K Terms Flashcards
WORDS OF THE PARTIES NOT WRITTEN IN THE CONTRACT AND THE PAROL EVIFDENCE RULE
What is the parol evidence rule (“PER”)?
NOTE: NY Distinction
WHAT IS THE PER?
→ PER keeps out evidence of a PRIOR or CONTEMPORANEOUS agreement (either oral OR written) that contradicts a later WRITING
→ Triggering Facts:
1) Final Written Words [Full or Partial Integration - written and final words that are either complete (full) or incomplete (partial)]
2) Earlier Words of both Parties
→ For Purposes of the Bar Exam:
The PER is like an evidence rule in the sense that…
1) The issue is whether evidence can be considered (i.e. admissible)
2) Whether parol evidence can be considered often depends on the purpose for which the evidence is to be introduced
**VERY IMPORTANT
NOTE: a PER problem REQUIRES a writing, so if the fact pattern involves an oral agmt, it’s a SOF problem, NOT a PER problem
**
WHEN PAROL EVIDENCE CAN BE CONSIDERED:
Under PER the parol evidence can be considered…
1) to correct a CLERICAL ERROR: Ct may consider parol evidence for the for purpose of determining if there was a clerical mistake (e.g. a typo)
2) to establish a DEFENSE against formation: Ct. may consider parol evidence for purpose of determining if there is a defense to enforcement of agmt. (e.g. fraud, duress, mistake, illegality, CONDITION PRECEDENT by extrinsic evidence)
3) to interpret a VAGUE or AMBIGUOUS term: Ct. may consider parol evidence for purpose of resolving ambiguities in the written contract (but NOT for a term that has a plain/ordinary meaning)
4) to supplement/add to a PARTIALLY integrated writing (a final stmt of the terms included, but not a COMPLETE stmt of terms agreed to, e.g. a lease for the ballroom that says nothing abt bridal suite)
NOTE: if there is a “merger clause” then this strengthens the PRESUMPTION that agmt is complete but is not conclusive
WHEN PAROL EVIDENCE CAN NOT BE CONSIDERED:
Under PER the parol evidence can NOT be considered…
1) to CHANGE or CONTRADICT TERMS in the written deal: Ct may not consider parol evidence for the purpose of changing or contradicting terms that appear in the written contract.
2) to ADD TO THE TERMS in the written deal: Ct may not consider parol evidence for the purpose of adding to the written deal UNLESS the ct. finds:
(a) that the written agreement was only a PARTIAL INTEGRATION; AND
(b) that the additional terms would ordinarily be in a separate agreement
PER ≠ K MODIFICATION
NOTE: the PER has NOTHING to do w/ what happens AFTER an agmt is reduced to writing; so such info MAY NOT be kept out [this is a modification, so there may be a consideration or a SOF issue (if oral)]
CONDUCT
Conduct as a source of contract terms
How is conduct relevant to K interpretation?
Conduct can be a source of contract terms.
Conduct can…
1) Explain words in the K
2) Fill gaps in the K
ON THE BAR EXAM conduct takes one of three forms
Order of importance of conduct:
1) COURSE OF PERFORMANCE: what parties have done under THIS K in the PAST (same parties/same K); this is the BEST evidence
2) COURSE OF DEALING: what these parties have done under PRIOR Ks with each other (same parties/different but similar K)
3) CUSTOM and USAGE of trade : what is the custom in the INDUSTRY in similar Ks; this is the furthest removed from the K (different but similar parties / different but similar Ks) (e.g. it is customary in “x” industry for the Term in question to mean “Y”)
WARRANTIES OF QUALITY
TYPES
In the sale of goods (Art. 2/UCC), what are the 3 types of seller warranties?
If there is a warranty question on the BAR EXAM, the facts triggering the warranty will be:
1) There was a sale of goods
2) The buyer has received the goods
3) The buyer is not happy with the quality of the goods
3 TYPES OF WARRANTIES
1) EXPRESS WARRANTY: a seller is LIABLE for breach of an express warranty, which can be created by… (i) stmts of fact;
(ii) promises;
(iii) description of the goods;
(iv) use of a sample or model product (i.e. you DON’T have to use the word “warranty”)
→ BUT NOT opinions/general subjective stmts (e.g. “all our products are top quality”)
→ NOTE: art appraisals = opinion too
→ In order for stmt to = an express warranty, it must be a “basis of the bargain” (i.e. if the buyer COULD have relied on the stmt)
2) IMPLIED WARRANTY: TWO types…
2a) IMPLIED WARRANTY OF MERCHANTABILITY = warranty that the goods are fit for their ORDINARY PURPOSE
→ Key fact: Seller
(i) needs to be a “dealer” (i.e. a merchant- and ONLY a merchant); AND
(ii) Has SPECIALIZED knowledge abt the PARTICULAR goods in the trxn
2b) IMPLIED WARRANTY OF FITNESS for a PARTICULAR purpose = a warranty that the goods are fit for a PARTICULAR PURPOSE Key facts: Seller
(i) KNOWS the buyer has a special use for the good; AND (ii) buyer is RELYING ON THE SELLER to pick out goods suitable for that use
→ NOTE: ANY seller can make an implied warranty of fitness, merchant or not!
