determining the terms of the K Flashcards
what is the parol evidence rule
evidentiary rule that requires that agreements made OUTSIDE of a written K, such as prior or contemporaneous oral agreements and prior or contemporaneous written agreements, are inadmissible extrinsic evidence in court unless there is evidence of fraud, duress, or mutual mistake
what does it mean for an agreement to be completely integrated
the contract is a complete statement / final expression of the agreement
the writing cannot be contradicted or supplemented
what does it mean for an agreement to be partially integrated
not intended to be complete agreement
may not be contradicted
MAY be supplemented with CONSISTENT terms
UCC presumes all writings are partial integrations
example of an agreement that may be partially integrated
merchant’s confirmatory memo
effect of a merger clause
A merger clause recites that the agreement is the complete agree- ment between the parties.
The presence of a merger clause is usually determinative in large commercial contracts.
For most contracts, however, the modern trend is to consider it as one factor in deter- mining integration.
what evidence is outside the scope of the parol evidence rule such that parol evidence/extrinsic evidence can be used as evidence?
(1) validity issues, including formation defects (fraud, duress, mistake, illegality) or conditions precedent to effectiveness (K not effective till condition)
(2) collateral agreements and naturally omitted terms
(3) ambiguities in the meaning of the terms
(4) issues regarding the existence of consideration
(5) reformation
(6) subsequent modifications
(7) additional terms under article 2
(8) add to partially integrated writing
(9) corrections of terms / typos
trigger of parol evidence on exam
you have a final writing and then someone is contesting that trying to add to it
rule of collateral agreements and naturally omitted terms
evidence of terms that would naturally be omitted from the written agreement is allowed
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 in the written instrument
exam tip
“partial” and “complete” integration language usually only the right answer when one party trying to add to the agreement
UCC rules of parol evidence
assumes all writings are partial integrations
parties cannot contradict a written contract
parties may add consistent additional terms UNLESS
(1) there is a merger clause, OR
(2) the courts find from all the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement
Parties can explain or supplement terms of the written contract with the following evidence, regardless of whether the writing appears to be ambiguous:
– course of performance
– course of dealing
– usage of trade
general rules of contract construction
a. Contracts will be construed as a “whole”; specific clauses will be subordinated to the contract’s general intent.
b. The courts will construe words according to their “ordinary” meaning unless it is clearly shown that they were meant to be used in a technical sense.
c. If provisions appear to be inconsistent, written or typed provi- sions will prevail over printed provisions.
d. The courts generally will try to reach a determination that a contract is valid and enforceable.
e. Ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention of the parties.
f. The parties’ course of dealing (that is, the sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding)
g. A usage of trade (that is, a practice or 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)
h. The parties’ course of performance (that is, if a contract involves repeated occasions for performance by either party and the other party has the opportunity to object to such perfor- mance, any course of performance accepted or acquiesced to is relevant in determining the meaning of the contract)
i. 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.
what are the article 2 supplemental/filler terms [just list]
(1) quantity – NONE; if quantity term is missing, it is missing an essential term of the K
(2) price
(3) place of delivery
(4) time for shipment or delivery
(5) time for payment
(6) assortment of goods
(7) warranties (express, implied, disclaimer, etc.)
(8) delivery terms and risk of loss
(9) insurable interest and ID
(10) bilateral K formed by performance
gap filler price term UCC
If: (1) nothing has been said as to price;
(2) the price is left open to be agreed upon by the parties and they fail to agree; OR
(3) the price is to be fixed in terms of some standard that is set by a third person or agency and it is not set,
the price is a reasonable price at the time for delivery.
gap filler place of delivery term UCC
If the place of delivery isn’t specified, the place usually is:
the seller’s place of business, if they have one; otherwise, it’s the seller’s home.
Gap filler provision for time for shipment or delivery UCC
If the time for shipment or delivery isn’t specified, shipment/delivery is due within a reasonable time.
gap filler provision for time of payment UCC
If the time for payment isn’t specified, payment is due at the time and place at which the buyer is to receive the goods.
Gap filler provision for assortment
If a contract provides that an assortment of goods is to be delivered and doesn’t specify which party is to choose:
the assortment is at the buyer’s option.
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.
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If the party who has the right to specify the assortment doesn’t do so seasonably, the other party is excused from any resulting delay and may either proceed in any reasonable manner (for example, choose a reasonable assortment) or treat the failure as a breach.
UCC gap filler for warranty IN GENERAL
contracts for sale of goods automatically include a warranty of title
they MAY include certain other implied or express warranties
what is an express warranty (UCC)
EXPRESS WARRANTY
Any statement 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 and is not a mere opinion or statement of value
BASIS OF THE BARGAIN
Statement, description, sample or model must have come at such a time that the buyer would have relied on it when they entered into the K
PROVING RELIANCE
– buyer need not prove they actually relied
– BUT seller may negate warranty by showing buyer actually did NOT rely
– seller did not have to have intended his statement to be a warranty
Types of implied warranties (UCC)
implied warranty of merchantability
implied warranty of fitness for a particular purpose
warranty of title and against infringement
implied warranty of merchantability (UCC) and associated liability
Warranty that the goods are merchantable
Merchantable = goods must at least be “fit for the ordinary purpose for which such goods are used.”
