Determining Terms of the K Flashcards
Determining K Terms
- Once you have determined K exists, next determine terms
Parol Evidence Rule - Supplementing, Explaining, or Contradicting Terms
- When parties express agreement in a writing w/ intent that it be the final expression of the bargain, writing is an “integration.”
- Any other expression (written/oral) made prior to the writing, as well as any oral expressions contemporaneous w/ writing, are inadmissible to vary terms of writing.
PER: Is the Writing an Integration?
- There are two components:
(1) whether writing was intended as final expression of agreement; and
(2) whether integration was intended to be complete/partial. - Evidence is admissible to show parties’ intent
Partial Integration - Additional Terms Permitted
- If an integration is complete, writing cannot be contradicted/supplemented.
- If integration is partial, writing may not be contradicted but may be supplemented by proving consistent additional terms.
- UCC presumes all writings are partial integrations.
Effect of Merger Clause
- Merger clause recites that agreement is the complete agreement between parties.
- Presence of merger clause is usually determinative in large commercial Ks.
- For most Ks, modern trend is to consider it as 1 factor in determining integration.
Tip:
A memo prepared by 1 party and not shown to the other can never be an integration b/c the parties could not have intended it to be the final complete expression of their agreement when 1 party has not even seen it. The writing is merely evidence of agreement. A confirmatory memo may be a partial integration under UCC b/c it was sent to the other party and that party was aware of its contents.
Evidence Outside Scope of PER
- B/C rule prohibits admissibility only of extrinsic evidence that seeks to vary, contradict, or add to an “integration,” other forms of extrinsic evidence may be admitted if they won’t bring about this result (fall outside PER scope)
Evidence Outside PER: Validity Issues
- A party to a written K can attack agreement’s validity.
- The party acknowledges that writing reflects the agreement but asserts agreement never came into being b/c of any of the following:
(1) Formation Defects
-Formation defects (ex. fraud, duress, mistake,& illegality) may be shown by extrinsic evidence.
(2) Conditions Precedent to Effectiveness
- If a party asserts there was an oral agreement that the written K would not become effective until a condition occurred, all evidence of the understanding may be offered & received.
Evidence Outside Scope of PER: Conditions Precedent to Effectiveness
- PE is often said to be admissible if the alleged
parol agreement is collateral to the written obligation (related to SM but not part of the primary promise) & does not conflict w/ it. - R.Ks include similar concept:naturally omitted terms doctrine.
- Doctrine allows evidence of terms that would naturally be omitted from written agreement.
- A term would naturally be omitted if:
(1) it does not conflict w/ written integration; and
(2) it concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument.
EOS of PER: Interpretation
- If there is uncertainty/ambiguity in written agreement’s
terms/dispute as to meaning of terms, PE can be received to help reach a correct interpretation of agreement. - If meaning of agreement is plain, PE is inadmissible.
EOS of PER: Showing of “True Consideration”
- PER will not bar EE showing “true consideration” paid (such as evidence that the consideration stated in K was never paid)
EOS of PER: Reformation
- If a party to a written agreement alleges facts (ex. mistake) entitling him to reformation of agreement, PE is allowed
EOS of PER: Subsequent Modifications
- PE can be offered to show subsequent mods of a written K
EOS of PER: Additional Terms Under Art 2
- Art 2 provides that a party can’t contradict a written K but may add consistent additional terms unless:
(1) merger clause, or
(2) cts find from all of circumstances the writing was intended as a complete & exclusive statement of terms of the agreement. - Art 2 also provides that a written K ’s terms may be
explained/supplemented by evidence of course of performance, course of dealing, and usage of trade—regardless of whether/not the writing appears to be ambiguous
General Rules of K Construction
- There are # of general rules of construction applied by cts when interpreting Ks.
General Rules of K Construction: Rules 1-4
(1) Ks will be construed as a “whole”; specific clauses will be subordinated to K’s general intent.
(2) Cts will construe words according to their “ordinary” meaning unless it is clearly shown they were meant to be used in a technical sense.
(3) If provisions appear to be inconsistent, written/typed provisions will prevail over printed provisions.
(4) The cts generally will try to reach a determination that K is valid & enforceable.
General Rules of K Construction: Rules 5-8 Plus When Rules Conflict
(5) Ambiguities in K are construed against the party preparing the K, absent evidence of the intention of parties.
(6) Parties’ course of dealing (sequence of conduct concerning previous transactions between parties to a particular transaction that may be regarded as establishing a common basis of their understanding)
(7) Usage of trade (a practice/method of dealing, regularly observed in a particular business setting so as to justify an expectation that it will be followed in the transaction in question)
(8) Parties’ course of performance (if a K involves repeated occasions for performance by either party and the other party has opportunity to object to performance, any course of performance accepted/ acquiesced to is relevant in determining K meaning)
- When rules conflict:
(1) express terms are given greater weight than course of performance, course of dealing, and usage of trade;
(2) course of performance is given greater weight than course of dealing or usage of trade; and
(3) course of dealing is given greater weight than
usage of trade
Art 2 Provisions on Interpreting Ks: Gap Filler Terms
- The key to forming SOGK is the quantity term.
- If other terms are missing from agreement, Art 2 has gap-filler provisions to fill in missing term(s).
Gap Filler: Price
- If:
(1) nothing has been said as to price;
(2) price is left open to be agreed upon by parties and they fail to agree; or
(3) price is to be fixed in terms of some standard that is set by a 3rd person/agency and it is not set, then price is a reasonable price at time for delivery
Gap Filler: Place of Delivery
- If place of delivery isn’t specified, the place usually is seller’s place of business, if they have one; otherwise, it’s seller’s home.
Gap Filler: Time for Shipment/Delivery
- If time for shipment/delivery isn’t specified, shipment/
delivery is due w/in a reasonable time
Gap Filler: Time for Payment
- If time for payment isn’t specified, payment is due at time & place at which buyer is to receive goods.
Gap Filler: Assortment
- If K provides an assortment of goods is to be delivered (ex. blouses in various colors and sizes) and doesn’t specify which party is to choose, assortment is at buyer’s option.
- If party who has right to specify assortment doesn’t do so seasonably, the other party is excused from any resulting delay and may either proceed in any reasonable manner (ex. choose a reasonable assortment) or treat failure as breach
Warranties
- SOGK automatically include a warranty of title (in most cases).
- Also may include certain implied warranties & express warranties
Express Warranties
- Any affirmation of fact/promise made by seller to buyer, any description of goods, and any sample/model creates an express warranty if statement, description, sample, or model is part of the basis of the bargain.
- For statement, description, sample, or model to be a part of the basis of the bargain, it need only come at such a time that buyer could have relied on it when they entered into the K.
- Buyer does not need to prove they actually did rely, although seller may negate warranty by proving that buyer did not rely.
- It isn’t necessary that seller intended affirmation of fact, description, model, or sample to create warranty.
Express Warranties: Distinguish Statements of Value/Opinion
- A statement relating merely to value of goods, or
a statement purporting to be only seller’s opinion/commendation of goods, doesn’t create an express warranty.