Contracts II - Parol Evidence

Question 1

Does the parol evidence rule apply to subsequent modifications of a contract?

Answer 1

No, the parol evidence rule applies only to “prior or contemporaneous” agreements and does not restrict subsequent modifications.

Question 2

Provide an example of how evidence excluded by the parol evidence rule before the execution of a contract may become admissible after the execution of the contract.

Answer 2

Evidence, such as an express warranty, excluded by the parol evidence rule before contract execution, can become admissible if the same warranty is made after the execution of the contract, as seen in cases like Downie v. Abex Corp. This is due to the fact that parol evidence only discharges extrinsic evidence before the contract was formed, but not afterwards.

Section 2–313 of the Uniform Commercial Code governs express warranties. It provides:

“(1) Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.”

Question 3

What may be the legal considerations for subsequent modifications of a contract, even though the parol evidence rule does not apply?

Answer 3

Legal considerations may include whether the modified contract complies with the statute of frauds (UCC Section 2-201) and any no-oral-modification (NOM) clause the parties may have included in their agreement.

Question 4

What does UCC Section 2-209(1) allow regarding modifications? (there is a requirement)

Answer 4

UCC Section 2-209(1) allows good faith modifications to be effective without consideration.

Question 5

Even with an integration clause, parol evidence may still be admissible in certain circumstances?

Answer 5

An integration clause does not control the question of whether there is an integrated agreement when there are oral conditions. Parol evidence of oral conditions may be admissible, especially in cases challenging the written agreement on grounds of fraud.

Question 6

What is Trade Usage and Couse of Dealing?

Answer 6

Trade usage and course of dealing are concepts recognized in contract law, particularly under the Uniform Commercial Code (UCC) in the United States. They play a crucial role in interpreting and supplementing the terms of a contract.

Trade Usage:

Definition: Trade usage refers to the regular practices or methods of dealing in a particular industry or trade that parties in that industry are generally aware of or have reason to be aware of.

Application: It involves the customs, practices, and norms that prevail in a specific business or trade. These customs can include accepted standards for quality, quantity, price adjustments, and other transactional terms within a given industry.

Course of Dealing:

Definition: Course of dealing refers to the historical conduct or pattern of behavior that exists between the parties involved in a series of transactions.

Application: It takes into account the parties’ prior interactions and transactions, establishing a consistent pattern of behavior or performance. Courts consider the course of dealing to understand the parties’ intentions and expectations, especially when interpreting ambiguous terms or filling gaps in a contract.

Question 7

Express Terms, Trade Usage, Course of Dealing, and Course of Performance in Contract Law, what is their definition and role?

Answer 7

1. Express Terms:

• Definition: Express terms in a contract are the specific provisions and conditions that the parties explicitly state and agree upon in a written or verbal agreement.
• Role: Express terms serve as the primary basis for determining the parties’ intentions and obligations within a contract.

2. Usage of Trade:
   * Definition: Usage of trade refers to the customary practices and methods regularly observed in a particular industry or trade when conducting business.
   * Role: It provides a contextual background to interpret terms in a contract, especially when industry-specific practices are relevant.
3. Course of Dealing:
   * Definition: Course of dealing involves the parties’ prior conduct and interactions in previous transactions, establishing a pattern of behavior between them.
   * Role: Course of dealing helps interpret ambiguous terms by considering how the parties have historically understood and implemented similar provisions.
4. Course of Performance:
   * Definition: Course of performance reflects the actual conduct of the parties in executing the terms of their current contract.
   * Role: It provides insights into the parties’ present interpretation and application of contract terms as demonstrated through their actions.

Question 8

Express Terms, Usage of Trade, Course of Dealing, and Course of Performance in Contract Law, which take precedence over which?

Answer 8

The Uniform Commercial Code (UCC) addresses inconsistencies between and among express terms, usage of trade, course of dealing, and course of performance. The hierarchy, as established by the UCC, prioritizes course of dealing over trade usage and course of performance over both. Express terms hold the highest authority, prevailing in case of conflicts.

• Course of dealing prevails over trade usage.
• Course of performance prevails over both trade usage and course of dealing.
• Express terms take precedence over all other sources.
• Courts should strive to reconcile inconsistencies, but express terms ultimately govern.

Question 9

What is the UCC’s instructions to courts having to deal with inconsistencies?

Answer 9

First, make any effort to reconcile any inconsistencies.
if that becomes impossible, the express terms will prevail.