Implied in every contract for sale by a merchant who deals in goods of the kind sold
ABSOLUTE LIABILITY:
absolute liability for breach – negligence doesn’t matter, and neither does seller’s knowledge or lack thereof
[apparently this is for all warranty cases]
implied warranty of fitness for a particular purpose (UCC)
warranty will be implied in a K for the sale of goods whenever
(1) any seller, MERCHANT OR NOT, has reason to know the particular purpose for which the goods are to be used and the particular purpose for which the goods are to be used and that that the buyer is relying on the seller’s skill and judgment to select suitable goods
AND
(2) the buyer in fact relies on the seller’s skill or judgment
warranty of title and against infringement (UCC)
WARRANTY OF TITLE
Any seller of goods warrants that the title transferred is good, that the transfer is rightful, and that there are no liens or encumbrances against title of which buyer is unaware
arises automatically, need not be mentioned in K
WARRANTY AGAINST INFRINGEMENT
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 similar claims.
A buyer who furnishes specifications for the goods to the seller must hold the seller harmless against such claims.
what does it mean to say that a warranty is “implied”
it arises automatically and need not be included in the K
How and to what extent can a warranty of title be disclaimed?
can be disclaimed or modified only by:
(1) specific language OR
(2) by circumstances that give the buyer notice that…
(a) the seller does not claim title OR
(b) seller is selling only such rights as they or a third party may have
[ex: sheriff’s sale]
How and to what extent can the implied warranties of merchantability or warranty of fitness for a particular purpose be disclaimed?
by specific disclaimers
by general disclaimers
Explain how to make specific disclaimers of or modifications to implied warranties of merchantability and fitness for a particular purpose
Specific disclaimer of warranty of merchantability
— can be specifically disclaimed only by mentioning merchantability
– if K is in writing, disclaimer must be conspicuous
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specific disclaimer of fitness for a particular purpose
– can be specifically disclaimed only by a conspicuous writing
– sufficient if it says, for example, “there are no warranties which extend beyond the description on the face hereof.”
general methods of disclaiming implied warranties by UCC
(1) “As is” or similar language (“with all faults”)
– does not have to be conspicuous, but cannot be hidden or in fine-print
(2) By examination or refusal to examine
— when buyer, before entering into K, has examined the goods or sample or model as fully as they desire, or has refused to examine, there is no warranty as to defects that a reasonable examination would have revealed
(3) by course of dealing, course of performance, or usage of trade
what does “conspicuous” mean in terms of specific disclaimers of warranty of merchantability and fitness for a particular purpose
A term is conspicuous when it is “so written, displayed, or presented that a REASONABLE person against whom it is to operate ought to have noticed it.”
Language in the body of a writing is conspicuous if: (1) it is in larger type than surrounding text;
(2) it is in a contrasting type, font, or color; or
(3) it is set off from the text by marks that call attention to it.
to what extent can parties limit damages for breaches of warranty?
they can limit damages to any warranty but it cannot be unconscionable
warranty disclaimers that limit damages for personal injury caused by a breach of warranty on consumer goods are prima facie unconscionable
when there is both an express warranty and language that seems to disclaim warranties, which provision wins?
The UCC provides that words or conduct relevant to the creation of express warranties and words or conduct tending to negate such warranties shall wherever possible be construed as consistent with each other, but “negation or limitation is inoper- ative to the extent that such construction is unreasonable.”
In other words, once an express warranty is made, it is very difficult to disclaim.
on the MBE, and “as is” or “with all faults” disclaimer will generally be as effective as ….
a specific disclaimer
when must disclaimer of warranty or limitation on remedy be made to be effective?
EFFECTIVE:
must be agreed to during bargaining process
INEFFECTIVE
included inside packaging of goods
EXCEPTION
– clickwrap on computer software are valid (rationale is that purchasers can return software if they disagree with the conditions)
buyer’s damages for breach of warranty in general, breach of warranty of title, and what happens in special circumstances that may affect damages
IN GENERAL
The measure of damages for breach of any warranty is the difference between the value of the goods accepted and the value of the goods as warranted, measured at the time and place of acceptance + incidental and consequential damages
BREACH OF WARRANTY OF TITLE [which results in dispossession]
Buyer may (1) rescind the K, (2) revoke acceptance of the goods, OR (3) sue for damages, which are usually value of the goods as warranted
SPECIAL CIRCUMSTANCES affect damages
Example: great appreciation or depreciation in value of goods between value of goods from time of delivery until dispossession
= value of goods measured at time of dispossession
who does warrant of merchantability apply to
merchants only
to whom do warranties extend?
