Interpretation

Question 1

Parol Evidence Rule

Answer 1

Terms of an oral written agreement are not enforceable if they were entered into prior to or simultaneously to written contract
- Contracts want deals to be written down to enforce efficiency

(1) binding integrated agreement discharges prior agreements that are inconsistent
(2) binding completely integrated agreement discharges prior agreements that are within its scope
(3) integrated agreement that is not binding or is avoidable and avoided does not discharge a prior agreement

Question 2

Integrated Agreements (209)

Completely and Partially Integrated Agreements (210)

Answer 2

IA: A writing or writings constituting a final expression of one or more terms of an agreement

CoPIA:
(1) completely integrated a complete and exclusive statement of the terms
(2) agreement, other than a completely integrated agreement

Question 3

Does P’s lease to rent out a room from D with the agreement to only sell soft drinks and not tobacco after orally agreeing that P would be the exclusive seller of soft drinks to find that company next-door is selling both products fall under the parole evidence rule where the oral agreement is integrated consistently with the written agreement and so exclusivity should be granted?

Answer 3

No, the written agreement embraces the alleged oral contract so the oral contract itself is an admissible —> P does not have the exclusive right to self soft drinks

• a binding, completely integrated agreement extinguishes prior promises within the scope (i.e., something that should have or would have been included in the written agreement). Final expression is in the writing
• Rest 2nd, 214 Evidence of Prior or Contemporaneous Agreements and Negotiations to establish whether writing is integrated is NOT pertinent because this contract only relies on “four corners” of the contract for intended meaning

Gianni v. R. Russel & Co (1924)

Question 4

When P exercised the option to buy-back their ranch after going bankrupt, could they include the option provision to keep the property in the family as admissible under the parole evidence rule?

Answer 4

Yes, the option to keep the house within the family is admissible under parol evidence

• the oral agreement is something that would naturally be made as a separate agreement by the parties drafting the written contract (binding completely integrated agreement, not final expression of all terms) —> oral agreement admissible
• Contextualist court

Masterson v. Sine (1968)

Question 5

Parol Evidence Steps

Answer 5

1) Determine if parties one to include promises not in the writing.

2) determine the level of integration
(a) Partial (213, 1): consistent with writing, if yes —> enforceable. if not —> not enforceable (Davis)
(b) Complete (213, 2): if within scope —> not enforceable. If outside scope could be separate agreement —> enforceable

3) Consistent Scope —> subject matter to know parties intent

Question 6

4 Corners vs. Contextual Judge

Answer 6

4 corners: just look at contract to find promises
- Sometimes people get screwed, could deter efficiency
- Encourages people to put things in writing

Contextual (more popular): looks at docs & context to know level of integration

Question 7

Can the Service Agreement for the dealership that was written but never signed or incorporated into the original Buy-Sell agreement, allowing D to purchase the dealership at a reduced price by paying P $50/ vehicle sold by both dealerships for seven years be integrated into the original agreement that contains a merger clause?

Answer 7

No, merger clauses in agreements prevent consideration of extrinsic evidence (service agreement) for the intent of parties because they represent a final and complete integration of their agreement

• “Four corners” court: we’ve discerned the parties’ intent —> cannot incorporate other things

Dissent: Merger clause is nonsensical boilerplate, look at extrinsic evidence.

Nelson v. Elway (1995)

Question 8

When P thought they signed a mortgage loan with a two-year prepayment as stated by their closing agent when presented with two seemingly identical stacks of paper, but discover they signed and almost identical document for five years instead is the five-year pre-payment penalty enforceable and can they invoke evidence to claim (1) there was a breach of contract by the mortgage company and (2) the closing agent committed common law fraud?

Answer 8

No (1) Davises not justified and relying on Bogdanovich’s oral statement that the stocks identical and there was no fraud because (2) Davises had to show they were relied and justified on what Bagdonovich said, but they should’ve done their due diligence—relying on anything but the signed stack is unreasonable.

