Gap-Fillers, Interpretation, and the PER Flashcards
Implied Warranties Under the UCC
Include:
- Warranty of Title
- Warranty of Merchantability
- Warranty of Fitness for a Particular Purpose
Implied Warranty of Title
Promise that there is good title to the goods, that there is a rightful transfer, and no liens or other security interests are attached to those goods.
How to Exclude or Modify the Implied Warranty of Title
- Specific language in K or
- Circumstances giving the buyer reason to know that the seller does not claim unencumbered title.
Limitations on Warranty of Title
A seller is not liable for such a claim if the buyer provides specifications to the seller and the claim arises out of compliance with the specifications.
Implied Warranty of Merchantability
If the seller is a merchant with respect to goods of that kind, there is a warranty that the goods are fit for the ordinary purposes for which those goods would be used.
How to Exclude or Modify the Implied Warranty of Merchantability
- specific use of the word “merchantability” and conspicuousness if in writing; or
- any other language or circumstances that would be reasonably understood by a buyer to exclude the warranty
Implied Warranty of Fitness for a Particular Purpose
Promise that the goods being sold are fit for the particular purpose for which the buyer intends to use them.
Limitations on Implied Warranty of Fitness
- The warranty only applies where, at the time of contracting, the seller has good reason to know:
- the particular purpose for which the goods are required; and
- that the buyer is relying on the seller’s skill or judgment to select or furnish reasonable goods.
How to Exclude or Modify the Implied Warranty of Fitness for a Particular Purpose
- disclaimer that is written, clear, and conspicuous; or
- goods have patent defects which are easily detectable
Express Warranties Under the UCC
Include:
- express warranty that goods will conform to the affirmation or promise
- express warranty that the goods will conform to the description
- express warranty that the whole of the goods will conform to the sample or model
Creation of Express Warranty That the Goods Will Conform to the Affirmation or Promise
Occurs when seller adds any affirmation of fact or promise that relates to the goods and becomes part of the basis of the bargain.
Creation of Express Warranty that the Goods Will Conform to the Description
Occurs when any description of the goods that is made part of the basis of the bargain.
Creation of Express Warranty that Goods Will Conform to Sample or Model
Occurs when any sample or model that is made part of the basis of the bargain.
Express Warranty v. Limitation/Disclaimer
Where an express warranty conflicts with a limitation or disclaimer, the express warranty will prevail.
Damages for Breach of Warranty
value goods would have been if they had been warranted - value of goods accepted (measured at time and place of acceptance).
Gap-Filling Default Rules (When There Are Missing Terms)
- Price- the reasonable price at the time established by the K for the delivery of goods
- Time- K action must be performed within a reasonable time
- Place of Delivery- the place of delivery will be the seller’s place of business unless otherwise agreed
Missing Duration Req. (For Employment Ks)
Default rule- the employer or employee can terminate at any time for any reason (presumption of at-will) in the absence of a K provision
-However, oral or written assurances of job security made to an individual employee as well as assurances contained in policy documents may override the default rule.
Obligation of Good Faith and Fair Dealing
-Good Faith- honesty in fact in the conduct or transaction concerned and in the case of a merchant, “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.”
When Does the Obligation of Good Faith and Fair Dealing Apply?
- Performance and enforcement of Ks, but not to negotiations or other pre-K conduct.
- Is particularly relevant when the terms of a K leave a critical term open to the determination of one party (e.g. open price or satisfaction)
Open Price Term
If a K leaves the price to be fixed by one of the parties, then the specified party must fix the price in good faith.
Satisfaction Term
A good-faith obligation requires the party making that determination to do so in good faith.
Order of Performance
When an agreement is silent about the order of performance, payment is not required until after the work is completed.
Ks with a Open Quantity Term
Include:
- Output Ks
- Requirement Ks
Output K
A K in which the buyer agrees to purchase all of a seller’s output for a particular good.
Requirements K
A K in which the seller agrees to supply the buyer with all of the buyer’s requirements for a particular good.
