Gap-Fillers, Interpretation, Parole Evidence Rule Flashcards
Elements of the Implied Warranty of Title
Seller warrants that
- They have title to the goods
- They have the right to transfer the goods
- The goods are sold without liens
Implied Warranties under the UCC - List
Warranty of Title
Warranty of Merchantability
Warranty of Fitness for a Particular Purpose
How the implied warranty of title can be modified or excluded
Specific Language in the Agreement
Circumstances that give the buyer reason to know that seller does claim to have unencumbered title
Warranty of Merchantability
Goods are fit for the ordinary purpose for which they would be used.
Only applies if seller is a merchant.
How the warranty of merchantability can be displaced
Specific mention of Merchantability in the disclaimer AND a conspicuous disclaimer if in writing.
Or any language, such as “AS IS” or PATENT DEFECT that would be reasonably understood by a buyer to exclude the warranty.
Warranty of Fitness for a Particular Purpose
Goods are fit for the particular purpose the buyer intends to use them.
Applies where at the time of contracting the seller has good reason to know the 1.) particular purpose for which the product is purchased and 2.) the buyer is relying on the sellers skill or judgement in selecting reasonable goods.
Seller need not be a merchant
How the warranty of fitness for a particular purpose can be negated.
Where the disclaimer is in writing the language is CLEAR AND CONSPICUOUS. or
The goods have patent defects that are obvious.
UCC - Creation of Express Warranties
express warranties that the goods will conform to some standard are created when the seller
expressly or impliedly
makes them part of the basis of the bargain in the following ways:
- Any affirmation of fact or promise.
- Any description of the goods
- Any sample or model
need not use the words “warrant” or “guarantee”
the mere affirmation of the value of the goods does not create a warranty but is mere puffery.
UCC Default Rule for Missing PRICE term
Reasonable Price at the time established by the contract for delivery.
UCC Default Rule for missing TIME term
Reasonable time
Default Rule under the UCC for a missing PLACE OF DELIVERY term
Sellers Place of Business
Common Law Default Rule for Service and Employment Contracts
Missing Price Term
Reasonable value of the services rendered.
Common Law Default Rule for Service and Employment Contracts
Missing Duration Term
Employment contracts in nearly every jurisdiction are AT WILL.
Employer may fire and employee may quit at any time and for any reason.
Obligation of Good Faith and Fair Dealing
Good faith is defined as honesty in fact.
Good Faith for the Merchant
Honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
Open Price Term where the contract leaves open the price to be fixed by one of the parties.
The party must fix the price in good faith.
Where a contract contains a satisfaction clause or similar term
The determination whether the party performs the obligation is satisfied must be exercised in good faith
Situations where Open Quantity Terms will arise - list
Output Contracts - where buyer agrees to purchase all of a sellers output for a particular good.
Requirements Contracts - Seller agrees to provide a buyers requirements for a particular good.
Under the UCC the party entitled to determine the particular quantity of goods must make that determination in good faith
Open Quantity - UCC - Prohibition on unreasonably disproportionate demand or tender if:
- There was a Stated Estimate
2. Past course of dealing
Ambiguous Terms - Objective vs Subjective Meaning
Objective meaning of the language trumps subjective meaning with 2 exceptions.
Exceptions to the General Rule that Objective meaning trumps Subjective meaning of the terms
- Where one party has reason to know the other parties subjective understanding, the first party is bound by that subjective understanding.
- Where, at the time of contracting, both parties have the same subjective understanding, their subjective understanding will control.
Rule of Contra Proferentem
If an ambiguous term is included in a contract, in case of doubt it will be construed against the drafter.
Rule applies to all contracts drafted by one of the parties regardless of bargaining power.
Doctrine of Reasonable Expectations
Ambiguous terms may be construed against the drafting party if they conflict with the reasonable expectations of the parties.