• Loan agreement is fully integrated: final in nature and creates completed legal obligation between parties

Extrinsic evidence cannot be used to contradict terms in a (partially or completely integrated) contract but can be used to prove fraud. (2005)

Davis v. GN Mortgage Corp. (2005)

Question 9

Rest 214: Evidence of Prior or Contemporaneous Agreements and Negotitations

Answer 9

(a) writing is or is not integrated
(b) that integrated, is completely or partially integrated
(c) meaning of the writing, whether or not integrated
(d) legality fraud, duress, mistake, lack of consideration, or other invalidating cause
(e) ground for granting or denying rescission, reformation, specific performance, or other remedy

Question 10

Textualist v. Contextualist Approach

Answer 10

Textualist = Contract has “plain meaning” and only one interpretation while ambiguous terms are susceptible to more than one (only if court determines text ambiguous will consider extrinsic evidence to prove contracts meaning)

• accuracy
• encourages writing in contracts
• savings (less disputes—clearer what the judge wants, clearer to parties)
• Not possible to be a truly textual court (need definitions which come from outside, extracting meaning from someone besides the contract writers)

Contextualist = (supported by Rest.) Considers extrinsic evidence in addition to language and structure of contract itself to determine if contract is susceptible to multiple meetings.

• Parties are not omniscient and they are fallible, as are predictions, so it’s important to include other stuff
• no parties are so sophisticated to entirely exclude extrinsic evidence

Question 11

Should extrinsic evidence to prove a term is ambiguous from the reciprocal cancellation provision (allowing either party to cancel the contracted sale of property if the pending litigation didn’t conclude by a certain time frame) be admitted given the contract contains a merger clause stating the parties intent is fully expressed in the agreement?

Answer 11

No. Extrinsic evidence regarding parties intent is not admissible to explain a written contract (parol evidence)

• a complete and unambiguous contract should be enforced, according to its terms without reference to evidence from outside the contract itself

W.w.w. Associates Inc. v. Giancontieri (1990)

Question 12

Should extrinsic evidence from D’s indemnity clause cover P’s property in the parties contract for D to replace P’s steamed turbine metal cover (which covered all loss/damages from injury to property) when P’s property was damaged during the work?

Answer 12

Yes, extrinsic evidence of indemnity clause was relevant should be admitted, but did not cover injuries to P’s property (since P is not a third-party).

• contextualist approach uses extrinsic evidence to find meeting at the outset of ambiguity

Pacific Gas & Electric Co. v. GW Thomas & Rigging Co (1969)

Question 13

Should we admit D’s oral evidence that she is considered to be Young’s wife under the escrow agreement, designating her the beneficiary of Young’s insurance money and admissible under parole evidence, even though Young was previously married under a different name with a surviving wife and Gertrude was the only known or considered wife at the time the contract was made?

Answer 13

Yes, Gertrude was the only individual believed to be the wife of Young at the time the contract was executed.

Interpretation is discerning the intent of the parties (objective manifestation thereof) because that is what’s wealth-enhancing.

Rest. 2d 201(1) Whose Meaning Prevails = Where parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning

In re Soper’s Estate (1935)

Question 14

Interpretation: What Courts Look at to find Parties’ Intent

Answer 14

Everything. Extrinsic Evidence that can clarify the disputed language:

-Trade Usage Evidence = how parties in the business or industry of disputing parties customarily understand the contract term

-Course of Performance Evidence = The parties have performed their obligations under their particular contracted issue in the past.

-Course of Dealing Evidence = the parties have behaved towards each other when acting according to prior legal agreements

-Negotiations, statements made at time of contract execution, commercial circumstances, TEXT

Question 15

How should the court interpret the word “chicken” as to include “stewing chicken” or “fowl” such as in the regulatory definitions and cited by market experts or by P’s interpretation to define it more narrowly as solely suitable for broiling and frying?

Answer 15

The court should define it broadly to include “fowl”. D was new to the trade and had no actual knowledge of what P argues is the trade usage of the term. P did not show that the usage of chickens to only broilers is notorious and universal.

Frigaliment Importing Co. v. BNS International Sales Corp (1960)

Question 16

Is D liable for failing to price protect P’s 1969 purchased of asphalt under a long-term supply contract where D raised the price from $44-$76 twice during the course of their business, given D’s previous trade usage behavior of holding oil prices for P, trust in the Oahu asphalt supplier and paver market, and Hawaii’s embracing of the UCC?

