PER and Interpretation

Question 1

Mitchill v. Lath NY 1928 (p. 383)

Answer 1

Parol Evidence Rule

Key Facts
P had written K to buy D’s farm for $8400, and had oral agreement that D would remove ice house. P received deed and invested in improvements to the property, but D didn’t remove the ice house.
Holding /Takeaway
Dismissed P’s complaint. Evidence of oral promise was kept from jury based on following test: 1) agreement must be collateral (it was). 2) parol evidence cannot contradict express or implied provisions of written contract (it didn’t). 3) parol evidence can’t pertain to issue that would ordinarily be embodied in written K (P did not satisfy this point).
Dissent/Critique
Parties would not normally include an agreement to remove an ice house on a property adjacent to the one for sale in the written K for the sale of the property. This parol evidence should be admitted.

Question 2

Hatley v. Stafford OR 1978 (p. 390)

Answer 2

Parol Evidence Rule

Key Facts
D’s written lease of P’s farm allows D to terminate agreement and recover possessions of wheat crop on land. P contends that the parties verablly agreed that D’s buy-out provision only applies for 30 days.
Holding /Takeaway
There was sufficient evidence to justify the trial court’s decision to admit the parol evidence. Parol evidence rule doesn’t apply if parties didn’t intend for written K to be final agreement. Courts should admit evidence of consistent additional terms only if there is substantial evidence that the parties didn’t intend for writing to embody agreement. This was a handwritten agreement reached without counsel, so it was not a sophisticated K, and the literal reading would make no sense.
Dissent/Critique
Majority decision makes statute meaningless by excluding any evidence of terms of written agreement itself; doesn’t reflect legislative intent.

Question 3

Lee v. Joseph Seagram & Sons 2nd Cir 1977 (p. 394)

Answer 3

Parol Evidence Rule

Key Facts
Oral agreement contradicted written lease.
Holding /Takeaway
Sufficient evidence to admit parol evidence.Integration is most easily inferred in real estate contracts; in more complex business agreements, oral agreements can be treated as separate and independent to written ones.
Dissent/Critique

Question 4

Masterson v. Sine CA 1968 (p. 394)

Answer 4

Parol Evidence Rule

Key Facts
Brother gave ranch to sister and husband with option to repurchase. There was a verbal agreement of nontransferability. Brother went bankrupt and sued for option on behalf of contractors.
Holding /Takeaway
Parol evidence admitted because it is natural to keep agreement of nontransferability separate from deed.
Dissent/Critique

Question 5

Hayden v. Hoadley VT 1920 (p. 395)

Answer 5

Parol Evidence Rule

Key Facts
P has written K to convey farm to D, with D agreeing to make certain repairs to village house and bar and to convey those to P. D said at time writing was signed they agreed orally that they had until 10/1 to perform.
Holding /Takeaway
D’s evidence of oral agreement was rightly excluded. Admission would allow for plain legal effects of written K to be controlled by oral evidence.
Dissent/Critique

Question 6

Interform Co. v. Mitchell 9th Cir 1978 (p. 397)

Answer 6

Parol Evidence Rule

Key Facts

Holding /Takeaway
Writing is a unique and compelling force. The Judge, assuming the function of reasonable person, determines whether the writing did supersede all previous undertakings, and, if so, its meaning to a reasonable person.
Dissent/Critique

Question 7

Luria Bros & Co. v. Pielet Bros Scap Iron & Metal Inc. 7th Cir 1979 (p. 400)

Answer 7

Parol Evidence Rule

Key Facts
R contractd to sell large quantity of scrap steel to P through oral conversations and written forms. R failed to perform, on grounds that K was expressly conditioned on R obtaining scrap metal from a specific supplier, which R contends the parties discussed orally.
Holding /Takeaway
R’s oral evidence is insufficient to be admitted under parol evidence rule.
Dissent/Critique

Question 8

Hargrave v. Oki Nursery 2nd Cir 1980 (p. 406)