In the LEASE of goods (Art. 2A/UCC), what are the types of LESSORwarranties?
THIS IS IN NY ONLY General rule: Same warranties under UCC/Art. 2A as under Art. 2 (i.e. express warranty, merchantability, fitness) EXCEPTION: a “finance lease” where a bank serves as a lessor (after buying from mnfr); here, the warranty is ONLY operating by original mnfr. Limitation on warranty are the SAME as with a sale of goods (Art. 2/UCC) (i.e. disclaimer OR ltd of buyer’s remedies)
RISK OF LOSS
Who bears the risk of loss (ROL) in the sale of GOODS (Art. 2/UCC)?
Risk of loss = who bears the risk if:
1) After K has been formed…
2) goods are damaged or destroyed…AND
3) neither the buyer nor the seller is to blame
(e.g. rats droppings infiltrating coffee that was shipped
in the best available containers)
Risk = A party must still perform by providing new goods (if seller bears) OR by paying K price notwithstanding the loss (if buyer bears)
HIERARCHY: look for the following things in the ORDER listed…ANALYSIS MUST FOLLOW THIS ORDER
1) AGREEMENT LANGUAGE: the agreement of the parties cntrls as to who shall bear the RoL (usually agreement identifies who bears RoL)
2) BREACH: the breaching party bears ROL, EVEN IF the loss is unrelated to the breach (e.g. if seller was 2 wks late in coffee delivery then seller would bear risk for contaminated coffee
3) COMMON CARRIER DELIVERY and DAMAGED or DESTROYED GOODS (e.g. UPS):
The RoL SHIFTS to the buyer when the SELLER COMPLETES its DELIVERY OBLIGATION which depends on type of K…
3a) → IF SHIPMENT K: for Seller to complete delivery
obligation, seller must
(i) TRANSPORT goods to a common carrier;
(ii) make delivery ARRANGEMENTS; AND
(iii) NOTIFY buyer
If all 3 are met then buyer bears ROL even before he
gets the goods
NOTE: A K is PRESUMED a shipment K, unless
otherwise stated
3b) → IF DESTINATION K: for Seller to complete delivery obligation: (i) Goods must ARRIVE at DESTINATION Buyer bears ROL ONLY WHEN he gets the goods
LOOK for “Free on board” (FOB) often followed by
city/place
The ROL PASSES TO THE BUYER AT the named location… If it’s “FOB [city where SELLER is located]”, then it’s a SHIPMENT K
If it’s “FOB [ANYother city]”, then it’s a DESTINATION K
4) CATCH-ALL / NON-CARRIER CASES (e.g. buyer pick up or seller personal delivery): ROL depends on whether seller is a MERCHANT…
4a) MERCHANT SELLER: “RECEIPT RULE” – Risk shifts
to BUYER on RECEIPT of the goods
4b) NON-MERCHANT SELLER: ROL PASSES TO
BUYER ONCE seller makes the goods AVAILABLE to
the buyer (i.e. the seller “TENDERS” the goods)
NOTE: Defective goods: if buyer properly rejects them, the ROL does NOT pass to buyer until the goods are cured / accepted
Who bears the risk of loss (ROL) in the LEASE of GOODS (Art. 2A/UCC)?
NOTE: NY ONLY
THIS IS IN NY ONLY
General rule: the ROL is on the LESSOR
EXCEPTION: a “finance lease” where a bank serves as a lessor (after buying from mnfr); here, the ROL is on the LESSEE
WARRANTIES OF QUALITY
LIMITATIONS
What are the 5 limitations on warranty liability?
NOTE: NY DISTINCTION
LIMITATIONS on warranties…
1) SoL: 4-year SoL on warranty actions that generally STARTS running when TENDER of delivery is made (NOT when buyer learns of product defect)
2) PRIVITY: if π did not buy the product directly from ∆ then there is a possible lack of privily issue
* **NOTE: NY DISTINCTION: NY does not have privity rqmt for natural persons suing for breach of UCC warranty
3) BUYER’S EXAMINATION OF GOODS: there is NO implied warranty as to a defect which would be obvious with examination (only affects implied warranties BUT NOT express warranties)
4) LIMITATION ON REMEDIES:
(i) a seller CAN limit a buyer’s remedies for breach of ANY warranty (express OR implied) if the limitation is NOT UNCONSCIONABLE
NOTE: A limitation cannot be prima facie unconscionable. A limitation on buyers remedy for PERSONAL INJURY is presumed unconscionable (rebuttable)
5) DISCLAIMERS: a seller CAN disclaim an implied warranty, BUT CANNOT DISCLAIM an express warranty
→ To disclaim an IMPLIED warranty, K must provide “magic words” (i.e. “as is”; OR “with all faults”)OR by CONSPICUOUS disclaimer →To disclaim merchantability, must use the word “merchantability” in disclaimer (NOT the case with fitness)
***NOTE: NOT LIKELY TO BE ON BAR EXAM b/c many states actually have statutes disallowing disclaimers on implied warranties
