Contracts - CONTRACT TERMS Flashcards
Contract Terms
now that we have answered the questions
(1) was there an offer?
(2) If there was an offer, was it terminated? (lapse, revocation, rejection, death of offeree)
(3) Was there an acceptance?
(4) Was there consideration?
(5) Is there a defense to formation or enforcement?
…. ok, through all of that and there is still an enforceable contract, we must now ask, what are the TERMS OF THE CONTRACT?
Parol Evidence Rule
Where the parties to a contract express their agreement in a WRITING with the INTENT that it embody the final expression of their bargain (i.e. the writing is an “integration”), any other expressions - written or oral - made prior to the writing, as well as any oral expressions CONTEMPORANEOUS WITH the writing, are INADMISSIBLE TO VARY the terms of the writing
Shorter version: Keeps out evidence of a prior or contemporaneous agreement (either oral OR written) that contradicts a later writing
–Police: give primacy to a later writing
EXCEPTIONS:
(1) to correct a clerical error
(2) To establish a defense against formation
(3) to interpret Vague or Ambiguous Term
(4) Conditions Precedent (added from MCs) - where a party asserts that there was an oral agreement that the written contract would not become EFFECTIVE until a condition occurred, all evidence of the understanding may be offered and received
e.g. before Kim signed a lease, the manager told her the Grand Ballroom was soundproof. Kim seeks RESCISSION because of the misprepresentation. Can Kim get this evidence in?
YES, not seeking to rewrite contract, just wants OUT, so evidence showing flaw in the agreement process gets in
EXCEPTIONS to PAROL EVIDENCE RULE
(1) to correct a clerical error
(2) to establish a defense against formation
(3) to interpret Vague or Ambiguous Terms
(4) to supplement/Add to a PARTIALLY-INTEGRATED WRITING [ie a FINAL statement of the terms included, but not a COMPLETE statement of all terms agreed to]
(5) Conditions precedent
e. g. Kim signs contract to lease “ballroom” and claims it was the Grand Ballroom and has a fax from the Ritz sent before the written lease supporting her claim. If Kim sues for breach of contract, court CAN consider the fax bc “BALLROOM” is Ambiguous
e. g. lease says nothing about sleeping accommodations. Kim claims that before signing the lease, the manager promised to “throw in the bridal suite for free.” KIM CAN get this into evidence bc it doesn’t appear to be complete on its face (doesn’t say anything about sleeping arrangements)
e. g.3 - Kim signs a written contract to buy a white dress from Michael Kors, and now claims that “white” meant “black.” - Kim CANNOT introduce evidence to prove her meaning - cts will give words and phrases their ordinary or “PLAIN MEANING” (plain meaning rule)
Merger Clause
e.g. “This contract is limited to the terms herein” - creates a strong presumption that all negotiations were merged in the written document
NOTE: under article 2, only a merger clause will keep out parol evidence, if don’t have one, evidence is likely to get in
Note on tests for determining whether the writing is a FINAL INTEGRATION
ONLY IN BIG OUTLINE
(1) CORBIN TEST (“C” for Circumstances) - followed by most courts, takes into account the specific CIRCUMSTANCES of the transaction involved (e.g. are the parties related or strangers, was it a large transaction etc.) and ask whether parties like these would naturally or normally include in their writing the extrinsic matter sought to be introduced - if So, EXCLUDE IT, otherwise let it in
(2) WILLISTON TEST - look at face of WRITTEN AGREEMENT and decide whether contracting parties would include the term sought to be proved. If so, exclude
SUBSEQUENT DEVELOPMENTS (stuff that happens AFTER contract is executed)
the Parol Evidence Rule has NOTHING TO DO with what happens AFTER an agreement is reduced to writing (PER LOOKS BACKWARDS), therefore, PER does not prevent evidence of subsequent developments from being introduced
Conduct of the parties can explain terms or fill in gaps
Article 2 provides that a written contract’s terms may be explained or supplemented by the following whether or not the writing appears to be ambiguous:
IN descending order of importance
(1) COURSE OF PERFORMANCE - what the parties did under THIS contract. Course of performance is the best evidence of what the parties intended
(2) COURSE OF DEALING - what they did under PRIOR contracts WITH EACH OTHER. Course of dealing is more removed from this contract - it is about prior dealings
(3) USAGE OF TRADE - what others in the trade do in SIMILAR CONTRACTS. Usage of Trade is the furthest removed from this contract- its about how other people act
Seller’s Warranties of Quality in sale of goods (article 2) - 2 kinds Express and Implied
EXPRESS WARRANTIES
Express Warranties - a Seller is LIABLE for breach of an express warranty
ANY affirmation of fact, or promise made by the seller to the buyer, any description of the goods, any sample or model creates an EXPRESS WARRANTY if any of those things is part of the BASIS OF THE BARGAIN.