Answer 8

The Fraud Exception to the Parol Evidence Rule

Key Facts
P vineyard operator sued D grape vine seller, alleging D had represented to P that the vines would be healthy, free of disease, and suitable for producing wine grapes. Vines were diseased and incapable of bearing fruit of adequate quality and quantity for P’s commercial wine production.
Holding /Takeaway“The law of fraud seeks to protect against injury those who rely to their detriment on the deliberately dishonest statements of another…But if in addition there is an interest in protecting the plaintiff from other kinds of harm, the plaintiff may recover in tort whether he has a valid claim for breach of contract.”
Dissent/Critique

Question 9

Lipsit v. Leonard NJ 1974 (p. 407)

Answer 9

The Fraud Exception to the Parol Evidence Rule

Key Facts
P was employed by D. Employement arrangement was drawn out in annual letter agreements. P says there was an oral agreement that P would be given equity in the corporation.
Holding /Takeaway
P’s harm was that he forewent other opportunities to stay w/ D for promise of equity. Possible tort claim may allow parol evidence and fraud action, but P must show fraudulent intent by D at time of representations. P is entitled to try to prove oral promises. Allowing tort fraud claim when contracts claim tails under PER ensures fairness (P needs some avenue to bring claim, present evidence, and seek justice).
Dissent/Critique

Question 10

Bank of America Nat. Trust & Sav. Ass’n v. Pendergrass CA 1935 (p. 411)

Answer 10

The Fraud Exception to the Parol Evidence Rule

Key Facts
P sued D for promissory note signed by D to be payable on demand. D argued he signed not after P promised orally that D would be allowed to operate ranch.
Holding /Takeaway
D’s evidence of oral agreement was inadmissable because it would extend/postpone D’s unconditional obligation to pay on demand. This is inconsistent under PER, even through fraud.
Dissent/Critique

Question 11

Sabo v. Delman NY 1957 (p. 412)

Answer 11

The Fraud Exception to the Parol Evidence Rule

Key Facts
P entered written K assigning P’s patents for shoe-making to D and providing for sharing the proceeds of those patents, after D had represented orally that he would finance the manufacture of the machines and use his best efforts to promote sale. D made only 2 machines.
Holding /Takeaway
Parol evidence rule forbids proof of extrinsic evidence to contradict the very terms of the written instrument, so P’s enforcement action must fail. P’s reliance was not reasonable because K had a non-reliance clause.
Dissent/Critique

Question 12

LaFazia v. Howe RI 1990 (p. 413)

Answer 12

Promises that Cannot be Enforced: Indefinite, Vague, and Illusory Promises

Key Facts
Ds entered into K with Ps to purchase deli. Ps told Ds they always paid cash and had not kept very good books, and there were no records except their tax returns, which did not reflect their true business numbers. Relying on tax returns, Ds figured it was not a viable business, but Ps had nice cars, nice houses, and the ability to support their kids. Ds agreed to buy business, paid $60,000 upfront, and signed promissory note for remaining $30,000. Parties signed a memo of sale, which had merger and disclaimer clauses (including that buyer relies on own judgment of business/profits and seller has not made any representations). When promissory note was due, Ds claimed they hadn’t made any money and couldn’t pay.
Holding /Takeaway
Summary judgment for Ps was appropriate because clauses in K precluded Ds from asserting that Ps made material misrepresentations regarding profitability of business.
Dissent/Critique

Question 13

Danann Realty Corp. v. Harris NY 1959 (p. 415)

Answer 13

Promises that Cannot be Enforced: Indefinite, Vague, and Illusory Promises

Key Facts
Buyer sued seller for fraud because of false representatiosn regarding operating expenses of building to be purchased. K had clause that seller didn’t make any representations to buyer as to physical condition, rents, leases, expenses, operation, or anything related to the premises.
Holding /Takeaway
Disclaimer destroyed buyer’s claim.
Dissent/Critique

Question 14

Rio Grande Jewlers Supply v. Data General Corp. NM 1984 (p. 418)

Answer 14

Promises that Cannot be Enforced: Indefinite, Vague, and Illusory Promises

Key Facts
Computer buyers sued seller for negligent misrepresentations as to computer’s capabilities. K specifically provided that it was to be the “complete and exclusive statement” of the parties’ agreement, and there was an effective disclaimer under the UCC.
Holding /Takeaway
Buyers won.
Dissent/Critique

