If there is an enforceable deal, what are its terms? Flashcards
PER - complete integration
– Complete Integration. If a written contract is the final and complete agreement of the parties (i.e., it is a fully integrated contract), the parol evidence rule prohibits parties from introducing prior oral statements or writings or contemporaneous oral statements that ADD TO OR CONTRADICT the written contract.
– If a contract contains a merger clause (“This is the complete and final agreement.”), there is a presumption of complete integration.
– On the MBE, parol evidence questions will generally state (or assume) that the contract is completely “integrated.”
PER - partial integration
– Partial Integration. If a written contract is the final (but not complete) expression of the parties’ agreement, the parol evidence rule prohibits parties from introducing prior oral statements or writings or contemporaneous oral statements that CONTRADICT the written contract.
– Whether a writing is integrated (completely or partially) is a question of law for the judge.
PER - purpose & 5 exceptions
– The PER is essentially trying to prevent parties from unilaterally altering terms to existing binding agreements by trying to bring in prior/contemporaneous negotiations that weren’t memorialized in the writing.
»> Many of the exceptions below is not a party trying to alter terms but instead trying to say there was no valid agreement to begin with.
»> The exceptions (i.e., situations in which parol evidence is admissible):
– parol evidence is admissible to prove that the contract never became operative because of fraud, duress, mistake, illegality, or failure to satisfy a condition precedent.
»> **here you are not trying to post-hoc change the terms of the agreement, you are just trying to get out of it altogether
– parol evidence is admissible to establish the meaning of an ambiguous term, to show that consideration was (or was not) in fact paid, to show the nature or source of consideration, to establish a case for reformation (i.e., the writing contains a clerical error), or to prove unconscionability.
– oral or written statements made AFTER the contract was executed—usually as part of a contract modification—are not subject to the PER; thus, such statements are generally admissible
»> **subject, of course, to SOF issues and considerations/PLD issues
– under the UCC, the following evidence (in order of preference) is admissible to explain or supplement a contract, regardless of whether the contract is integrated or ambiguous: (1) course of performance (the same parties in the same contract); (2) course of dealing (the same parties in earlier contracts); and (3) usage of trade (other parties in the same industry).
– if a prior or contemporaneous additional agreement is of a type that would “naturally and normally” be contained in a separate agreement (with separate consideration), its admissibility is not barred by the PER (e.g., a side deal).
implied terms - common law and UCC (generally)
- At common law, if the parties failed to agree on a material term, a court would not enforce the agreement because of indefiniteness. Under modern law, if a contract has been formed that fails to address one or more terms, the court will fill-in those terms as follows:
- Common Law and UCC: All contracts contain implied promises of good faith, fair dealing, and reasonable efforts in connection with performance and enforcement (not bidding).
– A gives B the exclusive right to sell A’s computers in Tennessee for one year in return for B’s promise to give A 50% of any profits B may make from selling A’s computers. The contract does not require B to sell (or even attempt to sell) any specific quantity of A’s computers. Is the contract enforceable?
»> Yes, because B has an implied duty to use “reasonable efforts” to sell A’s computers.
implied terms - 6 UCC gapfillers
• UCC: In addition, the UCC has gap-fillers
– Overview • Time and Place of Payment • Place of Delivery • Risk of Loss • Price • Date of Delivery • Mode of Delivery
implied terms - UCC gapfillers (time, place, and mode of payment)
– Time and Place of Payment
• Under the UCC, payment is due at the time and place at which the buyer is to receive the goods.
– In an installment contract, payment is due at the time and place at which the buyer is to receive each installment.
– The buyer may pay by check, but the seller may demand cash; in such event, the buyer must be given a reasonable time to obtain the cash.
implied terms - UCC gapfillers (place of delivery and risk of loss - non-delivery contracts)
• Non-Delivery Contracts (i.e. no common carrier involved)
– Place of Delivery. If the contract does not call for (expressly or implicitly) delivery, the UCC presumes that the buyer will pick up such goods at the seller’s place of business or, if none, the seller’s residence.
– Risk of Loss. In such cases, risk of loss shifts to the buyer upon
»> physical receipt by the buyer if the seller is a merchant or
»> tender (making available) by the seller if the seller is a non-merchant
implied terms - UCC gapfillers (place of delivery and risk of loss - delivery contracts)
• Delivery Contracts. The UCC recognizes two types of “delivery” contracts, which are used when the parties expressly provide for delivery by common carrier or the circumstances are such that common carrier delivery is implied:
– Presumption: If a contract calls for delivery but is silent as to risk of loss, the UCC presumes that the contract is a “shipment” contract.
– Shipment Contracts. Such contracts are created by the phrase “FOB or FAS Seller’s location.” Under such contracts, the seller’s risk of loss ends when the seller places the goods with a common carrier.