Question 10

Explain the meaning of UCC 2-208(2) and 2-208(3)

Answer 10

UCC 2-208(2) is the source for the hierarchy of interpretation. Express terms prevail over course of dealings, course of performance, and trade usage. Course of performance prevails over both trade usage and course of dealing. Course of dealing prevails over trade usage.

UCC 2-208(3) can justify a modification of a contract through course of performance. Course of performance as a modification is not an interpretation device. Conduct of parties may evidence their intention to modify the contract. Such a modification would still require meeting UCC 2-209.

Question 11

Under the UCC, are trade usage, course of dealing, and course of performance automatically included in a contract?

Answer 11

General condition: Unless carefully negated.

Trade usage and course of dealing are. Under the UCC, the express terms of the contract will be “read on the assumption that the course of prior dealings between the parties and the usages of trade were taken for granted when the document was phrased.”

For course of performance: Yes ,if there has been performance. For course of performance, parties are the best judges of the meaning of their written manifestation of agreement. Their course of performance should be preferred over trade usage and course of dealing as an aid to interpretation.

Question 12

In what kind of cases can course of performance not be cited?

Answer 12

When the performance has not started.

Question 13

The UCC allows adducing trade usage, course of dealing, and course of performance under one condition. Which?

Answer 13

Unless carefully negated.

“Unless carefully negated” means that the automatic inclusion of certain elements in a contract, such as trade usage, course of dealing, or course of performance, will be assumed unless the parties explicitly and intentionally reject or deny their inclusion. In other words, if the parties want to exclude these elements from influencing the contract, they need to clearly state that intention in the contract language.

Question 14

UCC 209(1-3)

Answer 14

(1) No consideration needed for a modification of contract
(2) Parties can agree to private statute of frauds
(3) If the contract modified falls under Statute of Frauds, it must be in writing

Question 15

What is the difference between the “Public Statute of Frauds” and the “Private Statute of Frauds” in the UCC? Where can we find these in the UCC?

Answer 15

• Public Statute of Frauds (Section 2-201): This refers to the general statute of frauds applicable to contracts for the sale of goods priced at $500 or more. It is considered “public” because it applies regardless of the parties’ intentions and is a statutory requirement.
• Private Statute of Frauds (Section 2-209(2)): Referred to as a “private” statute of frauds, this section comes into play when the parties themselves agree that any modification or rescission of their contract must be evidenced by writing. It allows parties to set their own requirements for modifications through a “no-oral-modification” (NOM) clause.

Question 15

The UCC only requires two terms to be in writing, which? Where can we find this in the UCC?

Answer 15

UCC 2-201

1) The name of the parties
2) The quantity and type of goods

Question 16

According to the UCC, does the price need to be in writing?

Answer 16

No, only the quantity and the type of goods.

Question 17

In what case would a modification have to be in writing under the UCC?

Answer 17

When the requirements under UCC 2-201 require a contract to be in writing.

Question 18

Would a requirements contract fall under the quantity requirement under UCC 2-201?

Answer 18

Zemco Manufacturing, Inc. v. Navistar International Transportation Corp. (1999)

UCC commentary states that the quantity requirement does not apply to requirements contracts.

Question 19

Under the UCC, who is a merchant?

Answer 19

“Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

Question 20

To fulfil requirements under UCC 2-201 as writing, does writing have to be with a written signature?

Answer 20

Neither the common law nor the UCC requires that the writing be acknowledged with a handwritten signature.

Question 21

What is a condition?

Answer 21

An event which must occur before a contract comes into existence.

Question 22

What does the Restatements (Second) say about orally agreed conditions?

Answer 22

The Restatement (Second) of Contracts, specifically in § 217, states that if the parties to a written agreement orally agree that the performance of the agreement is subject to a stated condition, the written agreement is not integrated concerning the oral condition. This means that the oral condition is not considered part of the integrated agreement.

Comment b to this section further clarifies that if the parties agreed orally on a condition, either the writing is not an integrated agreement, or the agreement is only partially integrated until the condition occurs.

Question 23

How does the Restatement (Second) of Contracts view the effect of an integration clause on a condition in a written agreement?

Answer 23

The Restatement (Second) of Contracts, specifically in § 217, states that even if there is an integration clause in a written agreement, explicitly rejecting oral terms, it does not control whether the agreement is integrated concerning an oral condition. If the parties orally agree on a condition, the written agreement is not integrated regarding that oral condition.

