CONTRACT TERMS

Question 1

PAROL EVIDENCE RULE

Answer 1

Keeps out evidence of a prior or contemporaneous agreement (oral or written) that CONTRADICTS a later WRITING

Question 2

4 EXCEPTIONS TO THE PAROL EVIDENCE RULE

Answer 2

EVIDENCE COMES IN IF OFFERED TO:

(1) Correct a clerical error
(2) Establish a defense against formation
- Ask if what is being introduced is being introduced to “rewrite” the K
(3) Interpret a vague or ambiguous term
(4) Supplement/add to a PARTIALLY integrated writing

Question 3

PARTIALLY INTEGRATED WRITING

Answer 3

A final statement of terms INCLUDED, but not a complete statement of ALL terms agreed to

-Partially integrated writings may be supplemented by proving up consistent additional terms

Question 4

MERGER CLAUSES

Answer 4

e. g. “K is limited to the terms herein”
- Indicate completely integrated documents, cannot be supplemented

UNDER ARTICLE 2:
-Only merger clauses keep out parol evidence

Question 5

SUBSEQUENT DEVELOPMENTS & THE PAROL EVIDENCE RULE

Answer 5

Parol evidence has NOTHING to do with what happens AFTER an agreement is reduced to writing
-These are MODIFICATION issues

Question 6

CONDUCT AS GAP FILLERS

Answer 6

(in order of importance)

(1) Course of Performance
- What these parties did under this K
(2) Course of Dealing
- What did these parties do under prior K’s with each other?
(3) Usage of Trade
- What do others in the trade do under similar K’s?

Question 7

EXPRESS WARRANTIES

Answer 7

-Include statements of fact, descriptions of the good, and use of samples/models

• In order to be actionable, MUST be a basis of the bargain
  
  • i.e. if the buyer could have relied on the express warranty

Question 8

IMPLIED WARRANTY OF MERCHANTABILITY

Answer 8

• Goods are fit for their ordinary purpose
• Seller MUST be a merchant who deals in goods of the kind
  
  • e.g. specialized knowledge about the particular goods involved in the transaction

Question 9

IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE

Answer 9

-Goods are fit for the buyer’s particular purpose

(1) Seller MUST KNOW buyer has a special use for the goods, AND
(2) That buyer is relying on the seller to pick out goods suitable for that use

-Seller does NOT have to be a specialized merchant

Question 10

WARRANTIES OF A LESSOR IN A LEASE OF GOODS (ARTICLE 2A)

Answer 10

Lessors of goods can make the same warranties under Article 2 as sellers under Article 2

EXCEPT: finance leases

Question 11

SELLER’S ABILITY TO DISCLAIM WARRANTIES (ARTICLE 2 AND 2A)

Answer 11

• Sellers can disclaim IMPLIED warranties, NOT express warranties
• Need magic words
  e. g. “merchantability” or “as is” or “with all faults”
• Otherwise disclaimer must be conspicuous

Question 12

LIMITATION OF BUYER’S REMEDIES (ARTCLE 2 AND 2A)

Answer 12

RULE: Seller can limit buyer’s remedies for breach of any warranty (implied or express) as long as the limitation is not unconscionable
-i.e. Limiting buyer’s remedies for personal injury is PRESUMED unconscionable

Question 13

RISK OF LOSS HIERARCHY

Answer 13

(1) Agreement of the parties
(2) Breach
- Breaching party bears ROL, even if loss and breach are unrelated
(3) Delivery by common carrier
- ROL shifts to buyer when seller completes delivery obligations
(4) Non-Carrier

Question 14

SHIPMENT CONTRACT

Answer 14

• Seller must get goods to a common carrier, make delivery arrangements, and notify buyer
• The above completes seller’s delivery obligations and ROL shifts to buyer

Question 15

DESTINATION CONTRACT

Answer 15

• Seller must get goods to a specific destination (usually where buyer is located)
• ROL passes to buyer at named location
  
  • FOB
• If FOB city is where the seller is located, Shipment K
• If FOB city is anywhere else, destination K

Question 16

NON-CARRIER CASES

Answer 16

Buyer is to pick up or seller is to deliver the goods - ROL depends on whether seller is a merchant

If merchant-seller –> Seller bears ROL until buyer takes possession
If non-merchant seller –> ROL passes to buyer once seller makes the goods available to buyer
(e.g where and how to get the goods)

Question 17

RISK OF LOSS IN LEASE OF GOODS

Answer 17

ROL is on the lessor

-EXCEPT: finance leases

Question 18

F.O.B. CONTRACT

Answer 18

When a K specifies that delivery is to be FOB a particular destination, the duties, obligations and risk of loss depend on the destination

IF FOB Seller’s place of business, the seller is responsible for placing the goods at his own expense and risk in the hands of a reasonable carrier, and the risk of loss passes to the buyer upon delivery to the carrier

If FOB anywhere else, seller is responsible, at his own risk and expense, for tendering conforming goods to the buyer at the destination named in the K, and the risk of loss does not pass until the goods are tendered to the buyer at the named destination