Contract Terms

Question 1

Parol Evidence Rule

Answer 1

Keeps out evidence of PRIOR or CONTEMPORANEOUS agreement (either oral or written) that CONTRADICTS a later WRITING.

Question 2

Exceptions to the Parol Evidence Rule

aka where the evidence of a prior or contemporaneous agreement will get in

Answer 2

(1) To correct a clerical error (ex- typo)
(2) To establish a defense against formation
(3) To interpret a vague or ambiguous term
(4) To supplement/add to a PARTIALLY-INTEGRATED writing

Question 3

Partially-Integrated Writing

v.

Fully-Integrated Writing

Answer 3

A writing is partially-integrated when it is a final statement of the terms included, but not a complete statement of all terms agreed to.

A writing is fully integrated when it is a final and complete statement of all terms.

Question 4

Merger Clauses

ex- “This K is limited to the terms herein”

Answer 4

CL- means the writing is fully-integrated and cannot be supplemented

Article 2- only a merger clause will keep out parol evidence. If you don’t have a merger clause, under Article 2 the evidence is likely to get in.

Question 5

Conduct to explain terms or fill gaps?

Answer 5

Conduct can explain terms or fill gaps. In descending order of importance–

(1) Course of Performance- what the parties did under this contract. Best evidence of intent.
(2) Course of Dealing- what the parties did under prior contracts w/ each other.
(3) Usage of Trade- what others in the trade do in similar contracts

Question 6

Seller’s Warranties of Quality in Sale of Goods (Art. 2)

EXPRESS WARRANTIES

Answer 6

• A seller is liable for breach of an express warranty that was a basis of the bargain
• Examples: statement of fact, promises, descriptions of the goods, use of a SAMPLE OR MODEL
• Opinion is NOT an express warranty
• if the buyer COULD have relied on the express warrant then it is considered a basis of the bargain

Question 7

Seller’s Warranties of Quality in Sale of Goods (Art. 2)

IMPLIED WARRANTIES: IMPLIED WARRANTY OF MERCHANTABILITY

Answer 7

• implied warranty that the goods are fit for their ORDINARY purpose
• seller must be a merchant who deals in goods of the kind

Question 8

Seller’s Warranties of Quality in Sale of Goods (Art. 2)

IMPLIED WARRANTIES: IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE

Answer 8

• implied warranty that the goods are fit for the buyer’s PARTICULAR purpose, even if not ordinary
• Seller must KNOW buyer has a SPECIAL USE for the goods and is RELYING on seller to pick out goods suitable for that use
• ANY seller can make an implied warranty of fitness, merchant or not!

Question 9

Lessor’s Warranties in a LEASE of Goods (Article 2A NY only)

Answer 9

General Rule- Same warranties under 2A as under article 2 (merchantability, particular purpose)

EXCEPTION- “Finance Lease”- banks are off the hood (ex- Citibank leases a computer, which it bought from dell. Is there an implied warranty of merchantability? Yes, but only made by Dell.)

Question 10

Disclaiming Warranties

Answer 10

SALES AND LEASES OF GOODS:

• a seller can disclaim implied, but not express, warranties
• Magic Phrases– a K that says “as is” or “with all faults” disclaims all implied warranties
• If there is no magic phrase, a disclaimer must be conspicuous (draw the attention of a reasonable buyer) and must use the word merchantibility if the seller wants to disclaim that

Question 11

Seller’s Limitations of Buyer’s Remedies

Answer 11

General ROL- seller can limit buyer’s remedies for breach of any warranty (express or implied) if the limitation is not unconscionable

Exception– limiting a buyers remedies for personal injury in the case of consumer goods is presumed (rebuttable) unconscionable.

Question 12

Risk of Loss in Sales of Goods

Answer 12

• if seller bears the risk of loss then he must provide new goods at no extra cost; if buyer bears the risk then they still have to pay
• Agreement of the parties controls
• In the absence of agreement, the breaching party bears the ROL
• No agreement & no breach? See Common Carrier & Non-Carrier Case rules

Question 13

Risk of Loss in Common Carrier Sale of Goods Cases

Answer 13

ROL shifts to buyer when seller completes its delivery obligations:

• Shipment K- seller must get the goods to a common carrier, make delivery arrangements, and notify buyer
• Destination K- seller must get the goods to a specific destination (usually where the buyer is located)
• FOB- risk passes to buyer at the named location

Question 14

Risk of Loss in Non-Carrier Sale of Goods Cases

Answer 14

Merchant Seller- Seller bears the risk until buyer takes possession of the goods

Non-Merchant Seller- Risk passes to buyer once seller makes the goods available to buyer (aka when the buyer tenders the goods)

Question 15

Risk of Loss in a LEASE of Goods (Art. 2A, NY only)

Answer 15

General Rule– risk is on the lessor

Exception- Finance Lease– risk is on the lessee

Question 16

Risk of Loss in a Construction Contract

Answer 16

The risk of loss during construction, absent contrary provisions, lies w/ the builder, who is generally in a better position to acquire insurance during the construction process.