Answer 16

Yes, a reasonable jury could have found that price protection was reasonably consistent with the express term of Shell’s posted price at delivery.

Courts admit evidence of customary trade usage and course of performance for parties to demonstrate implied contract terms

• UCC supports that these sources outweigh “express terms” unless they cannot be “reasonably reconciled”

Rest. 2d 222, Usage of trade = usage having such regularity of observance in a place, vocation or trade so as to justify an expectation that it will be observed with respect to the particular agreement
1) system of rules even though particular rules are changed from time to time
2) existence and scope are determined as questions of fact. If usage is embodied a written trade code, the interpretation is to be determined as a question of law.
3) usage of trade in the vocation or trade in which the parties are engaged, gives meaning to/supplements/qualifies their agreement

Rest 2d, 223: Course of Dealing =
1) a course of dealing is a sequence of previous conduct between parties, which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct
2) unless otherwise agreed, a course of dealing between parties gives meaning to or supplements their agreement

Nanakuli Paving & Rock Co. v. Shell Oil Co (1981)

Question 17

Should P be entitled to 35% of the consideration of the joint venture granting GM the Hummer trademark under P’s representation agreement with D when P was not involved in negotiating agreement and the role was to solely license the Hummer trademark as an exclusive non-employee representative?

Answer 17

No, unlikely that D would have intended for P to receive a commission on the joint venture agreement when P played no role in negotiating it.

A contract will not be interpreted literally if doing so would produce absurd results

• absurd = against intent of parties

Beanstalk Group, Inc. v. AM General Corp (2002)

Question 18

In an agreement for P to furnish D’s jet fuel, did D manipulate requirements through fuel freighting (lifting fuel and excess of the requirements at one station to preclude loading at another), given the parties prior trade usage behavior of allowing excess sums of fuel at certain locations and the UCC’s adherence to the standards of a parties relationship?

Answer 18

No, these performances consistent with good faith under the UCC and they did not breach.

Allocated risk of selling volatile good (oil). If we ruled bad faith, we deny them the fruits of their bargain—the ups and downs of entering into this industry

“Good faith” in a requirements contract speaks to trade usage, course of dealings. “Bad faith” can be exercising discretion in an exploitative way.

Eastern Air Lines, Inc. v. Gulf Oil Corp (1975)

Question 19

UCC 1-201 Good Faith

Rest 2d 205: Duty of Good Faith & Fair Dealing

Answer 19

UCC 1-201 Good Faith in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. assured in all contracts, but not negotiating price
- Want to imply that at T1 parties wanted this
- Contracts make you vulnerable so we don’t want to take advantage of vulnerabilities
- All contracts are incomplete
-Part of every contract, begins at performance and ends with K ends

Rest 2d 205: Duty of Good Faith & Fair Dealing = Every contract imposes upon each party, a duty of good faith and fair dealing in its performance and enforcement.

Question 20

Rest 2d 202, Rules in Aid of Interpretation

Answer 20

1) words and other conduct interpreted in light of all circumstances to ascertain parties intent

2) writing is interpreted as a whole, and all writings are part of the same transaction interpreted together

3) intention manifested where
(a) generally has a prevailing meeting, it is interpreted with that meeting;
(b) technical terms and words of art are giving their technical meeting when using a transaction within their technical field

4) where an agreement involves repeated occasions performance with opportunity for rejection, any course of performance accepted or acquiesced without objection is given great weight in the interpretation.

Question 21

Did D’s conduct breach the implied covenant of good faith and fair dealing when it insisted that she sell her petroleum gas distributorship after her husband died triggering the contracts key man clause terminating the parties contracted business obligations, but with only offering P a five day deadline to sell after multiple abrasive phone calls and withholding the option for her to sign her own contract?

Answer 21

Yes. D’s conduct breached the implied covenant of good faith and fair dealing because it extends to the post contract performance of each party (i.e. return of business records and other obligations long after the expiration of the contract term all of this subject to implied covenant.)

• should have apologized and offered condolences!