Question 15

Richardson v. Union Carbide Indus. Gases, Inc., NJ, 2002, p.464

Answer 15

Forms

Key Facts:
Battle of the Forms - Buyer and seller exchanged standard, boilerplate forms with contradictory indemnity clauses. Neither side objected to the language in the documents. One of the buyer’s employees was injured by the product (furnace components) and sued.
Holding/Takeaway:“Knock-out rule” - Conflicting terms fall out and, if necessary, are replaced by suitable UCC gap-filler provisions. UCC §2-207. UCC tried to reform the common law mirror-image rule.
Dissent:
Alternatives: Minority view that offeror’s terms control because 2-207 only applies to additional terms. Third view: assimilates “different” to “additional” so that the terms of the offer prevail over the different terms in the acceptance only if the latter are materially different

Question 16

ProCD, Inc. v. Zeidenberg, 7th Cir., 1996, p.469

Answer 16

Forms

Key Facts:
π compiled a contact database and sold at different price points for personal use and business use. π restricted usage through a license on the CDs and printed in the manual. ∆ ignored the license, bought the consumer version, and resold the database. Are licenses inside a box contract if all the terms aren’t listed outside the box?
Holding/Takeaway:
Offerer (seller) is master of the offer (2-204) and can set terms. Acceptance can be once the buyer has the opportunity to inspect, read the license, and fails to reject the goods.
Dissent:
See Klocek

Question 17

Hill v. Gateway 2000, 7th Cir., 1997, p.473

Answer 17

Forms

Key Facts:
π orders a computer via phone from ∆. ∆ ships computer with list of terms, said to govern unless customer returns within 30 days. One of the terms is an arbitration clause. Is the contract, and therefore the clause, enforceable?
Holding/Takeaway:
Approve-or-return method for terms is acceptable for commercial transactions. It is not necessary to recite the terms over the phone.
Dissent:
See Klocek

Question 18

Klocek v. Gateway, KS, 200, p.476

Answer 18

Forms

Key Facts:
∆, computer seller, includes terms in box. Terms include an arbitration clause. Did π agree to this clause by keeping the computer more than 5 days?
Holding/Takeaway:
7th Circuit didn’t show that the vendor is the master of the offer. Instead, the vendor accepted π’s order. Because π isn’t merchant, additional or different terms do not become part of the agreement unless π expressly agrees to them. Keeping the computer for 5 days not sufficient to establish express agreement
Dissent:
See ProCD and Hill

Question 19

Specht v. Netscape Communications Corp., 2d Cir., 2002, p.477

Answer 19

Forms

Key Facts:
πs downloaded free software from ∆’s website. To download, one must click “Yes” button to show acceptance of terms. To access the terms, one must scroll down past the “Download” button and click a link. Terms include arbitration clause. Is this sufficient for assent to terms? πs allege that their information was unknowingly transferred to ∆ following downloading the software.
Holding/Takeaway:
Clicking download with the license terms on a submerged screen does not sufficiently place consumers on notice of terms. Reasonably conspicuous notice of the existence of contract terms and unambiguous manifistation of assent to those terms by consumers are essential for electronic bargaining.
Dissent:

Question 20

Weisz v. Parke-Bernet Galleries, Inc., NY, 1971, p.667

Answer 20

Adhesion

Key Facts:
πs purchased paintings at auctions conducted by ∆. Paintings were found to be forgeries. π alleges ∆’s catalog constituted an express warranty of authenticity. The auction catalog disclaims that all property sold “as is” on a Conditions page. Only announcement said before the auction that “the auction is subject to the condictions of sale.”
Holding/Takeaway:
Trial court ruled the disclaimer ineffective based on the language used, the understated manner of its presentation, and the failure to give explicit warning via oral announcement. Appellate court reversed, saying πs should act with more caution given the circumstances and the nature of art auctions.
Dissent:

Question 21

Henningsen v. Bloomfield Motors, Inc., NJ, 1960, p.673

Answer 21

Adhesion

Key Facts:
π’s wife drove a new car purchased from ∆. The steering wheel malfunctioned leading to a crash. π sued for damages (personal injury, property, consequential) as an breach of implied warranty of merchantability. ∆ has disclaimer limiting liability for breach of warranty to replacement of defective parts. This was written in fine print on the back of the sales contract.
Holding/Takeaway:
The warranty is standard by auto manufacturers, so there is no free bargaining of parties. The warranty is take-it-or-leave-it for consumers. Auto manufacturers cannot use their grossly disproportionate bargaining power to contract out of liability for personal injuries and limit liability through an express warranty. Void against public policy. (A party with disproportionate bargaining power can’t use a standard contract provision to disclaim implied warranties).
Dissent:

