Determining Terms

Question 1

Parol Evidence Rule

Answer 1

Under the PER, evidence that is extrinsic to a written K is inadmissible to supplement or contradict the written K

• Applies if the writing is a complete integration - parties must intend the writing to express their final agreement

PER bars evidence of:

• Negotionations before K becomes integrated
• Agreements before K becomes integrated (oral or written)
• Exceptions - extrinsic evidence may be allowed if either:
  
  • Agreement was only partially integrated, or
  • Addtional terms would ordinarily be in a separate agreement

PER does not apply to, or bar admission of:

• Agreements (oral and written) made after the writing
• Evidence necessary to determine if there was a mistake in the process of reducing an agreement to writing
• Evidence concerning a party’s defense based on misrepresentaiton, fraud, or duress
• Evidence used to resolve ambiguities about the meaning parties intended to give particular terms in the writing

Question 2

Delivery & Risk of Loss in UCC Contracts

Answer 2

Under UCC Ks, risk of loss issues arise when goods are lost or destroyed

Goods shipped by common carrier - if goods are shipped by carrier (e.g. Fed Ex), risk of loss depends on type of K between buyer and seller

• Shipment Ks - seller only obligated to ship goods to buyer
  
  • Seller’s obligation satisfied when she delivers goods to carrier and notifies buyer; risk of loss then passes to buyer
• Destination Ks - seller obligated to ensure goods reach buyer
  
  • Risk of loss passes to buyer only when buyer takes delivery

Non-common carrier deliveries - if goods are lost or destroyed by no fault of either party, below factors determine who assumes risk of loss:

1. Prior agreement of the parties
2. Breach - if one party is in breach, they are liable for any uninsured loss, even if unrelated to the breach
3. Default - apply if the above factors are inapplicable:
   
   • Merchant seller - risk of loss shifts to buyer once he takes physical possession of goods
   • Non-merchant seller - risk of loss shifts to buyer upon delivery

“FOB [location]” - signifies passage of risk of loss between parties

• Seller bears risk and expense of getting goods to the named location, at which point risk passes to buyer
• E.g. A in Akron sells goods to B in Boise; K states “FOB Boise”; A is responsible for getting goods to Boise, then risk passes to B

Question 3

Warranties & UCC Implied Warranties

Answer 3

A warranty is a promise regarding a contract

• UCC Ks have default implied warranties, which can be disclaimed

Express warranty - affirmative promise about the quality or feature of a product

• E.g. manufacturer claims cell phone is water proof to 20 feet
• Warranty will be breached if the product falls short of seller’s promise or description

Implied warranty of merchantability - seller automatically warrants goods are fit for their ordinary purpose

Implied warranty of fitness for a particular purpose - seller warrants that goods are fit for buyer’s purpose if:

1. Buyer has a particular purpose;
2. Buyer relies on seller to select suitable goods; and
3. Seller has reason to know of buyer’s purpose and reliance on seller

Limiting warranty liability - K can limit liability for warranties

• Disclaimer - limits liability for implied warranties
  
  • “As is” or “with all faults” language is enforceable
  • Disclaimers will not limit liability for express warranties
• Remedy limitation - limits recovery upon breach of warranty
  
  • Generally valid for all warranties, unless the limitation provision is unconscionable