Gap Fillers, Interpretation, Parol E Rule Flashcards
Filling in the gaps w/Default Provisions - Gen’l Rule
The default gap fillers will be overridden where the parties provide for a different procedure, but if they do not, the default k terms will supplement their k.
UCC Default Rules for the Sale of Goods - Deals w/3 areas
- Implied Warranties
- Express Warranties
- Missing Terms
Implied Warranties - FMT (Friendly Mr. T)
- Warranty of Title and against Infringement
- Warranty of Merchantability
- Warranty of fitness for a particular purpose
Warranty of Title and against infringment
For the sale of all goods, there is an implied warranty of good title to the goods, of the rightful transfer of the goods, and that no liens or other security interests are attached to those goods. Can only be excluded or modified by 1) specific language; or 2) circumstances which give the buyer reason to know that the seller does not claim unencumbered title
Warranty of Merchantability
If the seller of goods is a merchant, then there’s a warranty guarantees that the goods are fit for the ordinary purposes for which those goods would be used
Warranty of Fitness for a particular purpose
Only applies where 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
Excluding or Modifying IWs of Merchantability and Fitness
- IW of Merchantability - use the word “merchantability”; need not be in writing, but if it is it must be conspicuous
- IW Fitness - use of language that is conspicuous
Eliminating all Implied Warranties
- “there are no warranties which extend beyond the description on the face thereof”
- “as is” or “with all faults” or similar language letting the buyer know of the exclusions
- buyer has fully examined the goods before entering into the k
- buyer refuses to inspect and defects would have been easily apparent
- course of dealing/performance, usage of trade indicate no warranties
Express Warranties
UCC says you can create Express Warranties (EWs). Seller can create EW by:
- any affirmation of fact or promise
- any description of the goods
- any sample or model
EW - affirmation of fact or promise
EW is created by any affirmation of fact or promise made by the seller to the buyer that relates to the goods and becomes part of the basis of the bargain. Goods must conform
EW - Description of the goods
Goods must conform to any description of the goods that is made part of the basis of the bargain.
EW - Sample or Model
Goods must conform to any sample or model that is made part of the basis of the bargain
EWs v. Limitation or Disclaimer
Words or conduct relevant to the creation of express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent w/each other. Where EW conflicts with a limitation or disclaimer, the EW prevails.
Missing Terms
Under the UCC, where pertinent terms are missing, use this:
- Price term - reasonable price at time of k
- Time Term - performance must be done w/in a reasonable time
- Place of delivery term - seller’s place of business
CL Default Rules for Service and EMT Ks
- Missing Price Term - reasonable value of the services rendered
- Missing Duration Term - as to EMT Ks, use “at will” EMT. Oral or written assurances of job security may take it out of the default rule (personnel handbook saying EMT is at will will win, but contradictory assurances will create a Q for the jury)
The Obligation of Good Faith and Fair Dealing - Generally
Both UCC and CL impose an obligation of GF in the performance and enforcement of ks (DNA to pre-k conduct or negotiation)
GF and Fair Dealing - “Good Faith”
- GF - honesty in fact, in the conduct or transaction concerned.
- GF re Merchant - honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade
GF - Critical Terms left open
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 GF
GF - Satisfaction Term
A k may contain a satisfaction clause whereby determination as to whether a party’s performance obligation is complete is left to the discretion of the other party - must do so in GF
GF - Open QTY Term: Output and Requirements Ks
A. Output K - buyer agrees to buy seller’s output of a good
B. Requirement K - Seller agrees to supply buyer’s demand requirements for a good
IN BOTH SITUATIONS, EITHER BUYER OR SELLER MUST MAKE THE DETERMINATION IN GF
Output and Requirement Ks - Disproportionate Tender or Demand
In addition to GF, UCC prohibits any unreasonably disproportionate demand or tender, if there was either
- a stated estimate
- or in the absence of an estimate, any comparable prior outputs or requirements
Interpreting Ambiguous Language - Objective v. Subjective Meaning
Objectively reasonable meaning of a term at the time of contracting controls over a subjective understanding of the term by one of the parties. 2 Exceptions:
- If one party knows or has reason to know of the other party’s subjective understanding, then that subjective interpretation will control
- Where both parties share the subjective understanding of the term at time of contracting
Interpreting Ambiguous Language - Contra Proferentum
If an ambiguous term is included in the K, then it is interpreted against the drafter. The meaning more favorable to the other party controls. Applies in ks where bargaining powers are equal and contracts of adhesion
Interpreting Ambiguous Language - Reasonable Expectations Doctrine
Even unambiguous terms may be interpreted against the drafting party if they conflict with the reasonable expectations of the other party.
