Terms of Contract Flashcards
Modification of Agreement - Traditional Law vs. Modern View
Common Law: Modification requires additional consideration
* Modification can be done orally if both parties agree to it (mutual assent)
UCC: Modification must be in writing but does not need consideration as long as it’s in good faith
* As modified, must be for $500 or more
Examples
- Promise not to sue constitutes consideration if claim is valid or claimant thought it was valid in good faith
- Discharge of Debt: Debt can be discharged through accord and satisfaction; debtor’s offer to make partial payment on existing debt is sufficient if there’s bona fide dispute on underlying claim
Modification of Agreement - UCC
For sale of goods, parties can modify contract as long as it’s done in good faith
Parol Evidence Rule
(1) Was writing a final expression of bargain?
* If yes, it is an integration and any other agreements made before writing are not admissible to change terms of writing.
(2) Was writing a partial integration or a complete integration?
* Depends on intent of parties and is decided by judge, not jury (ex. if parties intended writing to only apply to portion of agreement, it’s partial integration)
* Merger Clause: States that agreement is “complete” agreement between parties; modern trend treats it as one factor in determining partial vs. complete integration
Partial Integration: Can’t be contradicted but can be supplemented with consistent additional terms
* UCC presumes all writings are PARTIAL integrations
Under the parol evidence rule, if the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an “integration.” Any other expressions made prior to the writing (or oral expressions made contemporaneously with the writing) are not admissible to vary the terms of the writing.
* However, the parol evidence rule requires that the parties (not one party) intend a writing to be the final expression of their agreement. If only one party prepared and signed the writing, it can’t be considered a final expression of the agreement.
Complete or Partial Integration
If the parties intended the writing to be the complete and final expression of their agreement, the integration is complete, and the writing may not be contradicted or supplemented. If, however, the parties intended the writing to cover only a portion of the agreement, the integration is partial. In that case, it cannot be contradicted but may be supplemented with consistent additional terms.
Whether an integration is complete or partial depends on the intent of the parties and will be decided by the judge, not the jury. All relevant evidence is admissible for this purpose. One of the factors considered is inclusion of a merger clause in the writing. A merger clause states the writing represents the complete agreement of the parties.
Exceptions to Parol Evidence Rule
- Evidence concerning validity of agreement (formation defects from fraud, duress, mistake, or illegality; condition precedent to effectiveness)
- Evidence used to interpret (meaning of terms are ambiguous or uncertain)
- Evidence showing true consideration paid
- Evidence in action for reformation
Parol evidence rule doesn’t apply to any modifications made after writing
Implied Warranty of Merchantability
Warrants that goods are fit for their ordinary purpose
* Implied in EVERY contract by merchant of goods of kind sold
Implied Warranty of Fitness for a Particular Purpose
Implied when seller has reason to know:
* (a) particular purpose for which goods are to be used
* (b) that buyer is relying on seller’s skill and judgment to select goods
* (c) and buyer does rely
Express Warranty
- affirmation of fact or promise made by seller
- description of goods
- sample or model
IF the above are the basis of the bargain (buyer relied on it when entering contract)
Warranty of Title
Warrants that title transferred is good, had right to convey good, and there are no liens/encumbrances against title
* AUTOMATIC WARRANTY
Disclaimers
Warranty of Title: must have specific language/circumstance putting buyer on notice that seller isn’t claiming title
Merchantability: disclaim by conspicuous writing that states “merchantability” or general disclaimer (“as is”, refusal to examine, course of dealing)
Fitness for a Particular Purpose: disclaim by conspicuous writing or general disclaimer (“as is”, refusal to examine, course of dealing)
Express Warranty: disclaimer usually not given effect
Damages for Breach of Warranty
Difference between goods tendered and as warranted
