whether written or oral

o an EXCLUSIONARY rule: if not in the writing, will not be allowed before the ct (think of the gate around the judge/jury example
o integration: speaks to the parties’ intent that the writing be final
§ total: final and completeà not to be contradicted nor supplemented
§ partial: final but NOT completeà not to be contradicted but may be supplemented
§ unintegrated: not final nor completeà PER NOT APPLY
§ WHY important:
· 1 party may not unilaterally change the terms of the k once a/c’d
· protects parties from lying about terms never intended

A) Approaching PER Problem (EVALUATION)
a. K WRITTENà if no written doc exists, PER DOES NOT APPLY
b. Is it integratedà here you would indicate that from the fact pattern there is a problem being brought up by the parties
c. Do any of the 5 exceptions apply?: if any apply/are present, PER WILL NOT APPLY and EXTRINSIC EVI will be let in
i. Integratedà final statementà meaning now will have to let evidence in
ii. Statements/agreements made subsequent to the kà formed after/modifications
iii. Interpret a writingà figure out what term/doc means?
iv. Condition existsà must do something b4/after in order to create duty of performance
v. Avoidance existsà duress, mistake, etc
**If ANY existà PER NOT APPLY
d. Final writingà partial v. total

B) How do you determine integrationà Partial v. Total: 6 Tests exist
a. Four Corners (CL rule): just take the K @ face value (will only evaluate the piece of paper signed by the parties
b. “Collateral K” concept (CL rule): must evaluate if the agreement trying to bring in is related to the terms of the K; ask three questions
i. is the other agrmnt RELATED?
ii. does it CONTRADICT an express term in the writing?
iii. wud parties ORDINARILY PUT IT IN WRITING?
c. ☼Williston’s View (CL rule): brought up when there is an integration clauseài.e. “this doc is intended to be the final agreement between the parties, etc.” (the clause means that with its existence, it was most likely the intent of the parties that the written instrument be their final indication so courts will look at the intent of parties to bring in what isn’t in the K more closely)
i. If merger/integration clause exists, assume total UNLESS obtained by fraud/duress/mistake/etc.
ii. Ask would it be natural to include term in the contract
1. if yesà total
2. if noà partial
a. ASK THIS FOR EACH ADDITIONAL TERM
b. NOT LOOKING FOR INTENT WITH THIS RULE, RATHER USING THE OBJECTIVE, REASONABLE PERSON STANDARD
d. Corbin’s view (CL rule): look at intent of the parties and admit ALL relevant extrinsic evidence to ct/judge (not used)
e. ☼UCC 2-202: APPLIES TO GOODS ONLYà assumes that a writing is a partial integration (meaning you may not contradict the writing but you may explain and supplement it by consistent, additional terms) UNLESS judge finds writing to be the complete & exclusive statement of the parties termsà meaning total therefore will not introduce the extrinsic evidence (very liberal view)
f. RII: incorporates all of the tests

C) Cases/Probs:
a. #105: dealing with goods therefore will assume partialà allow evi: not contradict but may explain
b. #106: written K but PER not applyà exception exists: subsequent pro
c. Mitchell v. Lath: “ice house” case: P tried to introduce agmt that reason she bought house was b/c D pro to remove icehouse fr across the way; ct: “collateral K” concept: related enough that if had meant for it to be part of K, wud’ve included it
d. Lee v. Seagrams: “distributorship agrmt” case: sold shares to Seagrams after yrs in biz; had agmt w/D that would be set up elsewhere w/a distrib. but relocation not in K; ct: enforced agmt sep and apart fr K by evaluating: 1) nature of K (corp deal) 2) prev relationship (friends for many yrs therefore relied on word) 3) no integration clauses existed (4 a big corp, wudn’t have forgotten that) 4) agmnt not contradict anything in K
e. Luria: “scrap metal” case: P claims D getting scrap metal then wud sell it to D if obtained fr specific supplier; used to diff defs of “inconsistent” but the ct adopted the following: “the absence of reasonable harmony in terms of the language AND respective obligations of the parties”à contradictory not only to what the parties said but also to the duties (obligations) of the parties as expressed in the k
f. Pym: “only if approved” case: precedent to condition ks: agmt signed that would only go ahead with experiment if analyst approved; no approval means no K therefore PER does not applyà no intent to K