Trade Usage, Course of Dealing, and Course of pe
Extrinsic E of these can be used to fill in contractual gaps or resolve ambiguities. It is not available to contradict express terms of the K.
In case of conflict: COP>COD>Trade usage
Usage of Trade
UCC defines this as any practice or method of dealing having such regularity of observance in a place or trade as to justify an expectation that will be observed with respect to the transaction in question.
Course of dealing
UCC defines this as a pattern of conduct concerning previous transactions b/w the parties that is fairly to be regarded as establishing a common basis of understanding for interpreting their subsequent expressions and other conduct
Course of Performance
UCC says this is present when a particular k involves repeated occasion 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 in it without objection.
Parole E Rule - Generally
Parole E governs;
- both oral and documentary E of negotiations and other communications b/w the parties; and
- communications that took place prior to or contemporaneously with the execution of the written k
Parole E Analysis
If a party seeks to introduce parole E, court will determine its admissibility of the E based on 2 questions:
- what is the purpose of such E
- does it relate to a term in the k which is integrated
Integration - Full v. Complete
- Full Integration - the terms contained within the k are intended to be the final discussion of the parties as to those specific terms.
- Complete Integration - parties intend the k to represent a “complete and exclusive statement of all the terms” –> only the terms inside the k are considered part of the k
Determining Full Integration
This is a Q for the JUDGE only. Judge looks at thoroughness and specificity of the written instrument in connection with the terms at issue. Parole E and extrinsic E are admissible
Determining Complete Integration
Judge Q only. Look for:
- merger clause (e.g., “contain the complete and entire agreement of the parties”)
- Details with which the k sets for the provisions and the k’s length
- Use “all the circumstances” test and consider proffered Parole E and extrinsic E in connection with that
Purpose for which Parole E is introduced
- to explain or interpret a term or terms
- to supplement the term or terms
- to contradict a term or terms
Parole E to explain or interpret a term
Maj JDX: parole E is always admissible for this purpose.
Min: only if patently ambiguous
Parole E - supplement terms
Parole E is admissible for this unless there’s complete integration. However, the UCC allows trade usage, COD, COP in sale of goods cases to supplement the terms of a written agreement.
Parole E - to contradict
admissible unless there’s full integration.
when is Parole E N/A?
- Subsequent Agreements - DNA to subsequent agreements entered into after the execution of the written document
- Collateral Agreements - Parole E rule doesn’t affect agreements b/w the parties that are entire distinct from the written agreement of the k at issue (can use parole E)
- Attacks on the validity of the written agreement (see next card)
Parole E Rule N/A - Attack on Validity of the written agreement
Parole E will not bar efforts to prove that the written agreement is invalid or unenforceable. A party can assert this by showing:
- failure of an oral condition precedent to the agreement
- absence of consideration
- mistake or duress
- fraud
- reformation
Attacks on Validity of Written Agreement - Reformation
Parole E is n/a where a party alleges facts entitling him to reformation of the written agreement. To obtain reformation, pf must show:
- there was an antecedent valid agreement
- which is incorrectly reflected in the writing (e.g., by mistake); &
- proof of these elements is established by C&C E