Question 24

What are some conditions or situations that can render a contract void or voidable under US law? (6)

Answer 24

Underage (Minority)
Conditions affecting contract validity
Mistake (mutual or unilateral)
Duress
Failure of a condition preceding a contract
Fraud

Question 25

In US case law, when can the parol evidence rule not be precluded? (7)

Answer 25

The parol evidence rule may not be precluded when there are allegations of fraud, mistake, duress, illegality, lack of capacity, conditions precedent, or when the contract is partially integrated.

Question 26

What is the legal remedy of “reformation” in contract law?

Answer 26

Reformation is a legal remedy sought when there is a mistake or error in a written contract. It involves a court-ordered correction of the contract to accurately reflect the true intentions of the parties.

Question 27

In what circumstances is parol evidence admissible in cases seeking contract reformation?

Answer 27

Parol evidence is admissible in cases seeking contract reformation, especially in equity, when the evidence is clear, strong, and convincing, demonstrating a mutual mistake or error in the written instrument. The goal is to use parol evidence to align the contract with the actual intentions of the parties.

Unlike the general application of the parol evidence rule, which restricts the introduction of extrinsic evidence, reformation is an exception. In the context of reformation, the court may allow parol evidence to be presented, even if it contradicts or varies the terms of the written contract. This exception recognizes that the parol evidence rule should not bar evidence that demonstrates a mutual mistake or clerical error in drafting the contract.

Question 28

Parol evidence is a useful tool for a judge to say no to evidence, but you cannot say that. Explain this.

Answer 28

The judge can use the parol evidence rule as a tool to restrict certain claims or arguments presented by parties involved in a legal dispute. The parol evidence rule generally limits the admission of extrinsic evidence, such as oral statements or prior negotiations, to interpret or contradict the terms of a written contract. So, when a party attempts to introduce evidence that goes against the terms of the written contract, the judge can invoke the parol evidence rule to disallow or limit the use of such evidence.

Essentially, the judge can say, “No, you cannot bring in that particular piece of evidence because it falls under the scope of the parol evidence rule, which restricts the introduction of extrinsic evidence that may alter the terms of a written contract.” This allows the judge to maintain consistency with the principle that written contracts are generally the best evidence of the parties’ intentions and agreements.

Question 29

59 [7] CISG, Article 8:
(1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.
(2) If the preceding paragraph is not applicable, statements made by and conduct of a party are to be interpreted according to the understanding a reasonable person of the same kind as the other party would have had in the same circumstances.
(3) In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.

Where do we find the objective theory rule and subjective theory rule in this article?

Answer 29

Article 8(1) - Subjective Theory Rule:

Interpretation According to Intent: Article 8(1) of the CISG states that, for the purposes of the convention, statements and conduct of a party are to be interpreted according to the intent of that party, provided the other party knew or could not have been unaware of that intent.
Subjective Element: This provision introduces a subjective element by focusing on the actual intent of the party making the statement or engaging in the conduct.
Knowledge of Other Party: The clause takes into account whether the other party was aware or could not have been unaware of the intent. If the intent is clear to the other party, that intent governs the interpretation.

Article 8(2) - Objective Theory Rule:

Interpretation According to a Reasonable Person: Article 8(2) of the CISG provides that, if Article 8(1) is not applicable, statements and conduct are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.
Objective Standard: This clause adopts an objective standard for interpretation, emphasizing the viewpoint of a hypothetical reasonable person rather than the actual intent of the party.
Avoidance of Subjectivity: By shifting the focus to how a reasonable person would perceive the statements or conduct, Article 8(2) aims to avoid overly subjective interpretations that might arise from the specific characteristics or peculiarities of individual parties.
In summary, while Article 8(1) leans toward a subjective theory by prioritizing the actual intent of the party and considering the knowledge of the other party, Article 8(2) adopts an objective theory by emphasizing the perspective of a reasonable person in the absence of clear intent.

Question 30

Consider a scenario where Columbia and Royster engage in a contractual process involving the exchange of purchase orders and acceptance forms for the sale of 31 tons of Phosphate per year. The basic terms are agreed upon, but fine print details in the contract span 13 pages. The forms exchanged between the parties do not match, and there is limited scrutiny of the details. However, delivery is made by Royster, and payment is made by Columbia. Analyze this scenario in the context of contract formation, applying both the last shot rule under classic common law and the principles of UCC Article 2-207(3). Highlight the key differences between these two approaches and discuss the implications for determining the existence of a contract.

