Terms of the Contract

Question 1

What is the parol evidence rule?

Answer 1

General: When parties express K in writing with the intent that the writing is a final expression of the bargain, any expression (written or oral) made prior to the final writing is inadmissible to vary the terms of the contract.

Exception:
— to prove formation defects (like fraud, duress, mistake…)
— to prove there was a condition precedent
— to correct clerical errors
— interpret ambiguous terms
— showing true consideration
— additional terms under Art 2
— inapplicable to subsequent modification

Question 2

When is a writing an integration?

Answer 2

(1) intended as final expression
(2) intended to be complete

— evidence admissible to show parties’ intent

Question 3

What is a partial integration?

Answer 3

A final expression not intended to be complete may not be contradicted but may be supplemented by consistent additional terms

Question 4

What is the effect of a merger clause?

Answer 4

Presence of a merger clause a factor in determining whether it is a complete integration

Question 5

When interpreting a contract, what is the hierarchy of sources you turn to?

Answer 5

1 - the words themselves
2- course of performance
3 - course of dealing
4 - usage of trade

Question 6

How are contracts construed, as a general rule?

Answer 6

As a whole (specific clauses subordinated to overall intent); words according to their ordinary meaning?

Question 7

What provisions have superiority where they are inconsistent?

Answer 7

A written or typed provision prevails over a printed provision

Question 8

What is the presumption in interpreting the contract?

Answer 8

Presumption of validity/enforceability (courts try to interpret in a way that will be enforceable)

Question 9

How are ambiguities in a contract construed?

Answer 9

Contra proferentum; against the party that drafted it

Question 10

What are the steps taken when rules conflict?

Answer 10

(1) express terms
(2) course of performance
(3) course of dealing
(4) usage of trade

Question 11

What are UCC gap-filler terms and when are they used?

Answer 11

If terms are missing/knocked out, the UCC supplies some default terms

Question 12

What are the UCC price gap-fillers?

Answer 12

Reasonable price at time of delivery

Question 13

What are the UCC place of delivery gap-fillers?

Answer 13

Seller’s place of business (if none, seller’s residence)

Question 14

What are the UCC time for shipment or delivery gap-fillers?

Answer 14

Due in a reasonable time

Question 15

What are the UCC time for payment gap-fillers?

Answer 15

At the time and place when/where buyer is set to receive the goods

Question 16

What are the UCC assortment gap-fillers?

Answer 16

If K provides an assortment of goods is to be delivered but not who is to choose the assortment, assortment is at buyer’s option

Question 17

What is the effect of risk of loss (neither party at fault) in a sale of goods contract?

Answer 17

If the seller bears the risk, it must provide new goods to the buyer at no additional cost or be liable for breach.

If the buyer bears the risk, they must still pay the contract price even though the goods are destroyed

Question 18

How do you determine the risk of loss?

Answer 18

IN ORDER:

(1) Does the agreement itself allocate risk?
(2) Is there a breach? The breaching party bears the risk of loss even if the breach is unrelated.
(3) Delivery by a common carrier like UPS or Amtrak? Risk of loss shifts to the buyer when the seller completes its delivery obligations (shipment vs. destination contract)
(4) Non-carrier (buyer picks up or seller delivers)? Risk depends on whether seller is a merchant. If a merchant, risk stays with merchant until buyer takes possession. If not, buyer bears the risk of loss once the seller tenders (makes the goods available to the buyer)

Question 19

What is the difference between a shipment and a destination contract?

Answer 19

2 forms of carrier contract!
Shipment – seller completes delivery obligations when it gets the goods to a common carrier, makes delivery arrangements, and notifies the buyer. **commonly tested because it is counterintuitive

Destination contract – seller must get the goods all the way to a specific destination (usually, but not necessarily, where the buyer is).

Shipment contract is presumed unless clearly stated otherwise. **FOB + city name = free on board at X city indicating a destination contract
***FAS = free alongside and applies to boat shipments (risk of loss passes at dock)

Question 20

What is the effect of defective goods on risk of loss?

Answer 20

If the buyer has the right of rejection, risk does not pass until defects are cured or they accept the goods.

Question 21

What is the effect of revocation of acceptance on risk of loss?

Answer 21

If a buyer revokes acceptance, the risk of loss is treated as having rested on the seller from the beginning to the extent of any deficiency in the buyer’s insurance. ***If the seller ships nonconforming goods, it negates the need to ask whether the contract is a shipment or destination contract.

Question 22

What is a sale or return contract and how is risk allocated?

Answer 22

Definition: buyer takes goods for resale and can return if unable to resell.
Risk of loss: Ordinary rules apply, but if returned, buyer retains the risk of loss while goods are in transit.

Question 23

What is a sale on approval contract and how is risk allocated?

Answer 23

Definition: The buyer takes goods for a trial period and may return them even if they conform.
Risk of loss: Risk does not pass until buyer accepts the goods by keeping them past a certain time or notifying the seller. Return is at seller’s risk.

Question 24

What happens when goods are destroyed before the risk of loss passes?

Answer 24

If the goods were identified when the contract was made are destroyed without fault and before risk of loss passes to the buyer, the seller’s performance is excused. If the goods were not identified until after the contract was made the seller would have to prove impracticability to obtain discharge.

Question 25

What is an express warranty?

Answer 25

An affirmation of fact, description, promise, model or sample (more than opinion/mere puffery). May not be disclaimed

Question 26

What is a warranty of title?

Answer 26

Warranty that title is good, transfer is rightful and no liens or encumbrances. May be disclaimed by specific language or circumstances showing seller does not have title

Question 27

What is the implied warranty of merchantability?

Answer 27

If seller is a merchant. Warranty implied by law that the goods are fit for ordinary purposes. May be disclaimed.

Question 28

What is the implied warranty of fitness for a particular purpose?

Answer 28

regardless of merchant status, if the buyer has a particular purpose for which they are buying goods and the seller knows this and the buyer is relying on the seller to choose suitable goods, there is an implied warranty that those goods are fit for that purpose. May be disclaimed

Question 29

How are implied warranties disclaimed?

Answer 29

Conspicuous written disclaimer, or language like “as is”/also through course of performance course of dealing and usage of trade

Question 30

How may a seller limit a buyer’s remedy in a sale of goods?

Answer 30

A seller may limit a buyer’s remedy for breach of any warranty so long as the limitation is not unconscionable. Always unconscionable to limit remedy for personal injury

Question 31

What are the basic rules governing modification of contracts?

Answer 31

At common law: no modification absent new consideration UNLESS due to unanticipated circumstances (unforeseeable at time of formation) and modification is fair/equitable

UCC: can be modified without new consideration if in good faith

Question 32

When may a written contract be orally modified?

Answer 32

Common law: A written K may generally be modified orally even where the original K required a written modification UNLESS the statute of frauds applies.

UCC: A written K may be modified orally UNLESS the statute of frauds applies or the written K specified no oral modifications.