Question 22

Richards v. Richards, WI, 1994, p.680

Answer 22

Adhesion

Key Facts:
Exculpatory Contracts π, a truck driver, and his wife signed a passenger authorization form that released the ∆ company from all claims by a passenger. On a trip, the car overturned and π’s wife sustained injuries.
Holding/Takeaway:
Exculpatory agreements are disfavored, but not automatically void. Three factors in combination led to this exculpatory contract being void against public policy: 1. The liability release function of the contract isnt clear. 2. the release is extremely broad and all-inclusive, 3. It is a standardized form that allows little to no opportunity for negotiation or free and voluntary bargaining.
Dissent:

Question 23

Columbia Nitrogen Corp. v. Royster Co., 4th Cir., 1971, p.431

Answer 23

Interpretation

Key Facts:
π manufactures mixed fertilizers. It constructed a new facility which enabled it to produce more phosphate than it needed. It contracted with ∆ to sell phosphate for three yeras. The price of phosphate plunged. ∆ ordered only part of the agreed amount, then π lowered the price for three months, but ∆ wouldn’t pay full contract prince. π sues for breach. ∆ defends by saying that the trade custom is for the contract price to be a projection to be adjusted
Holding/Takeaway:
∆ allowed to present evidence that the practice was so prevalent that it is part of the agreement between parties.
Dissent:

Question 24

Robert Indus. v. Spence, MA, 1973, p.432

Answer 24

Interpretation

Key Facts:
Evidence admitted related to the facts and circumstances of the transaction for the purpose of removing ambiguity of contract terms.
Holding/Takeaway:
Retreat from four-corners standard: When a written agreement is uncertain in meaning, all the circumstances of the parties leading to its execution may be used to understand the contract (but not to contradict or change terms). The words are still the most important evidence of interpretation.
Dissent:

Question 25

Federal Dep. Ins. Corp. v. W.R. Grace & Co., 7th Cir., 1989, p. 432

Answer 25

Interpretation

Key Facts:
(None)
Holding/Takeaway:
The words of a contract are still important. Parties disagreeing on meaning does not make it ambiguous.
Dissent:

Question 26

Spaulding v. Morse, MA, 1947, p.433

Answer 26

Interpretation

Key Facts:
∆ created a trust for π. ∆ would pay into the trust until π entered higher education, then would increase the payments during that period of higher education. π entered into military service and the payments stopped. π sued to enforce the agreement.
Holding/Takeaway:
∆ is not required to provide assistance for π during his military service as the purpose of the payments is preempted by the military servvice.
Dissent:

Question 27

Frigaliment Importing Co. v. B.N.S. International Sales Corp., NY, 1960, p.435

Answer 27

Interpretation

Key Facts:
What is “chicken”? . . . Since the word “chicken” standing alone is ambiguous . . . π contracted to buy chickens from ∆. Disagreement on type of chicken required by the contract. π contends for a narrower, specific type of chicken, while ∆ argues it is chicken in the broader sense so long as they conform to other contract specifications.
Holding/Takeaway:
Party advocating a special meaning of a term bears the burden of proof in showing that the narrow, special reading of the term was the intended meaning by the parties.
Dissent:

Question 28

United Rentals, Inc. v. RAM Holdings, Inc., DE, 2007, p.441

Answer 28

Interpretation

Key Facts:
π company and ∆ company were in negotiations to merge and created a merger agreement contract. π wanted to restrict ∆’s ability to unilaterially leave negotiations. The parties disagree as to whether the merger agreement allows for the remedy of specific performance.
Holding/Takeaway:
Forthright Negotiator Principle - “In cases where extrinsic evidence does not lead to a single, commonly held understanding of a contract’s meaning, a court may consider the subjective understanding of one party that has been objectively manifested and is known or should be known by the other party.” Both parties’ interpretations of the contract were reasonable, so extrinsic, parol evidence was allowed, which still wasn’t clear enough, so the court applied the forthright negotiator principle.
Dissent: