Contracts - Terms of the Contract

Question 1

What triggers a discussion of the parol evidence rule?

Answer 1

(1) Final Written Contract

(2) Earlier words of one or both parties.

Question 2

What is the policy behind the parol evidence rule?

Answer 2

The underlying premise is that the final written version of a deal replaces earlier agreements, negotiations and conversations.

Two key issues: Is parol evidence admissible and for what purpose?

Question 3

Definition of Integration

Answer 3

Written agreement that court finds is the final agreement, triggers the parol evidence rule.

Question 4

Definition of Partial Integration:

Answer 4

Written and final, but not complete.

Question 5

Definition of Complete Integration

Answer 5

Written and final and complete

Question 6

Definition of Merger Clause

Answer 6

Contract clause, such as, “This is the complete and final agreement.”

Question 7

Definition of Parol Evidence

Answer 7

Words of party (or parties) [Oral or written]

Before integration (before agreement was put in written form)

Question 8

Can evidence of earlier agreement be considered for the purpose of changing/contradicting terms in the written deal?

Answer 8

No!

Evidence of POST-contract statements and telefaxes however are admissible.

Question 9

Can parol evidence be considered for the limited purpose of determining whether there was a mistake in integration (i.e. clerical mistake)?

Answer 9

Yes!

Question 10

Can a defendant offer parol evidence for the purpose of a defense to the enforcement of an agreement (i.e. misrepresentation, fraud, or duress)?

Answer 10

YES - Defense Exception

Court may consider evidence of earlier words of the parties for the limited purpose of determining whether there is a defense to the enforcement of the agreement.

Question 11

Can parol evidence be used for resolving ambiguities in the written contract?

Answer 11

Yes!

Question 12

When can parol evidence be used to add terms to a written agreement?

Answer 12

General rule: Can’t look at earlier agreement.

However, additional terms can be add if the court finds:

(i) that the written agreement was only a partial integration; or
(ii) that the additional terms would ordinarily be in a separate agreement.

Question 13

What are the three forms of conduct that can be a source of contract terms?

Answer 13

(1) Course of performance
(2) Course of Dealing
(3) Custom and usage to explain words in contract or to fill gaps in contracts.

Question 14

Under the UCC, how does a seller of goods satisfy his delivery obligations if the good are being delivered by a common carrier?

Answer 14

Depending on if its a shipment contract or a destination contract.

Most contracts are a shipping contract.

If it says free on board (FOB) - followed by the city where the seller is or where the goods ar then its a shipment contract.

If its FOB followed by any other city then its a destination contract.

Question 15

Under the UCC, how does a seller of goods satisfy his delivery obligations if the good are being delivered by a common carrier and its a SHIPMENT CONTRACT?

Answer 15

Seller completes its delivery obligation when it

(i) gets the goods to a common carrier;
(ii) makes reasonable arrangements for delivery AND
(iii) notifies the buyer.

Question 16

Under the UCC, how does a seller of goods satisfy his delivery obligations if the good are being delivered by a common carrier and its a DESTINATION CONTRACT?

Answer 16

The other possibility is that the contract is a destination contract, which means that the seller does not complete its delivery obligation until the goods arrive at the destination.

Question 17

When is risk of loss a problem?

Answer 17

Where (i) after the contact has been formed, but before the buyer receives the goods;

(ii) the goods are damaged or destroyed; and
(iii) neither the buyer nor the seller is to blame.

Question 18

What are the possible consequences in a risk of loss problem?

Answer 18

If its on the buyer, he has to pay the full contract price for the lost or damaged goods.

If its on the seller, no obligation on the buyer and possible liability on the seller for nondelivery.

Question 19

What are the four rules for risk of loss under the UCC? [Start at one and work through each rule]

Answer 19

(1) Agreement - agreement of the parties controls
(2) Breach - breaching party is liable for any uninsured loss even though breach is unrelated to problem.
(3) Common carrier delivery - risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations.
(4) “Catch-All” (no agreement, no breach, no deliver by carrier): determining factor is whether the seller is a merchant (buyer irrelevant).
* Risk of loss shift from a merchant-seller to a buyer on the buyer’s receipt of the goods; risk of loss from a nonmerchant seller when he or she “tenders’ the goods. [tender=made available]

Question 20

What is an express warranty of quality?

Answer 20

Words that promise, describe, or state facts. Distinguished from just sales today which is more general, an opinion.

Question 21

What is the implied warranty of merchantability and when does it apply?

Answer 21

Warrants that the goods are fit for ordinary purpose for which such goods are used.

Applies when the seller is a merchant and deals in goods of that kind.

Question 22

What is the implied warranty for a particular purpose and when does it apply?

Answer 22

Warrants that the goods are fit for a particular purpose.

Trigger facts:
(i) buyer has a particular purpose;

(ii) buyer is relying on seller to select suitable goods;
(iii) seller has reason to know of purpose and reliance.

Question 23

What is the Statute of Limitation on warranty liability?

Answer 23

Four year SoL and generally the statute starts running on possible warranty actions when the “tender of delivery is made”, not when the buyer learns that the product is defective.

Question 24

Is privity of contract required for warranty liability?

Answer 24

MBE - Yes?

MA - Privity has been eliminated as a requirement for recovery of breach of warranty.

Question 25

How does a buyer’s examination of goods affect warranty liability?

Answer 25

There is no implied warranties as to defects which would be obvious on examination.

Question 26

How do a disclaimer of warranty liability affect express and implied warranties?

Answer 26

Express warranties generally cannot be disclaimed.

Implied warranties can be disclaimed either by:

(i) CONSPICUOUS language of disclaimer, mentioning merchantability, OR
(ii) “as is” or “with all faults.”

Question 27

Can parties contract set limits on warranty liability?

Answer 27

Yes, possible to limit remedies even for express warranties.

General test is unconscionability. Prima facie unconscionable if breach of warranty on consumer goods causes personal injury.

Question 28

MA Distinction on limitations on remedies for warranty liability?

Answer 28

MA Is more protective of consumers than most states.

Sellers cannot disclaim implied warranties in CONSUMER transactions. However, it is possible to limit remedies for even express warranties.

MA courts will closely scrutinize the limitation to ensure that the remedy does not fail for its essential purpose.

Question 29

Can a finance lessor be held liable for violation of a warranty?

Answer 29

NO, nothing ever happens to financial lessor.

Original seller is liable.