Answer 30

The example provided illustrates the difference between contract formation under common law and the Uniform Commercial Code (UCC), specifically focusing on the concept of the “last shot rule” and how UCC’s Section 2-207(3) addresses this issue.

Common Law:

Counteroffers and Last Shot Rule: In the common law scenario, when parties exchange forms with differing terms, each form is considered a counteroffer rather than an acceptance. The last shot rule dictates that the final form sent, usually containing the seller’s terms upon delivery, becomes the governing terms of the contract. The contract is formed at the moment of performance (delivery or payment).

Formation at Performance: Under common law, a contract is not deemed formed until one party starts performing, either through delivery or payment. Until then, the forms exchanged are considered offers and counteroffers.

Risk in Changing Minds: If a party changes its mind or attempts to modify the terms before performance begins, common law principles may lead to uncertainty about whether a valid contract exists.

UCC (Section 2-207(3)):

Elimination of the Last Shot Rule: UCC Section 2-207(3) provides a different approach. Even if the forms exchanged contain varying terms, the UCC ensures that a contract is formed as soon as the parties believe they have reached an agreement, typically upon the exchange of the second form.

Contract Formation Timing: Unlike common law, the UCC allows for the formation of a contract before performance begins. The focus is on the moment the parties believe they have reached an agreement.

Solution through Gap Fillers: If there are discrepancies between the forms, the UCC incorporates default terms as gap fillers, ensuring that a contract is established with terms that can be determined even if the forms do not perfectly match.

In summary, the UCC’s Section 2-207(3) simplifies the contract formation process by eliminating the last shot rule, allowing parties to form a contract as soon as they both believe they have reached an agreement, and providing a mechanism to address discrepancies through default terms (gap fillers) in case of conflicting forms.

Question 31

In Mellon Bank v. Aetna Business Credit Corp. (1980), we discussed two different tests regarding bankruptcy. Which?

Answer 31

Balance Sheet Test:

Criteria: This test focuses on the company’s balance sheet, comparing its assets to its liabilities.
Purpose: If a company’s liabilities exceed its assets, it may be considered insolvent and eligible for bankruptcy.
Insolvency Threshold: If the value of a company’s assets is not sufficient to cover its liabilities, it may indicate financial distress.

Cash Flow Test:

Criteria: This test examines the company’s cash flow and ability to meet its financial obligations as they become due.
Purpose: It assesses whether the company has sufficient cash flow to service its debts and other financial commitments.
Cash Flow Adequacy: If a company is unable to generate enough cash to cover its operating expenses, debt payments, and other obligations, it may face financial distress.

Question 32

What is required to invoke the parol evidence rule in contract law?
Why is the plain meaning rule criticized?

Answer 32

To invoke the parol evidence rule, a party must demonstrate that the contract is ambiguous, showing either patent or latent ambiguity.

Patent ambiguity is evident on the face of the contract, while latent ambiguity requires external evidence to reveal. The rule limits the use of extrinsic evidence in interpreting or contradicting the terms of a written agreement.

The plain meaning rule, advocating a strict adherence to the text without considering extrinsic evidence, is criticized for its potential to overlook hidden ambiguities, especially in cases of latent ambiguity.

Question 33

What is latent ambiguity?

Answer 33

Latent ambiguity refers to a hidden or not immediately apparent ambiguity in the language of a contract. Unlike patent ambiguity, which is evident on the face of the contract, latent ambiguity requires external evidence to uncover the uncertainty or confusion in the contract’s terms. This ambiguity becomes apparent only when considering extrinsic evidence such as the parties’ intentions, prior negotiations, or industry practices. The existence of a latent ambiguity allows parties to introduce such extrinsic evidence to aid in the interpretation of the contract and resolve uncertainties not apparent from the contract’s language alone.

Question 34

Why does the professor argue that the plain meaning rule and the four corners test are considered nonsense?

Answer 34

The professor contends that the plain meaning rule and the four corners test are nonsensical because they imply an unrealistic approach to contract interpretation. The plain meaning rule suggests that judges can determine the “plain” meaning of contract terms without considering the diverse perspectives and backgrounds of the parties involved. The four corners test, which limits interpretation to the four corners of the contract, is criticized because it fails to acknowledge that meaning is context-dependent. Every person brings a unique background, and what may seem plain to one may not be so for another. The professor emphasizes that the only individuals who can truly know the “plain meaning” are those who crafted the contract, and interpretation should consider the circumstances, context, and legal meanings associated with the text.