Obligations for Open Quantity Ks
- Buyers or sellers must make determinations in good faith
- Neither party can make an unreasonably disproportionate demand or tender if:
- there was a stated estimate made between the parties; or
- in the absence of a stated estimate, any comparable prior outputs or requirements
Interpreting Ambiguous Language: Obj. v. Subj.
Obj. reasonable meaning > subj. understanding by one party unless:
- the other party knows or has reason to know of the first party’s subjective understanding
- the evidence demonstrates that both parties shared the subj. understanding of the term at the time of K, the mutual subj. understanding will control.
Interpreting Ambiguous Language: Rule of Contra Proferentem
If an ambiguous term is included in the K, then it will be interpreted against the party who supplied the term during negotiations or drafting (want to encourage people to draft Ks well).
Doctrine of Reasonable Expectations
Unambiguous terms may be interpreted against the drafting party if they conflict with the reasonable expectations of the other party (therefore, boilerplate that is inconsistent with the reasonable expectations of the purchaser would be unenforceable).
Trade Usage, Course of Dealing, Course of Performance in UCC Ks
- Admissible uses –> to fill in gaps (supplement terms) + resolve ambiguities (explain terms)
- Inadmissible uses –> to contradict express terms of K
Trade Usage
Any practice or method of dealing having such regularity or observance in a place or trade as to justify an expectation that it will be observed with respect to the transaction in Q.
Course of Dealing
A pattern of conduct concerning previous transactions between the parties that is fairly to be regarded as establishing a common basis of understanding for interpreting their subsequent expressions and other conduct (what the parties did in their previous Ks).
Course of Performance
When a particular K involves repeated occasions for performance by a party and the other party, with knowledge of the nature of the performance and opportunity for objection to it –> accepts the performance or acquiesces (how the parties have acted under their current K).
Trade Usage, Course of Dealing, Course of Performance: Conflicts
Course of performance > course of dealing and usage of trade
Course of dealing > usage of trade
Parol Evidence Rule
General rule that states that any agreement other than what is written in a K is inadmissible in court.
When the PER Applies
Evidence of negotiations and communications that took place prior to or contemporaneously with the execution of the written K.
Steps in a PER Analysis
- Does the evidence relate to a term or K which is integrated?
- What is the purpose for which the evidence is being introduced?
Integration: Full v. Complete Integration
- Full Integration- terms contained in K are intended to be the final discussion of the parties as to those specific terms
- Complete Integration- when parties intend the K to represent a “complete and exclusive statement of all the terms”
Determining Full Integration
- Courts will look at:
- the thoroughness and specificity of the written instrument in connection with the terms at issue (more thorough and specific = more likely parties intended it to be the entire agreement)
- parol and other extrinsic evidence
Determining Complete Integration
- Courts will look at:
- presence or absence of a merger clause
- detail with which the K sets forth its provisions
- the length of the agreement
- parol and other extrinsic evidence
Merger Clause
Claims that the writing “contains the complete and entire agreement of the parties” or other words to that effect. Authorities are divided, however, on whether a merger clause is conclusive or merely persuasive on the question of complete integration.
Purpose of Introducing the Parol Evidence
Include:
- Explain or Interpret
- Supplement
- Contradict
Using Parol Evidence to Explain or Interpret a Statement
- Majority rule- always admissible
- Minority (CL) Rule- threshold showing that the term is patently ambiguous is required first.
Using Parol Evidence to Supplement
- CL- admissible unless the K is completely integrated
- UCC- usage of trade, course of dealing, and course of performance evidence are admissible
Using Parol Evidence to Contradict
- CL- admissible unless the terms in question are fully integrated
- UCC- course of dealing or course of performance evidence may be admissible in sale of goods cases to “qualify” the meaning of an integrated term
Evidence Where the PER Does Not Apply
Include:
- subsequent agreements
- collateral agreements (distinct from written K at issue)
- attacks on the validity of the written agreement, including:
- the failure of an oral condition precedent
- absence of consideration
- mistake or duress
- fraud; and
- reformation