Applies in principle to all contracts but mostly found in insurance contracts. Can also apply in other contracts of adhesion
Court will distinguish between dickered terms and boiler plate terms. Doctrine applies to defeat BOILERPLATE terms which are inconsistent with the reasonable expectations of the parties.
Usage of Trade
Extrinsic evidence used to fill gaps and resolve ambiguities.
Any practice or method of dealing having such regularity of observance in a place or trade as to justify an expectation that it will be observed with respect to the transaction in question.
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.
Course of Performance
When a PARTICULAR contact 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 in it without objection
What Prevails - Course of dealing - Course of Performance - Usage of Trade
Course of Performance prevails over Course of Dealing and Usage of Trade.
Course of Dealing prevails over usage of Trade
Can fill in gaps in contracts and with Course of Performance, it can establish a waiver or modification of express terms
Parole evidence Rule covers
Efforts to shed light on the meaning of an agreement by providing the negotiations of the parties leading up to the written agreement.
Includes oral and documentary evidence of negotiations and other communications between the parties that took place prior to, or contemporaneously with the execution of the contract.
What 2 questions need to be answered in a Parole Evidence Analysis
- What is the purpose for which the evidence is being offered?
- Does the evidence relate to a term in the contract which is integrated.
Fully Integrated
A contract is fully integrated when the terms contained within the contract are intended to be the final expression of those terms.
Completely Integrated
Parties intended the contract to represent a COMPLETE and EXCLUSIVE statement of all the terms.
Who decides whether the terms of a contract are partially or completely integrated into a contract.
The judge, not the jury will decide.
What Evidence will the judge rely on to decide whether terms are fully or completely integrated into a contract?
Whether there is a merger clause, the length and detail of the contract provisions themselves.
Merger Clause
Clause stating the writing contains the complete and entire agreement of the parties or other words to that effect.
Effect is that the contract is Completely Integrated
Purpose for Which Parole Evidence is offered
Explain or interpret terms - always allowed for this purpose
Supplement terms - allowed unless contract is completely integrated
Contradict terms - parole evidence is not allowed if the terms are integrated. Need not be completely integrated for to be barred for this purpose.
Where Parole Evidence Rule Will Not Apply - List
- Subsequent Agreements
- Collateral Agreements
- Attack on the Validity of the Written Agreement unless exception applies.
Parole Evidence Rule and Subsequent Agreements
Rule only applies to oral or written communications made prior or contemporaneously with the execution of a written agreement.
Does not apply to agreements entered into subsequent to the execution of the written document.
Parole Evidence Rule and Collateral Agreements
Parole Evidence Rule will not effect agreements that are completely distinct from the written agreement of the contract at issue.
Parole Evidence and Attacks on the Validity of the Contract
Parole evidence rule applies only to valid agreements. Does not bar the use of evidence to prove the agreement is invalid and unenforceable.
How a party can a party use parole evidence to attack the validity of the contract?
- Failure of an Oral Condition Precedent to the Agreement
- Absence of Consideration
- Mistake or Duress
- Fraud
- Reformation
Failure of an oral condition precedent
Evidence that the parties orally agreed to a condition precedent to the contract taking effect will not be barred by the parole evidence rule.
Absence of consideration and Parole Evidence Rule
Evidence that an agreement lacks consideration or that there was a false recital of consideration is not barred.
Parole Evidence and Fraud
Parole Evidence of fraud is always admissible in a majority of jurisdictions.
A minority will all admission of evidence of fraud unless the contract provides that the parties made no representations and relied on no representations during the course of making an agreement.
Reformation - Defined
based on the premise that the parties reached an agreement concerning the instrument, but when reducing the agreement to writing, as a result of mutual mistake or fraud, some provision or language was omitted from, or incorrectly stated in the instrument intended to be the expression of the actual agreement of the parties.
Reformation Requirements
- There was an antecedent valid agreement
- Incorrectly reflected in the writing by mistake or fraud
- Proof of these elements is established by clear and convincing evidence.