Question 35

What is the difference between interpretation and construction?
Which comes first?

Answer 35

If the question is one of the legal effect of the parties’ expression rather than the meaning of that expression, the process has often been called construction rather than interpretation. See 3 CORBIN ON CONTRACTS § 534. Interpretation must precede construction. Though this distinction is sound, the untidy fashion in which courts may use the term “construction” to mean “interpretation” affects the utility of the distinction.

Question 36

What is a summary judgement?

Answer 36

Summary judgment is a legal procedure that allows for the prompt resolution of a case without a full trial. It is a judgment entered by a court for one party and against another party without a full trial. This judgment is typically granted when there is no genuine dispute about the material facts of the case, and the moving party is entitled to judgment as a matter of law.

Question 37

Why do many cases discussed involved summary judgement and parol evidence?

Answer 37

Summary judgment is a legal procedure that allows a court to decide a case without a full trial. It is typically granted when there is no genuine dispute of material facts, and the moving party is entitled to judgment as a matter of law. The essential requirement for summary judgment is the absence of any genuine issue of material fact – if all relevant facts are undisputed or clear, the court may grant summary judgment.

The parol evidence rule, which generally excludes extrinsic evidence that contradicts or adds to the terms of a written contract, often becomes relevant in appeals for several reasons. Appeals involving the parol evidence rule commonly arise when there are disputes about the interpretation or construction of contractual terms.

Question 38

When should evidence of collateral agreements be excluded, and what standards do the RESTATEMENT OF CONTRACTS and the UCC apply?

Answer 38

Exclusion of Evidence:
Evidence of collateral agreements should be excluded when the fact-finder is likely to be misled, and the rule is based on the credibility of the evidence.

RESTATEMENT OF CONTRACTS (Section 240(1)(b)):
Separate Consideration Test: Evidence of a collateral agreement may be permitted if it “is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract.” This standard allows the introduction of evidence for a separate agreement if it makes sense considering the circumstances of the parties, even if not part of the main written contract.

UCC Standard:
Certain Inclusion Test: The UCC states that “If the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact.” This implies that if additional terms align with what would naturally be included in the written document, evidence of their alleged making should be excluded.

Question 39

In Masterson v. Sine, the court considered the completeness of the deed as a factor for admitting extrinsic evidence. What did the court note about the completeness of certain contracts, particularly deeds?

Answer 39

In Masterson v. Sine, the court acknowledged that deeds, more often than not, are considered incomplete contracts. This recognition opens the door to the admission of extrinsic evidence to clarify terms or provisions that might not be fully captured within the formalized structure of such contracts.

Question 40

In partial integration, when is exstrinsic evidence not allowed?

Answer 40

In cases of partial integration, the black letter rule is that you cannot directly contradict the written documentation.

Question 41

What is the “no brainer” move for lawyers to counter parol evidence (i.e. allow for the introduction of exstrinsic evidence)?

Answer 41

Matter of interpretation. Do not contract the meaning. Say that it means something else as a matter of interpretation.

Question 42

What is the usual statement of the rule regarding parol or extrinsic evidence in relation to a written agreement? What does it aim to protect? (McCormick on Evidence)

Answer 42

The usual statement of the rule is that parol or extrinsic evidence will not be received to vary or add to the terms of a written agreement. This rule aims to preserve the integrity and certainty of written documents, guarding against disputes stemming from fraudulent claims or faulty recollections of the parties’ intent as expressed in the final writing (MCCORMICK ON EVIDENCE, § 210, p. 427, 1954).

Question 43

How does the rule regarding parol or extrinsic evidence impact the substantive law?

Answer 43

The rule declares certain kinds of facts legally ineffective in the substantive law, essentially forbidding the proof of these facts (it discharges evidence according to the wording of the Restatements).

This prohibition serves to eliminate undesirable means of evidencing some fact to be proved, ensuring the legal effectiveness and reliability of written documents (9 WIGMORE ON EVIDENCE, 3d Ed., 1940, § 2400, p. 3).

Question 44

Is the parol evidence rule a procedural rule?