MAJORITY RULE
the seller’s warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in the buyer’s home if it is reasonable to expect that the person may use, consume, or be affected by the goods and that person suffers personal injury because of a breach of warranty.
to what extent do contracts for sale of goods require delivery
All contracts for the sale of goods require delivery of the goods
when does risk of loss pass from seller to buyer if goods and damaged or destroyed? Depends on the circumstances
(1) defective goods
(2) revocation of acceptance
DEFECTIVE GOODS
If the buyer has a right to reject the goods, the risk of loss doesn’t pass to the buyer until the defects are cured or the buyer accepts the goods in spite of their defects. Note that a buyer generally has the right to reject for any defect.
REVOCATION OF ACCEPTANCE
If the buyer rightfully revokes acceptance, the risk of loss is treated as having rested on the seller from the beginning to the extent of any deficiency in the buyer’s insurance coverage.
what is a non carrier sale and when is the time of payment and place of delivery
parties did not intend that the goods would be moved by a common carrier
place of delivery = seller’s place of business
(for example, when you buy groceries).
time of payment = upon tender of delivery
who bears risk of loss for non carrier sales
if the seller is a merchant:
risk of loss passes to the buyer only when they take physical possession of the goods.
If the seller is not a merchant:
risk of loss passes to the buyer upon tender of delivery [making goods available to buyer]
what is a carrier case and when is time of payment
sale in which it appears the parties intended the goods to be moved by a carrier
for example, when you order a book from a website
time of payment = when buyer receives goods
types of carrier cases and
(1) what they are
(2) place of delivery
(3 ) who bears risk of loss
common carrier = fed ex, etc.
SHIPMENT CONTRACTS
— contract authorizes or requires the seller to ship the goods by carrier but does not require them to deliver the goods at a particular destination
– place of delivery = shipper’s location
– risk of loss passes to buyer when goods are delivered to the carrier
– if no other terms, UCC assumes K is a shipment K
DESTINATION CONTRACTS
– the contract requires the seller to deliver the goods at a particular destination, not just address for shipment
– place of delivery = the destination specified by the buyer
– the risk of loss passes to the buyer when the seller tenders delivery of goods to the buyer at the destination.
seller’s duties under shipment K
In a shipment contract, the seller must:
(1) make a reasonable contract with the carrier on behalf of the buyer;
(2) deliver the goods to the carrier;
(3) promptly notify the buyer of the shipment;
AND
(4) provide the buyer with any documents needed to take possession of the goods.
—- bar examiners do this K a lot
common delivery terms and their risk meaning
FOB + [location] = free on board
risk of loss passes to buyer at the named location
– FOB + seller city = shipment contract
– FOB + any other city = destination contract
FAS = free alongside
– used when goods shipped by boat
– risk of loss passes to buyer once goods are delivered to the doc
Sale or return contracts —who bears the risk?
DEFINITION
buyer takes goods for resale but may return them if unable to resell
RISK OF LOSS
Rules for ordinary sales apply
– BUT if goods are returned to seller, risk remains on buyer while goods are in transit
sale on approval contracts – who bears the risk?
DEFINITION
buyer takes goods for trial period and may return them even though they conform to the contract
RISK OF LOSS
Risk does not pass until buyer accepts goods (buy failing to return them or to notify seller of intention within the required time)
if buyer returns goods, return is at seller’s risk
what happens when goods are destroyed before the risk of loss passes?
if goods that were identified when K was made are destroyed
(1) without fault by either party
AND
(2) before risk of loss passes to the buyer,
… the K is avoided, i.e. the seller’s performance is excused
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If the goods were not identified until after the K was made, the seller in this situation would have to prove impracticability to be discharged
what does UCC give buyers to help them when they bear risk of loss before receiving goods purchased?
Article 2 gives buyers a special property interest in goods as soon as they are identified as the ones that will be used to satisfy the contract (for example, as soon as the seller sets them aside for the buyer).
This special property interest is insurable.
what happens when a bilateral contract is formed by the parties’ performance ?
rule in UCC
rule for CL
UCC:
under Article 2, the contract includes all of the terms on which the writings of both parties agree. Any necessary missing terms are filled in by the supplemental terms provided for in Article 2.
COMMON LAW:
The contract includes the terms of the last communication sent to the party who performs
parol evidence can be:
oral OR written
showing someone a sample or model = what kind of warranty?
express warranty that goods will be like that sample
can you disclaim an express warranty?
no
for risk of loss, look for the following in order:
(1) if the agreement allocates risk, the agreement of the party controls
(2) ask who bears risk?
— if there is a breaching party, breaching party will bear risk of loss or destroyed goods even if breach was not related to reason why goods were damaged or destroyed
who bears risk of loss when there are defective goods and there is breach?
— if there is a breaching party, breaching party will bear risk of loss or destroyed goods even if breach was not related to reason why goods were damaged or destroyed
bar examiner common carrier contract most likely
shipment contract presumed unless clearly indicates otherwise
exception to the parole evidence rule
parol evidence is admissible to show a condition precedent to the existence of a K
when parties express their agreement in a writing but then asset that there was an oral agreement that the written K would not become effective until a condition occurs, what is allowed to be offered into evidence?
evidence of the oral understanding may be offered and received
rationale is that the written agreement is not being ALTERED by the parol evidence, because the written agreement never came into being