II. Interpretation

PER v. Interpretation: with int, trying to figure out what a term in the K means
Determine whether or not require to bring in evidence

If so: use 3 tests

Four corners: face of K (minority opinion)
2 step approach: (majority opinion)

Step 1: proffer evidence to Judge to demonstrate that the writing (or term) is ambiguous
Step 2: if judge agrees IS ambiguous, he will introduce evidence to the record to explain ambiguity (let in the circumstances of the K where the jury will then decide the intent of the parties)

UCC: GOODSà terms may be supplemented not contradicted via course of dealing/performance/trade usage

If not: use 10 Rules of Interpretation (CONSTRUCTION)

Review surrounding circumstances
Determine principle purpose of K
Look at the whole K
The reasonable, lawful meaning prevails over the literal, illegal meaning
Favor the public interest
Will find a/g person who construed the K
Evaluate conduct after K formed
Will take final over earlier agmnts
Unless otherwise indicated

Ordinary/pop words given their meaning
Terms of art (industry) words will be given their special meaning
Legal words given their precise meaning
Trade/local/profession words given particular meaning

Unless otherwise indicated, inconsistencies will be resolved:

parties are IN THE K already (unless you do this)
o Time of the Essence clauses: in construction Ks, time of the essence will not exist b/c penalty clauses are “time of the essence” clauses saying that if not adhere to it, will be accompanied by a penalty; but outside of construction Ks, will be construed as a promises not a condition that both parties will be able to collect and not to work as a forfeiture

Probs/Cases:
o #136: a) particular situation: pro or condà cond b) not sueà no K since ins co did not suffer losses (CONDITIONS ARE ENFORCEABLE W/Ins cos); remember: if writing K, will always want to be viewed as a pro so that law may ENFORCE it
o #137: can sue but amt is frivolous therefore would find a proà not sue
o #138: intro promissory conditionà had a K but can now get to sue 4 damages b/c he did not act on pro
o #139: a) not illusory; cond of satis exists, P not have to pay b/c done in good faith (personal) b) reas person standard (object) b/c cond of satis if of commercial natureà would be wrong if fd to be acceptable by reas person c) prof standard; must be in food faith & for a prof reason; architect did not provide a reason by simply labeling it ‘ugly’
o #140: wil have to pay b/c question of time of getting pd not IF; will will not discharge a debt b/c of ‘aunt’s death’ b/c not duty of aunt but rather of party (Algernon) to pay back debt; fd pro not cond
o #141: a condition therefore no responsibility to obtain the financing (if so, then would be a pro)à also means she wouldn’t have to find financing either
o Howard v. FCIC(express lang/rule intro): “stalks cut from bad crops” case; P was sued on a “condition” saying will not pay D b/c cut down the stalks b4 inspection; ct: reviewed paragraphs and one stated a condition where the other one did not; did not find conditions
o Jones v. Eastside (express/look at essence of k/cond precedent): “city approval of plans” case: P claimed that D’s pymt was subject to his getting final approval on plans for project; a lot of modifications existed but in essence: ct fd that D was asking P to assume responsibility for forces that were out of his control; do not think anyone would go into biz if expected to forfeit for things out of their immediate control
o Bright v. Ganas (public policy move): “hit on dying employer’s wife” case: fd a condition b/c if employer had lived, would’ve fired him since P did not live up to condition of “loyalty” & “faithfulness” (public policy)
o Gray v. Gardner (cond subsequent): “whale ship arriving” case: more of an interpretation case; however, showed that the D must prove