Answer 44

No, the parol evidence rule is not a procedural rule. It is a substantive rule of law that governs the admissibility of evidence in contract disputes. The rule determines which evidence, particularly oral or extrinsic evidence, can be considered in interpreting or contradicting the terms of a written contract. It focuses on the legal effect of the evidence and its impact on the substantive rights and obligations of the parties involved in the contract.

Question 45

Which five maxims of interpretation did we look at? What do they mean? Which one had a reference to restatements?

Answer 45

Contextual Interpretation - Surrounding Circumstances:

This maxim emphasizes considering all circumstances surrounding the contract’s formation, both prior and contemporaneous, to precisely identify the intended meanings of the parties. It rejects the notion that the contract document speaks for itself, encouraging a holistic understanding.

Purpose of the Parties:

This guide advises uncovering the parties’ apparent objectives in entering the contract, examining both the overall contract and specific clauses. Understanding the parties’ intentions helps in interpreting and giving effect to the contractual terms.

The Transaction Must be Viewed as a Whole:

Courts advocate for interpreting the entire agreement as a cohesive unit, with each part contributing to the meaning of the whole. This approach ensures that every clause is understood in the context of the overall agreement, preventing isolated interpretations.

Reasonable, Lawful, or Effective Interpretation Preferred:

This maxim encourages interpretations that are reasonable under the circumstances, avoiding literal readings that could lead to absurd or impractical results. It prioritizes legal, just, and fair interpretations over those that would result in undesirable outcomes.

Public Interest Favored:

When faced with reasonable choices in interpreting language, this guide suggests adopting the construction that aligns with public interest. Particularly relevant in contracts involving government entities, it aims to favor interpretations that serve the broader welfare of the public.

Question 46

Which maxim has a reference to Restatements? What is the reference?

Answer 46

The Transaction Must be Viewed as a Whole. Innumerable cases state that all of the different parts of the agreement must be viewed together, as a whole, and each part interpreted in the light of all of the other parts. As RESTATEMENT (SECOND) OF CONTRACTS § 80, comment d, suggests, “A word changes meaning when it becomes part of a sentence, the sentence when it becomes part of a paragraph.” Courts prefer an interpretation which gives meaning to all parts of the agreement as contrasted with an interpretation that fails to give meaning to one or more parts.

Question 47

According to restatements, how are interpretation and parol evidence rule connected?

Answer 47

According to the RESTATEMENT (SECOND) OF CONTRACTS, interpretation and the parol evidence rule are distinct processes. Interpretation, as defined in § 200, involves ascertaining the meaning of a promise, agreement, or its terms. Importantly, interpretation is unrelated to the parol evidence rule. Interpretation evidence is not presented to alter or add to the terms of the written contract; instead, its purpose is to determine the meaning of the writing or other expressions of intent. In essence, the parol evidence rule comes into play only after the interpretation process, once the meaning of the writing has been established.

Question 48

What does the restatements say about finding the meaning of parties in contracts? How does it support Corbin’s stance?

Answer 48

Professor Corbin suggested that “[n]o contract should ever be interpreted and enforced with a meaning that neither party gave it.’ The RESTATEMENT (SECOND) OF CONTRACTS suggests a Corbin approach. “The primary search is for a common meaning of the parties, not a meaning imposed on”. RESTATEMENT (FIRST) OF CONTRACTS § 227, comment a.

Question 49

In what cases will the parol evidence rule not be excluded?

Answer 49

Fraud, duress, or mutual mistake.

Question 50

Delete this card

Answer 50

In the Restatements context, a final and complete agreement means complete integration.

Whether a binding agreement is completely integrated or partially integrated, it supercedes inconsistent terms of prior agreements. To apply this rule, the court must make preliminary determinations that there is an integrated agreement and that it is inconsistent with the term in question.

Question 51

What “integration tests” exist for courts to make “preliminary determinations” according to the Restatements to determine full or partial integration?

Answer 51

“Integration” Tests. Consider the following tests and determine which of these tests is mentioned in the principal case and the remaining cases in this section.

(a) The Appearance Test - The judge simply examines the writing and, from its appearance alone, determines that it is “complete.” (“Four Corners Test”)

(b) The Separate Consideration Test- If the extrinsic agreement is one that has been made for a “separate consideration,” evidence of that agreement is admissible. - Similar consideration under Restatements.

