Determining the Terms of the Contract

Question 1

Parol Evidence Rule: Supplementing, Explaining, or Contradicting Terms

Answer 1

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an INTEGRATION.

Any other expressions made prior to the writing, as well as any oral expression contemporaenous with the writing, are inadmissible to vary the terms of the writing

Question 2

Is the Writing an “Integration”? 2 Components

Answer 2

1. Whether the writing was intended as the final expression of the agreement and
2. Whether the integration was intended to be complete or partial

Question 3

Partial Integration: Additional Terms Permitted

Answer 3

If the integration is partial, the writing may not be contradicted but may be supplemented by proving consistent additional terms

Question 4

Evidence Outside Scope of Parol Rule

Answer 4

1. Validity Issues: formation defects, conditions precedent to effectiveness
2. Collateral Agreements and Naturally Omitted Terms: a term would be naturally omitted if: (1) it does not conflict with the written integration and (2) it concerns a subject that similarly situated parties would not ordinarily be expected to include
3. Interpretation
4. Showing of “True Consideration”
5. Reformation
6. Subsequent Modifications
7. Additional terms under Art. II: can add consistent additional terms unless there is a merger clause or the courts find from all of the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement

Question 5

General Rules of Contract Construction

Answer 5

1. Contracts will be construed as a “whole”
2. The courts will construe words according to their “ordinary” meaning
3. Written or typed provisions will prevail over printed provisions
4. The courts generally will try to reach a determination that the contract is valid and enforceable
5. Ambiguities in a contract are construed against the party preparing the contract

For more, see page 54 of CMR

Question 6

Article II Provisions on Interpreting Contracts

Answer 6

Supplemental Gap-Filler Terms: Article II has gap-filler provisions to fill in terms on price, place of delivery, time for shipment or delivery, time for payment, and assortment

Question 7

Warranties

Answer 7

Contracts for the sale of goods automatically include a warranty of title. They may also contain certain implied and express warranties

Question 8

Express Warranties

Answer 8

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain

Question 9

Implied Warranty of Merchantability

Answer 9

Implied in every contract for sale by a merchant who deals in the goods of the kind sold, there is a warranty that the goods are merchantable, i.e. fit for the ordinary purpose for which such goods are used

Note: seller’s knowledge of defect not relevant: absolute liability standard!

Question 10

Implied Warranty of Fitness for a Particular Purpose

Answer 10

A warranty may also be implied in a contract for the sale of goods whenever (1) any seller … has reason to know the particular purpose for which the goods are to be used that the buyer is relying on and (2) the bueyer relies on the seller’s skill or judgment

Question 11

Warranty of Title

Answer 11

Any seller of goods warrants that the title transferred is good, the transfer is rightful, and that there are no liens against the title that the buyer is aware of at the time of contracting

Question 12

Warranty Against Infringement

Answer 12

A merchant seller regularly dealing in goods of the kind sold also automatically warrants that the goods are delivered free of any patent, trademark, copyright, or other similar claims.

Buy a buyer who furnishes speculations must hold seller harmless against such claims

Question 13

Disclaimer of Warranties

Answer 13

Warranty of Title: Can be disclaimed or modified only by specific language or by circumstances that gave buyer notice

Implied Warranties: Implied warranties of merchantability and fitness can be disclaimed by either specific disclaimers or general methods of disclaimer

Warranty of Merchantability: Can be specifically discalimed or modified only by mentioning merchantability and must be conspicuous, i.e. reasonable eprson ought to have noticed it

By examination or refusal to examine: if buyer has examined, there is no warranty as to defects that reasonable examination would have revealed

By course of dealing: implied warranties may also be disclaimed by the course of dealing