Parol Evidence and Damages Flashcards
Parol Evidence
Evidence of prior or contemporaneous agreements or negotiations may not be introduced to contradict the terms of a partially or fully integrated writing. In a fully integrated writing, the parties intend the writing to be the final expression of their entire agreement. In a partially integrated writing, the parties intend the writing to be the final expression of the terms contained in the writing but not a complete expression of all the terms agreed upon.
Role of the Judge
The judge determines, as a question of law, whether the evidence is partially integrated or wholly integrated. This is accomplished outside the presence of the jury.
The judge is a gatekeeper for parol evidence.
Classical Approach
Williston approach = the four corners approach. Idaho and about half the states prescribe to this approach. It says you only look at the writings on the paper itself.
Modern Approach
Corbin approach = Adopted from the second restatement in about half the states, but not in Idaho. This looks at the written agreement AND can allow testimony to be presented to the judge, but not the jury.
“Four corners” came from this case.
Thompson v. Libby
How to test for parol evidence
Ask:
- Is the contract in writing?
- Is it integrated, and to what degree?
- If UCC then use Corbin
- Idaho uses Williston (four corners), unless UCC
- Easiest way to determine fully-integrated under Williston is when a merger clause is found.
- If fully integrated (99%) of the time this is the case:
- If partially integrated:
- Other information can be used, provided it does not directly conflict with the writings.
- Judge is a gatekeeper
- Check for Exceptions:
Example of a Merger Clause
“This agreement encompasses the entire agreement of the parties, and supersedes all previous understandings and agreements between the parties, whether oral or written.”
Idaho and Merger Clauses
In Idaho, a merger clause is dispositive with one exception: Fraud. Most commonly fraud in the execution.
Concise definition of Parol Evidence
The parol evidence rule prevents extrinsic evidence from being used to contradict or vary the terms of a written contract that is intended as the full expression of the parties’ agreement.
Patent Ambiguity
Facial ambiguity– a person with a dictionary would be able to determine that a term has more than one meaning. The court may use any judicially recognizable authorities (dictionaries, encyclopedias, legal dictionaries, judicial notice of facts like the hour the sun rose on any given day.) Under a classical approach only patent ambiguity is considered.
Latent Ambiguity
Ambiguity not apparent from the words alone. Does not appear ambiguous on its face. This is usually determined by testimony, emails between the parties or other evidence. Under a modern approach patent and latent ambiguity are considered.
Trade Use Language – Ambiguity
Conflicting trade usage is not dispositive because the buyer is a novice. Government USDA grading language is not dispositive because the court was not convinced from the language of the K that the parties agreed to use the government’s meanings. To be dispositive the parties to the K must have agreed in the K as to the meanings of the words. (Frigaliment Importing Co. v. B.N.S. International Sales Corp)
Expectation Damages
Give the non-breaching party the benefit of the bargain. The financial equivalent of what the non-breaching party would have obtained had the K not been breached. This is the Benefit of the Bargain.
How to Calculate Expectation Damages
\+Loss in Value (Direct Damages) \+Other Loss (Consequential Damages) -Costs avoided -Loss avoided (mitigated) ------------------------------- BOB
Direct Damages
Direct damages are damages that result naturally from the defendant’s breach and are calculated by measuring the difference between the net value of what the breaching party promised and what the non-breaching party received. Consideration provides the measuring stick. This is like Ray v. Eurice.
Consequential Damages
Consequential damages are damages that do not flow directly and immediately from the breach of contract but result as a natural and secondary consequence of the defendant’s non-performance. Under Hadley v. Baxendale, consequential damages must be foreseeable to the defendant at the time of the contract formation. This allows the parties to estimate the risk of their venture.
Foreseeable secondary consequences not recoverable as consequential damages:
- Attorney’s fees
* Zapata Hermanos v. Hearthside Baking Co. – overdue invoices- Emotional Distress
- Erlich v. Menezes – Poorly built dream house
- Emotional Distress
Emotional Distress Damages
Typically only in Ks that deal with the business of death: Undertakers, etc.