(c) The Natural Omission Test - If the extrinsic agreement is one that might naturally and normally be made as a separate agreement by parties situated as were the parties to this contract and, therefore, not be included in the writing, the evidence is admissible. The converse of this test might be called the “natural inclusion” test. (We saw this in the conveyance document).

(d) The Certain Inclusion Test - Unless the extrinsic agreement was such that it would certainly have been included in the writing, the evidence is admissible.

(e) The Writing Omission Test - If the extrinsic matter is mentioned, covered, or dealt with in the writing, presumably the writing was meant to represent all of the transaction on that element; if not, the evidence is admissible. In general, see MURRAY ON CONTRACTS § 85C.

Question 52

How does the categorization of the parol evidence rule as a substantive rule affect its application on appeal?

Answer 52

The parol evidence rule, considered a substantive rule of law, maintains its impact on appeal, meaning it remains operative even if a party did not object to evidence violating the rule during the trial. This classification underscores that the rule’s influence extends throughout the legal process, shaping the rights and obligations of the parties, and is not limited to its application during the trial phase.

Question 53

Under the Uniform Commercial Code (UCC), what does the term “final expression” signify?
How does the UCC use the terms “complete and exclusive”?
How are these concepts analogously expressed in the Restatements of Contracts?

Answer 53

In the UCC, the term “final expression” indicates that a writing may conclusively cover certain aspects of an agreement but does not necessarily prohibit the inclusion of additional consistent terms or supplementary agreements. It suggests that the writing might be conclusive on specific matters without being an exhaustive and exclusive statement.

The UCC employs the term “complete and exclusive” to describe a writing that serves as the final, comprehensive expression of the parties’ agreement. If a writing falls under this category, it generally prevents the introduction of contradictory oral or written evidence, emphasizing its role as a conclusive and all-encompassing statement.

In the Restatements of Contracts, the term “completely integrated” is used to describe a writing that represents the full and exclusive expression of the parties’ agreement. Analogously, the term “partially integrated” or “final” refers to a writing that is conclusive on certain matters but does not constitute a complete and exclusive statement of the entire agreement, allowing for the inclusion of additional terms or agreements.

Question 54

What does the restatements say about merger clauses and what are the two types? Which type is more likely going to be accepted?

Answer 54

Printed Merger Clauses:

A printed merger clause is a standard clause included in a form contract or document.
The Restatement suggests that a printed merger clause is likely to conclude the issue of whether the agreement is completely integrated.
Courts may be more inclined to give conclusive effect to a printed merger clause.
Negotiated Merger Clauses:

A negotiated merger clause is one that the parties actively consider and include in their agreement.
The Restatement implies that conclusive effect may depend on evidence of the parties consciously considering and assenting to the terms of a negotiated merger clause.
Courts may be more hesitant to treat a negotiated merger clause as conclusively determining the completeness of the agreement without such evidence.

Question 55

In the case of Raffles v. Wichelhaus (1864), the plaintiff (Raffles) and the defendant (Wichelhaus) entered into a contract for the sale of 125 bales of Surat cotton at a specified rate, with delivery specified as “to arrive ex Peerless from Bombay” in Liverpool. The challenge arose because there were two ships named “Peerless” arriving from Bombay, one in October and another in December. The defendant believed the contract referred to the October ship, while the plaintiff thought it pertained to the December ship. When the December ship arrived, the defendant repudiated the agreement, leading to a breach of contract dispute. How did the court decide?

Answer 55

There was no contract (no meeting of the minds).

Question 56

What are maxims and what is the issue with them?

Answer 56

Maxims are sayings or principles that guide legal interpretation. However, they are not binding rules and can be subjective, leading to contradictions. The problem with maxims is that they may contradict each other, causing confusion and making it challenging to establish a consistent approach.

Question 57

In the context of Restatements of Contracts, what does collateral mean?

Answer 57

In the context of Restatements of Contracts, the term “collateral” typically refers to agreements or terms that are separate from the main or primary written contract. Collateral agreements are additional or supplementary understandings between parties that may not have been explicitly included in the main written contract.

Question 58

What is an express warranty?

Answer 58

Section 2–313 of the Uniform Commercial Code governs express warranties. It provides:

“(1) Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.”

Question 59

What is the UCC analogue to Restatement’s “fully integrated”?

Answer 59

Complete and exclusive.

Question 60

Two parties to a contract have altered their mutual performance over time, neither of the side complained. What UCC article does this refer to?

Answer 60

209(3): Modification of contracts can stem from performance.