CONTRACTS

Question 1

Name types of evidence that are not within scope of parol evidence rule (i.e. they are admissable).

Answer 1

1. The following may be show by extrinsic evidence:
2. Formation defects
   
   1. (e.g., fraud, duress, mistake, and illegality
3. Evidence of a condition precedent to effectiveness to an agreement
4. Evidence that “true consideration” was paid
   
   1. Nonpayment of consideration may be admitted as a defense

Question 2

What is parol evidence rule?

Answer 2

• Any other agreements made prior to a fully integrated agreement
  
  • as well as any oral agreements made contemporaneous with writing
    
    • inadmissible to vary terms of writing

Question 3

What does it mean if a term is “collateral” to a written agreement?

Answer 3

The term is related to subject matter of agreement but is not part of the primary promise

• Parol evidence isadmissible if:
  
  • alleged parol agreement is collateral to written obligation
  • and does not conflict with it

Question 4

-Under Article 2, a party may offer evidence of what to explain or supplement a written Ks terms?

Answer 4

• course of dealing
• usage of trade
• or course of performance

Question 5

Is parol evidence admissable when there is uncertainty or ambiguity in written agreement’s terms or a dispute as to meaning of those terms?

Answer 5

Yes.

Parol evidence is admissable to aid court in reaching correct interpretation of agreement.

• But if meaning of the agreement is plain
  
  • parol evidence is inadmissible

Question 6

-Article 2’s version of parol evidence rule provides:

Answer 6

A written Ks terms may be explained or supplemented by:

• course of dealing, usage of trade, or course of performance evidence
• WHETHER OR NOT WRITING APPEARS AMBIGUOUS (differs from general rule)
  
  • however the extrinsic cannot contradict a written K
  • but may supplement by adding consistent additional terms
  • UNLESS:
    
    • there is a merger clause
    • or court finds from all circumstances that writing intended as complete and exclusive statement of terms of agreement

Question 7

How are conditions subsequent to formation of a K and conditions precedent to formation of a K treated under the parold evidence rule?

Answer 7

• Evidence of condition subsequent to formation of a K
  
  • (e.g., an oral agreement that an existing duty to perform is excused upon happening of an event)
    
    • is within scope of parol evidence rule
• Evidence of condition precedent to effectiveness of a K
  
  • (e.g., oral agreement that written K would not become effective until a condition occurred)
    
    • falls outside scope of parol evidence rule

Question 8

Restatements of Contracts applies the naturally omitted terms doctrine. What is this?

Answer 8

• it allows a party to introduce evidence of terms that might naturally be omitted from the written agreement
• A term would naturally be omitted if:
  
  • it does not conflict with written integration; and
  • it concerns a subject that similarly situated parties would not ordinarily be expected to include in written instrument

Question 9

Despite parol evidence rule, a party to a fully integrated written K can always offer evidence:

Answer 9

Attacking agreement’s validity at time of formation

Question 10

What is a condition precedent to K effectiveness?

Answer 10

An agreement that a K will not become binding until a certain condition has occurred.

Question 11

What is a condition subsequent to formation of a K?

Answer 11

When there is a K, but a party is not obliged to perform until the happening of a certain event.

The condition limits or modifies a duty under a formed K and is subject to parol evidence rule.

Question 12

If a past obligation would be enforceable except for the fact that a technical defense to enforcement stands in the way (e.g., statute of limitations), the courts will enforce a new promise if:

Answer 12

It is in writing or has been partially performed

Question 13

When is a gratuitous surety promise considered supported by proper consideration?

Answer 13

• If gratuitous surety’s promise to pay is before or at same time as creditor performs or promises to perform
  
  • creditor’s performance/promise = consideration for surety’s promise
    
    • bc creditor incurred detriment in exchange for surety’s promise
• If gratuitous surety does not make promise until after creditor performed or made promise to perform
  
  • no consideration for surety’s promise
  • because of preexisting legal duty rule

Question 14

What is the material benefit rule?

Answer 14

A modern trend. VA DOES NOT FOLLOW THIS

• A promise considered to have valid consideration if:
  
  • (i) its based on a material benefit previously conferred by promisee on promisor, and
  • (ii) promisee did not intend to confer benefit as a gift.
    
    • e.g. promisee performed an act at promisor’s request or
    • performed unrequested act during an emergency

Question 15

What is the preexisting duty rule?

Answer 15

A promise to perform, or the performance of, an existing legal duty is not consideration.

Question 16

What is moral consideration?

Answer 16

Consideration already given or performed before a promise was made.

Question 17

What is ratification.

Answer 17

A promise to perform a voidable obligation.

Question 18

Is consideration with only a possibility of future value adequate consideration?

Answer 18

Yes, even if the value never comes into existence.

Question 19

What is sham consideration?

Answer 19

When parties never intended that the consideration be paid.

$1 in K that is never paid

Question 20

What is token consideration?

Answer 20

Consideration that is entirely devoid of value and is usually not considered to be legally sufficient consideration.