For a statement, description, sample, or model to be a part of the basis of the bargain, it need only come at such a time that the BUYER COULD HAVE RELIED on it when she entered into the contract.
OPINION: an opinion is NOT [look for general or objective statements] - e.g. “Chevy cars are better” … “you will like this” - no warranty
Seller’s Warranties of Quality in sale of goods (article 2) - 2 kinds Express and Implied
IMPLIED WARRANTIES
The regular implied warranties are
(1) the Implied Warranty of Merchantibility
(2) The Implied Warranty of Fitness for a Particular Purpose
Implied Warranty of Merchantibility
attaches when the Seller is a MERCHANT who DEALS IN GOODS OF THE KIND and it warrants that the goods are fit for their ORDINARY PURPOSE
ie look for a “dealer” who has specialized knowledge about the particular goods involved in the transaction
e.g. shoes from footlocker
Implied Warranty of Fitness for a Particular Purpose
attaches when Seller knows the buyer has a SPECIAL USE for the goods and is RELYING ON THE SELLER TO PICK OUT GOODS SUITABLE FOR THAT USE - warrants that the goods are fit for the buyer’s PARTICULAR purpose
e. g. Buck Naked tells a shoe store clerk he needs shoes for interview with wall street firm. Clerk shows him a SAMPLE PAIR of white hushpuppies. Buck buys a pair in his size. lawyers laugh him out of the office - BREACH OF IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
- note, here there is also an implied warranty of merchantibility but that wasn’t breached
BAR TIP**: ANY seller can make an implied warranty of fitness, MERCHANT OR NOT!!
LESSOR’s WARRANTIES IN A LEASE OF GOODS (Article 2A ONLY) - NY ONLY
General Rule is that a lessor gives the SAME warranties under article 2A as a Seller under article 2.
EXCEPTION: FINANCE LEASE
e.g. Bill Gates leases a computer from Citibank, which bought the computer from Gateway.
There IS an implied warranty of merchantability, but not from the BANK, only from Gateway (NY LIKES BANKS)
Limitations on Warranty Liability in Sales and Leases of Goods
A Seller CAN disclaim implied but not express warranties (makes sense, not going to allow you to expressly warrant something, and then disclaim it)
disclaimer of implied warranties by words like “AS IS” or “WITH ALL FAULTS” is valid
a contract that says “THERE ARE NO IMPLIED WARRANTIES OF MERCHANTIBILITY OR FITNESS” - properly disclaims these warranties - but the disclaimer must be CONSPICUOUS (here, it is…all caps - meant to catch attention of a reasonable buyer)
NOTE: if NOT using magic words (e.g. “as is”) must actually use word “Merchantibility” if want to disclaim it, but don’t have to specify “fitness”
Limitations on Buyer’s Remedies
General Rule: Seller can limit buyer’s remedies for breach of ANY warranty (express or implied) if the limitation is NOT UNCONSCIONABLE (at time of the contract)
EXCEPTION: limiting buyer’s remedies for PERSONAL INJURY in the case of CONSUMER GOODS is PRESUMED UNCONSCIONABLE (consumer protection clause
Failure of Limited Remedy
If a limited remedy “fails of its essential purpose” the remedy provisions of article 2 apply
e.g automobile dealer sells a car and the contract provides the dealer’s liability for defects in the car is limited to repair or replacements. Generally, this is not unconscionable but if particular customer brings his car back numerous times for the same problem and dealer is unable to effectively fix the car, the remedy fails of its essential purpose, and a court may ignore the limiting clause and allow the normal remedies for breach
