General Notes Flashcards
Degrees of Integration
(1) Completely integrated – a writing that says everything to which the parties have agreed
–Court will bar all extrinsic evidence
–Exceptions include evidence of fraud, mistake, undue influence, or duress, as well as evidence required to facilitate interpretation of a contract
(2) Partially integrated – a writing that completely addresses those topics it does address but does not include everything to which the parties agreed
–Court will only admit extrinsic evidence if the evidence is consistent with the terms in the writing
–Exceptions include evidence of fraud, mistake, undue influence, or duress, as well as evidence required to facilitate interpretation of a contract
(3) Not integrated – a writing that really does not express a final and complete agreement as to any of the terms it states
–All extrinsic evidence admitted
–A contract is not integrated at all if either it is not in writing or if it is in writing but none of its terms are final.
–arises in two circumstances:
(A) if the parties developed a document both understood to be a draft and ended up entering into an entirely oral agreement; or
(B) a party is claiming that a letter or document confirming the parties’ agreement (but which the other party never saw, agreed to, or signed) is a binding writing.
Types of evidence to which parol evidence applies
Extrinsic evidence of:
(1) prior oral or prior written contract term for which there is no extra consideration
(2) extrinsic evidence of a contemporaneous oral term for which there is no extra consideration
Types of evidence to which parol evidence does not apply
o extrinsic evidence of a subsequent oral or subsequent written contract term
o extrinsic evidence of an oral or written contract term if the parties agreed to separate consideration for that promise
o extrinsic evidence of a contemporaneous written term
UCC Parol Evidence Rule (2-202)
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
(a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and
(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
Williston Integration Approach
o If a contract contains a merger clause, Williston courts (and even many Corbin courts) conclude that the contract is completely integrated.
o Williston courts then ask whether a contract appears complete on its face
o treat it as a completely integrated agreement, unless the parties “naturally would have omitted” the extrinsic term from the writing.
— NOTE: “naturally would have omitted” is the major exception in the Williston approach
Corbin Integration Approach
o Corbin’s “All Evidence” approach reject the “Four Corners” idea and the “naturally would have omitted” test. Instead, courts applying this approach search for the parties’ actual intention with respect to integration.
o Only if the parties intended the contract to be completely integrated will it be treated as such.
Standards for determining inconsistencies in a contract
o Competing approaches:
(1) Complete negation test: parol evidence is consistent so long as the extrinsic evidence does not completely negate a term in the writing
(2) Reasonable harmony test: parol terms excluded if they are not in reasonable harmony with terms in contract and respective obligations of the parties
Mitchill v. Lath (Willistonian) Parol Evidence Rules
o three conditions must exist for parol evidence:
(1) The agreement must in form be a collateral one;
(2) it must not contradict express or implied provisions of the written contract;
(3) it must be one that parties would not ordinarily be expected to embody in the writing, or, put in another way, an inspection of the written contract, read in the light of surrounding circumstances, must not indicate that the writing appears “to contain the engagements of the parties, and to define the object and measure the extent of such engagement.” Or, again, it must not be so clearly connected with the principal transaction as to be part and parcel of it.
o How closely bound to the contract is the supposed collateral agreement is the decisive factor in each case.
Masterson v. Sine Parol Evidence Rules
o When only part of the agreement is integrated, the same rule applies to that part, but parol evidence may be used to prove elements of the agreement not reduced to writing.
o Credibility is a factor in assessing admissibility of parol evidence
o Difficulty in formulating a term can be considered in parol evidence analysis
Exceptions to the parol evidence rule
o Extrinsic evidence is always admissible if it will help a court interpret an ambiguous contract term in a written agreement
o Evidence of mistake, fraud, deceit, etc.
o Restatement section 214: agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish… (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating clause (e) ground for granting or denying rescission, reformation, specific performance, or other remedy
o Evidence of an oral condition precedent to formation can be admissible
o Restatement section 217: where the parties to a written agreement agree orally that performance of the agreement is subject to the occurrence of a stated condition, the agreement is not integrated with respect to the oral condition
o NOTE: evidence can be admitted for a limited purpose (e.g., to determine whether a mistake was made but not to determine whether a contract includes additional terms)
Trident Center v. Connecticut General Life Insurance Co. (California)
the exclusion of relevant, extrinsic, evidence to explain the meaning of a written instrument could be justified only if it were feasible to determine the meaning the parties gave to the words from the instrument alone.” 69 Cal.2d at 38, 442 P.2d 641, 69 Cal.Rptr. 561. This, the California Supreme Court concluded, is impossible: “If words had absolute and constant referents, it might be possible to discover contractual intention in the words themselves and in the manner in which they were arranged. Words, however, do not have absolute and constant referents.” Id. In the same vein, the court noted that “[t]he exclusion of testimony that might contradict the linguistic background of the judge reflects a judicial belief in the possibility of perfect verbal expression. This belief is a remnant of a primitive faith in the inherent potency and inherent meaning of words.”
Three types of ambiguities
- patent ambiguity: an ambiguity that appears on the face of a document;
a. ambiguous word or phrase
b. grammatical sloppiness
c. words/phrases contradict - latent ambiguity: an ambiguity that is only revealed after learning additional information; and
- an ambiguous “gap” in a contract: the parties’ contract is silent or incomplete regarding an issue that has arisen (courts’ efforts at addressing such gaps are referred to as “gap filling”).
Common Contract Interpretation Rules
(1) “Course of Performance” - The best evidence of a contract’s meaning is evidence of how parties performed contract at issue
(2) “Course of dealing) - The next best evidence of a contract’s meaning is evidence of how parties performed prior to contract
(3) Evidence of admissions and other significant statements made by the parties during their negotiations
(4) “trade usage”
(5) Consistency with public policy
(6) “contra proferentem” – against person who drafted it
Frigaliment Importint Co v. B.N.S. International Sales Corp.
“when one of the parties is not a member of the trade or other circle, his acceptance of the standard must be made to appear” by proving either that he had actual knowledge of the usage or that the usage is “so generally known in the community that his actual individual knowledge of it may be inferred.”
–In order to meet the alternative requirement, the law of New York demands a showing that “the usage is of so long continuance, so well established, so notorious, so universal and so reasonable in itself, as that the presumption is violent that the parties contracted with reference to it, and made it a part of their agreement.”
Landon v. Twentieth Century-Fox Film Corp.
If a party demonstrates ability to unambiguously claim provision, and contract fails to do so, presumption is that party did not claim provision
Warranties per trade usage
a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.
(2) Goods to be merchantable must at least
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, be of fair average quality within the description; and
(c) be fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) be adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
Warranties of fitness
A warranty of fitness is a type of warranty that asserts that the goods are suitable for the special purpose of the buyer, and such warranty will not be satisfied by mere fitness for general purposes.
Haines v. City of New York - Gap Filling
In the absence of an express term fixing the duration of a contract, the courts may inquire into the intent of the parties and supply the missing term if a duration may be fairly and reasonably fixed by the surrounding circumstances and the parties’ intent
