Interpretation Flashcards
Parole Evidence Rule Generally
Parole evidence rule is a rule of evidence that under certain circumstances will prohibit the admission of extrinsic evidence for certain purposes.
Certain Circumstances - Parole evidence rule only applies to contracts which are integrated (reduced to a writing)
Extrinsic Evidence - Anything which is outside the four corners of the integration
Integration
An integration occurs when the parties intended the writing to be a final expression of their agreement. An integration can either be partially or completely integrated.
The court will look to all the evidence to determine whether the writing is a partial or complete integration.
NOTE- The UCC presumes all writings are partially integrated.
Merger Clauses
A merger clause is one that recites that the agreement is complete and final statement of the parties agreement.
In large commercial contracts, it is usually dispositive (complete integration)
In other contract, it is considered as one factor for determining integration.
Common Law Parole Evidence
Complete Integration - If a contract is found to be a complete integration, then the parties are prohibited from admitting extrinsic evidence for the purpose of contradicting or supplementing the agreement
Partial Integration - If he contract is found to be a partial integration, the parties are prohibited from admitting extrinsic evidence for the purpose of contradicting, BUT are not prohibited from admitting extrinsic evidence for the purpose of supplementing.
UCC Parole Evidence
Terms set forth in a writing intended by the parties as a final expression of their agreement may not be contradicted by evidence of any prior agreement or contemporaneous oral agreement but may be explained or supplemented by:
1) Course of performance, Course of Dealing, Usage of Trade; and
2) evidence of consistent additional terms (supplement) unless the court finds the writing to have been intended as a complete and exclusive statement of the terms of the agreement.
NOTE - Merger clause is dispositive
Big 3 Evidence
Course of Performance - Conduct or sequence of behavior repitisously adopted by the parties in their performance of the contract
Course of Dealing - Conduct or sequence of behavior repitisously adopted by the parties in their performance of previous independent contracts between themselves
Usage of Trade - Conduct or behavior so readily observable in the location, vocation, or trade such that the parties should have known it would be part of the contract
Common Law Exceptions to Parole Evidence Rule
CREMIC
Conditions Precedent
Rights in Equity
Explaining
Modifications
Invalidity
Collateral Agreements
Invalidity and Conditions Precedent (Parole Evidence Rule)
A party to a written contract can attack its validity on the following grounds
Formation Defects - Formation defects may be shown by extrinsic evidence
Conditions Precedent - If a party asserts there was an oral agreement that the written contract would not become effective until a condition occurred, all evidence of that understanding may be offered.
Collateral Agreements and Naturally Omitted Terms (PER)
Extrinsic evidence is admissible if the evidence is collateral to the written obligation
Naturally Omitted Terms - Evidence of naturally omitted terms may be admitted. A term is naturally omitted if (1) it does not conflict with the integration and (2) it concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument.
Interpretation (PER)
If there is uncertainty or ambiguity in the written agreement’s terms or a dispute as to the meaning of those terms, parole evidence can be received to aid the fact finder in reaching a correct interpretation
If the meaning is plain, no parole evidence is admissible
Explaining at common law requires some ambiguity to be present (not UCC)
Consideration, Reformation, and Modifications (PER)
True Consideration - PER will not bar extrinsic evidence showing true consideration was paid
Reformation - If a party to the agreement alleges facts entitling him to reformation, PER doesn’t apply
Modifications - Extrinsic evidence may be offered to show subsequent modifications of a written contract
General Rules of Construction
Construed As a Whole - Contracts will be construed as a whole (specific clauses will be subordinated to the contract’s general intent)
Ordinary Meaning - Courts will construe words according to their ordinary meaning unless it is clearly shown that they are meant to be used in a technical sense
Inconsistency - If provisions appear to be inconsistent, written or typed provisions will prevail or printed provisions
Validity - Courts will generally try to reach a determination that a contract is valid and enforceable
Ambiguities - Ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention to the parties
UCC Gap Filler Price
If the parties have not otherwise agreed on a price, then the price shall be a reasonable price at the time and place of delivery if:
1) the contract says nothing as to price;
2) the price is left to be agreed by the parties and they fail to agree; or
3) the price is to be set by a third party and not so set
UCC Gap Filler Quantity for Output or Requirement
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, except no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate any normal or comparable prior output or requirements may be tendered or demanded.
UCC Gap Filler Delivery
Unless otherwise agreed:
a) the place for delivery of goods is the seller’s place of business or if he has none his residence; but
b) If the goods are identified at the time of formation and both parties have knowledge of the goods at formation, then that is the place for delivery
