Contract Interpretation Flashcards
Contracts are based upon — intent
In other words, . . .
Objective
What a reasonable person would think
Where does contractual interpretation start?
The language of the contract-the four corners rule
Parol evidence is inadmissible when
The contracts in unambiguous, there is no special meaning attached to the words by custom or usage, and there is not fraud, mistake, ambiguity, illegality, duress, or undue influence
Course of performance defined
Evidence about how the parties have performed this contract in the past
Course of dealing defined
Evidence about how the parties have performed in past contracts
Usage defined
Custom or habitual practice regularly used/observed in trade or industry
Implied Covenant of Good Faith and Fair Dealing
Breached when one party acts in a manner that would deprive other party of benefit of bargain
Parol Evidence will . . .
Not be admitted to add to or contradict a written contract that constitutes an integration
What is parol evidence
An alleged prior or contemporaneous written agreement with the scope of the writing OR evidence of an alleged contemporaneous oral agreement
Steps in determining if parol evidence is excluded
1) is the writing integrated-final expression of parties’ agreement
2) is it fully or partially integrated
3) is parol evidence rule applicable or is there an exception
What is partial integration
Writing sets forth some, but not all, terms of the agreement
When is a writing an integration?
When the parties intend it to be the final expression of at least some part of the agreement
How to determine when parties intend agreement to be final
1) four corners rule
2) formal intent test-does writing, taken as a whole, appear to express finality
3) UCC-assumes only partial integration
What is a merger clause?
Provision of contract stating contract is complete and final agreement and supersedes any other. Makes a contract fully integrated
Exceptions to parol evidence rule
1) ambiguity
2) separate consideration
3) collateral agreement
4) naturally omitted consistent terms
5) defenses (formation and enforcement)
6) condition precedent
