contract interpretation

Question 1

what are the two traditional view Restatements approaches to ambiguity of terms in contract?

Answer 1

subjective (what do each of the parties THINK the terms mean?) and objective (what would a reasonable person think it means?)

Question 2

describe the subjective traditional Restatement view of ambiguity

Answer 2

what do each of the parties THINK the term means?

Question 3

describe the objective traditional Restatement view of ambiguity

Answer 3

what would a reasonable person think the ambiguous term means?

Question 4

what’s the Restatements Modern View of ambiguity?

Answer 4

modified objective (Corbin’s view)

Question 5

describe the modified objective (Corbin) view of ambiguity

Answer 5

Restatements Modern view - (1) who controls the contract, and (2) what did the controlling party mean by the term?

Question 6

under the modified objective approach to ambiguity, what if both parties attach the same meaning to a term?

Answer 6

parties’ shared meaning controls

Question 7

under the modified objective approach to ambiguity, what if both parties attach different meanings to a material term?

Answer 7

no contract exists - lack of mutual assent

Question 8

under the modified objective approach to ambiguity, what is superior knowledge?

Answer 8

one party knows or has reason to know of the meaning attached to a material term by the other party

Question 9

what happens in the case of superior knowledge under the modified objective approach to ambiguity?

Answer 9

the innocent party’s meaning controls, in order to enforce good faith and fair dealing

Question 10

what is parol evidence, defined?

Answer 10

external oral or written evidence of prior or contemporaneous agreements

Question 11

what does the parol evidence rule do?

Answer 11

operates to EXCLUDE evidence of prior or contemporaneous agreements

Question 12

what 3 kinds of evidence are always allowed in, despite the parol evidence rule?

Answer 12

trade usage, course of performance, course of dealing

Question 13

what are the three types of contract integration for purposes of parol evidence?

Answer 13

fully integrated, partially integrated, completely unintegrated

Question 14

how much parol evidence is allowed for a fully integrated contract?

Answer 14

none - contract is complete

Question 15

what kind of parol evidence is allowed in a partially integrated contract?

Answer 15

PE allowed to explain or supplement terms already in contract - can’t contradict what’s already existing

Question 16

how much parol evidence is allowed for a completely unintegrated conract?

Answer 16

PE allowed liberally, since there is not enough to guide the court in interpreting the contract

Question 17

how is parol evidence applied under CISG?

Answer 17

it’s not applicable - can testify to anything regarding the agreement

Question 18

define “trade usage” in terms of parol evidence

Answer 18

established/recognized customs and standards for the field or industry, at the time the contract was entered into

Question 19

define “course of performance” in terms of parol evidence

Answer 19

how have you been performing under this current contract up until now? how has this issue been dealt with so far?

Question 20

define “course of dealing” in terms of parol evidence

Answer 20

how have the parties dealt with OTHER contracts or OTHER transactions of this type - not under this current contract, but under ones in the past with the same parties

Question 21

what is the role of the merger clause?

Answer 21

excludes all parol evidence - language says that “no changes shall be valid unless reduced to writing and signed by the parties” - merges all prior or contemporaneous negotiations

Question 22

what are the two methods of determining the level of integration?

Answer 22

traditional “four corners” view and modern “permissive approach”

Question 23

describe the traditional “four corners” method of determining integration

Answer 23

focus on written contract terms within the “four corners” of the piece of paper

Question 24

describe the modern, “permissive” view of determining the level of contract integration

Answer 24

focus on party intent/context - reviews relevant external evidence of party intent

Question 25

what are the five exceptions to the parol evidence exclusion rules?

Answer 25

(1) evidence to establish invalidation (fraud, duress), (2) establishment of collateral agreement, (3) subsequent oral/written modification, (4) oral condition precedent to contract, (5) mistake in integration (clerical)