Fraud Exception
1) A false representation of material fact
2) The party making the representation must have known his representation was false, or made with reckless disregard to the falsity.
3) The victim would have had to justifiably and reasonably relied on the representation.
4) And suffered injury as a result.
Remedies for Fraud
- Getting out of the contract (recession)
- Tort suits (including punitive)
- But not at the same time.
Syester v. Banta (the Iowa Cougar)
Additional K
Carey orders a car from a dealership, but when the car comes in he doesn’t buy it after all. But then Kenny comes along and buys it some time later. This is an additional K.
Mitigating K
DeVeaux owns only one truck that Carey contracts to buy. Carey backs out but Kenny steps in and buys the car from DeVeaux. Because the car sold anyway, the K is mitigated.
In a mitigating contract, the plaintiff could perform the new contract only because the defendant’s breach freed the plaintiff from the obligation to perform the original contract. Both contracts could not be performed at the same time. If the contract is a mitigating contract, the proceeds from that contract are a loss avoided that must be deducted from awarded damages.
Capacity
To determine if a K is LOSS avoided or COST avoided it comes down to capacity. Lost volume turns on whether the non-breaching party had a willingness and capacity enter into the K in the first place. Additional K vs. Mitigating K.
Formula for Capacity =
Willing + Able.
Additional K
If the non-breaching party does not lose a volume of business then it is an additional K.
In an additional contract, the plaintiff is willing and able to perform both contracts regardless of the defendant’s breach. Both contracts could be performed at the same time. If the contract is an additional contract, the plaintiff is entitled to the proceeds from both contracts. In addition, the plaintiff is not required to deduct those proceeds from awarded damages.
Mitigating K
If the non-breaching party lost business as a result of the breach then it is a mitigating K.
Exceptions to the Parol Evidence Rule
Ambiguity– If a term is ambitious the court will allow limited parol evidence to be submitted to the jury to inform them.
New agreements made after the execution of the writings
. . . but not if subject to a conditioned precedent (like a home sale contingent on loan approval)
Undue Influence
Fraud
Scribbiners Errors (typos)
Collateral agreements (more than one separate contract
Frustration of Purpose
After the K is created:
1) A Supervening Event occurs
2) That frustrated the principle purpose of the K so completely that without the ability to do it, the K would make little sense.
- *The frustration must be SUBSTANTIAL.
- 7-11 The sale of gas is merely incidental to the primary purpose of Seven-11 who’s principal object is to sell food items.
***The party seeking rescission bears the burden of proof.
“Subsequent government action” is one of the best arguments to make when showing a supervening circumstance.
Impracticability
The supervening event that changed the nature of the subject matter
The nonoccurrence of that supervening event is a basic assumption of the contract.
One of the parties can’t be at fault, or the cause for the supervening event.
The question is: Was the change so fundamental that it changed the creature itself, rather than just the collateral value?
Supervening Events
1) Recession is not a supervening event.
2) Change in value (collateral) is not basic. Basic would be the very animal itself (baron cow).
Frustration of Purpose won’t work:
The purpose frustrated can’t be related to the collateral value. In other words the lack of profitability isn’t a frustration of purpose.
Impossibility
When a K is predicated on the basic presumption that something will continue to exist. Think of Michael Jackson’s death. This is accomplished in a court of equity through the doctrine of rescission.
Remedy for Breaches
In most breaches of contract, the preferred remedy is expectation damages. The aim of expectation damages is to provide the non-breaching party with the benefit of the bargain. The benefit of the bargain makes the non-breaching party monetarily whole by putting that party in the same position he would have occupied had the contract been performed correctly. For a breach of contract, damages are calculated by adding the amount of direct damages to the amount of consequential damages, then subtracting the cost avoided and loss avoided.
UCC and Delegation
The UCC recognizes that in many cases an obligor will find it necessary or even convenient to relieve itself of the duty of performance in a K.
Unless the K says you can’t delegate.
A party may perform a duty through a delegate unless otherwise agreed to or unless the other party has a substantial interest in having his original promisor perform the acts prescribed by the K.