Good faith and fair dealing is owed, even after keyman clause terminated on the contract.
- key man clause allows contract to be with who you want it to be with

Carmichael v. Adirondack Bottled Gas Corp. (1993)

Question 22

Did D breach the covenant of good faith and fair dealing when they, over a span of 19 months, dodged the persistent outreach of P’s attorney and then successor, denying P’s confirmation to exercise the option to enter into $150k 99year lease for the tennis club he was already leasing before it’s deadline pass, which would result in a tripled rent increase?

Answer 22

Yes. D breached the covenant of good faith and fair dealing. They knew that P wanted to enter into the 99 year lease term and said P failed to tender the money as required, but evidence showed that P’s attorney honestly believe that the money was not due in full until the party signed all documentation closing the deal.

Evasions in the performance of a contract violate the covenant of good faith and fair dealing, even though the actor believes his conduct to be justified” by denying the other to enjoy the benefits (fruits) of contract.

Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Center Associates (2005)

Question 23

Was it a avowedly opportunistic and in bad faith for D to withhold information that the firm was going to be sold, precluding P from collecting 30x the amount of money from stocks that he did when he quit, given that the stock purchase agreement provided employees their stocks at book value upon termination, which is the accounting firm of the work / # of shares outstanding?

Answer 23

Yes. D had duty to disclose material information about Corp. stocks because stock purchase agreement said that employees would take the value of the stock into account when deciding whether or not to leave the corporation.

• the potential stock value was what P bargained for at T1

Good faith and fair dealing is violated when one party interferes with the right of the other enjoy the benefits (fruits) of the bargain .

Jordan v. Duff & Phelps, Inc. (1987)

Question 24

Interpretation of Integrated Agreement 212

Answer 24

(1) The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in light of the circumstances in accordance with the rules stated in this chapter.

Question 25

Contradiction of Integrated Terms (215)

Answer 25

Except the state in the proceeding section where there is a binding agreement, either completely are partially integrated, evidence of prior contemporaneous, agreements or negotiations is not admissible in evidence to contradict the term of the writing

Question 26

Consistent Additional Terms 216

Answer 26

(1) evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that agreement was completely integrated

(2) an agreement is not completely integrated if writing omits a consistent additional term which is
(A) agreed to separate consideration, or
(B) such a term as in the circumstances might naturally be omitted from the writing

Question 27

Final Expression: Parol or Extrinsic Evidence UCC 2-202

Answer 27

Terms with respect to which the confirmatory memoranda of the parties agree, or to which our other otherwise set forth and writing intended by parties as final expression of their agreement with respect to such terms as our included there and may not be contradicted by evidence of any prior agreement or of a contemporaneous or agreement, but may be explained or supplemented

A) by course of performance, course of dealing, or usage of trade (1-103); 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

Question 28

Whose Meaning Prevails 201

Answer 28

1. If the party agreed on the meaning of a term at T1 it governs.
2. If the parties disagreed on the meeting at T1, but one understood or should have understood the other’s meaning (and the opposite is not true), the meaning that was intended by one and understood by the other governs
3. If parties had different intentions and neither knew/should have known the meaning intended by the other, the courts will search for the most objectively reasonable meeting.

Question 29

Standards of Preference in Interpretation 203

Answer 29

In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable

A) an interpretation which gives a reasonable, lawful and effective meaning to all the terms is preferred to an interpretation of leaves a part unreasonable, unlawful, or of not effect

B) express terms are given greater weight than course of performance course of dealing and use of trade. Course of performance is given greater weight than course of dealing or usage of trade; course of dealing is giving greater weight than usage of trade.

C) specific terms and exact terms are given greater weight than general language

D) separately, negotiated or added items are given greater weight than standardized, terms or other terms and not separately negotiated

Question 30

Supplying an Omitted Essential Term 204

Answer 30

When the party is to a bargain, sufficiently defined to be an a contract, have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court

Question 31

Interpretation Against the Draftsmen 206

Answer 31

In choosing among the reasonable meaning of a promise or agreement or a term there of, that meaning is generally preferred which operates against the party who supplies the words or are from whom the writing otherwise proceeds

Question 32

Output, Requirements, and Exclusive Dealings UCC 2-306

Answer 32

1. 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 that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded
2. Lawful agreement by either the seller or the buyer for exclusive dealing in the kind concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and the buyer to use best efforts to promote their sale