»> Seller’s Breach: Risk of loss remains with the seller if the seller is in breach (e.g., shipped nonconforming goods).
– Destination Contracts. Such contracts are created by the phrase “FOB or FAS Buyer’s location.” Under such contracts, the seller’s risk of loss ends when the goods arrive at buyer’s location.
»> Buyer’s Breach: Risk of loss is borne by the buyer if the buyer is in breach (e.g., anticipatory repudiation), but the buyer is entitled to any insurance proceeds the seller obtains for such loss.
implied terms - UCC gapfillers (price)
• The parties can conclude a contract for sale even though the price is not settled. In such case, the price is a reasonable price at the time for delivery if:
– (a) nothing is said as to price;
– (b) the price is left to be agreed by the parties and they fail to agree; or
– (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency (e.g., Kelley Blue Book) and it is not so set or recorded.
implied terms - UCC gapfillers (date and mode of delivery)
• Date of Delivery: The time for shipment or delivery or any other action under a contract if not agreed upon by the parties shall be a reasonable time. Reasonableness depends on the circumstances, such as: – how complicated the good is to make – past dealings of the parties – the practice of the industry – the needs of the buyer
- ***A party must give NOTICE before treating a sales contract as breached due to the passage of a reasonable time for performance. – can’t just walk away without him knowing
- Mode of Delivery: The default rule is that goods will be delivered and received in a single lot.
warranties - express
• Express: statements of fact, models, samples, etc. that are part of the buyer’s basis of the bargain; strict liability for breach
»> express warranties CANNOT be disclaimed (good for buyer)
– BUT, the Parol Evidence Rule may bar evidence of express warranties made prior to the execution of an integrated contract (bad for buyer)
– note: any statements regarding quality of goods are typically not express warranties, but mere puffery (ex – “this car is top quality!”)
warranties - implied UCC (3 types and how they can be disclaimed)
– Implied Warranty of Merchantability (this warranty applies only to Merchants who sell goods of this kind): the goods must be fit for their ordinary purposes.
»> This warranty may be disclaimed generally (e.g., by selling “as is” or “with all faults”) OR specifically (e.g., by a CONSPICUOUS disclaimer mentioning “merchantability”).
– Implied Warranty of Fitness for a Particular Purpose: this warranty is made by any seller who knows the buyer’s specific needs and knows that the buyer is relying on the seller’s expertise to select suitable goods.
»> This warranty may be disclaimed generally (e.g., by selling “as is” OR “with all faults”) or specifically (e.g., by a CONSPICUOUS written disclaimer).
»> ex) buyer asking dealer what headlight they need or special oil
– Automatic Warranties. The seller also impliedly warrants that she (1) has good title; (2) has the right to convey; and (3) there are no liens or encumbrances on the goods.
implied warranties - UCC other notes (privity, notice, defenses)
- Privity. Article 2 requires horizontal privity. Under the majority view, a person (other than the buyer) bringing suit for breach of warranty must be (1) a natural person in the buyer’s family or household, or a guest in the buyer’s home and (2) must be seeking damages for personal injury.
- Notice. As a prerequisite to filing a breach of warranty claim, the buyer must give pre-suit notice to the seller within a reasonable time after the breach is discovered or should have been discovered.
- Defenses. Assumption of the risk and unforeseeable misuse of the product are defenses to claims for breach of warranty; contributory negligence is not a defense.
Requirements/Output/Exclusive Contracts (general rule)
• Although no numerical quantity is specified in requirements, output, and exclusive contracts, such contracts are sufficiently definite (and enforceable) because the quantity is capable of being made certain by reference to objective facts:
o A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith.
»> If buyer agrees to purchase from seller all of the widgets buyer will require (or need) in 2020, this is a valid requirements contract.
If seller agrees to sell all of the widgets it manufactures (or produces) in 2020 to buyer, this is a valid output contract.
»> If buyer agrees to purchase from seller such widgets as buyer may wish (or desire or decide) to order in 2020, this is an illusory contract that is unenforceable.
Requirements/Output/Exclusive Contracts (specific rules)
• Outputs & Requirements Contracts
o It is assumed that the parties to an output or requirements contract will act in good faith. As a result, neither party may tender or demand a quantity unreasonably disproportionate to:
»> (a) any stated estimate; or
»> (b) any normal or otherwise comparable prior output or requirements.
o A party may in good faith discontinue a particular line of business if it proves UNMARKETABLE OVER A PROLONGED PERIOD OF TIME
»> However, curtailment of output by the seller or suspension of purchases by the buyer merely because the contract in question is unprofitable is not by itself sufficient to constitute good faith.
o In addition, the “rights” in requirements and output contracts are assignable as long as the assignee does not disproportionately alter the quantity.
• Exclusive Contracts
o A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
