Contract Terms Flashcards
What does the Parol Evidence Rule Exclude?
What are the exceptions to the PER?
Evidence of a prior or contemporaneous agreement (either oral or written) that contradicts a later writing.
(PER assumes that a later writing is more reliable than whatever came before).
Note: A PER problem requires a writing.
- Exceptions to PER:*
1) To correct a clerical error (typo)
2) To establish a defense against formation (duress, misrepresentation, fraud, unconscionability, etc)
3) To interpret a vague or ambiguous term
4) To Supplement/Add to a Partially-Integrated Writing [a final, but incomplete statement of all the terms agreed to]. Can’t contradict but can add terms.
Does the Parol Evidence Rule exclude fraudulent statements made prior to the written agreement?
No! There is an exception to the PER that allows a party to introduce such evidence as a defense to cnotract formation.
Can Parol Evidence be used to add terms to an agreement?
Yes, if the agreement was only a partial integration!
But it cannot be used to contradict already existing terms.
A writing is fully integrated if there is a merger clause! [“This contract is limited to the terms herein”].
What is the effect of a merger clause?
A merger clause says “This contract is limited to the terms contained herein”.
A merger clause makes an agreement a total integration.
Under Article 2, ONLY a merger clause will keep out parol evidence!
How do you determine whether a writing is a total or partial integration?
ARTICLE 2: NEED a merger clause.
Everything else: Determine if the contract is full on its face.
Does the PER exclude things that occur after the writing is made?
No. Anything after (oral or written) can be admitted.
When do we look to the parties’ conduct is determining the meaning of the contract terms?
To explain terms or fill in gaps. Look in this order:
1) Course of Performance (how did the parties interact under this contract? This is the best evidence.)
2) Course of Dealing (What did the parties do under prior contracts with each other?)
3) Usage of Trade (What do others in the trade do in similar contracts?)
What are express warranties?
Express Warranties:
1) A seller is liable for a breach of an express warranty. An express warranty is a statement of fact, promise, description of the goods, and the use of a sample or model! [often tested!]
An opinion is NOT an express warranty.
Ex: This computer is guaranteed for 2 years. This IS an express warranty!
NOTE: The express warranty must be a basis of the bargain – but if buyer could have relied on it, it is basis of the bargain!
For an Article 2 seller to be liable for an express warranty, what must occur?
The seller is liable for an express warranty (not opinion), that is the basis of the bargain.
[anything buyer could have relied on is the basis of the bargain!]
What is the importance of buyer’s use of a sample or model?
It is an express warranty of how the goods will be.
What are the Seller’s Implied Warranties in Article 2?
When are they present?
1) Implied Warranty of Merchantability:
(That the goods are fit for their ordinary purpose).
Seller must be a Merchant [nearly anyone in business world] who deals in goods of the kind. [Meaning a dealer who has specialized knowledge about the particular kind of goods].
Example: It is implied that shoes bought from foot locker are fit for ordinary use. No IWH for a delivery van you buy from Foot Locker.
2) Implied Warranty of Fitness for a Particular Purpose:
(The goods are fit for the buyer’s particular purpose.)
This occurs when seller knows buyer has a special use for the goods and is relying on seller to pick out goods suitable for that use.
Note: ANY seller can make an implied warranty of fitness for a particular purpose, merchant or not!
Does a nonmerchant seller have any implied warranties?
A nonmerchant seller can still imply the implied warranty of fitness for a particular purpose, but not the implied warranty of merchantability.
What are Lessor’s warranties in a lease of goods? (Article 2A)
General Rule: The same as a Seller’s under Article 2.
Exception: “Finance Lease.” Tax scenario: A bank buys equipment for a manufacturer and leases it to lessee. There is NO implied warranty of merchantability from the bank, but instead will by the manufacturer.
NY Legislature loves banks.
Example: Citi buys computers from Gateway and Citi leases them to Bill Gates. Citi retains the implied warranty of merchantability.
What warranties can a seller disclaim under under Article 2?
How?
A seller can disclaim implied, but not express, warranties.
Magic Language:
A seller may disclaim both implied warranties by saying “as is” or “with all faults.”
No magic language:
Can write, in LARGE PRINT, “There are no implied warranties of MERCHANTABILITY or fitness.
Must use the word merchantability to disclaim the warranty of merchantability if no magic language.
Can a seller limit a buyer’s remedies for seller’s breach of a warranty? (Under Article 2)
Exceptions?
General Rule: Seller can limit buyer’s remedies for breach of any warranty (express or implied) if the limitation is not unconscionable.
Exception: Limiting buyer’s remedies for personal injury in the case of consumer goods is presumed unconscionable. [rebuttable, but difficult]
