Terms of the Contract Flashcards
What is the Parole Evidence Rule?
Prior written or oral, and contemporaneous oral expressions, that contradict, modify, or vary contractual terms are inadmissible if the written contract is intended as a complete and final expression of the parties.
Under the Parole Evidence Rule, what is a Merger clause?
A clause in a contract stating that the written agreement represents the complete and final expression of the parties.
Under the Parole Evidence Rule, why is a Merger clause important within a contract?
It strengthens the presumption that the written document is final.
Under Parole Evidence, what is a common test used when one party wants to bring in a term?
If the parties normally would have included the term (or provision) in the contract but did not, then the term will not become part of the contract.
Does the Parole Evidence Rule apply to subsequent (future) dealings or future Modifications to the contract?
No, only prior and contemporaneous (same time) dealings.
What are the four exceptions to the Parole Evidence Rule?
1) Ambiguity 2) Formation defenses such as: Fraud/Misrepresentation, Duress, Mistake, Illegality or Incapacity 3) a condition precedent to the contract having any legal effect 4) course of performance, course of dealing, or usage and trade that may explain or supplement the evidence.
What UCC codes deal with Acceptance with Additional terms?
2-207 (1) and 2-207 (2)
Under 2-207(2), as between merchants, an additional term(s) in acceptance automatically becomes part of the contract unless one of what three elements are present?
1) the offer limits acceptance to the terms of the offer 2) the offeror objects (to the additional term) within a reasonable time 3) the additional term materially alters the contract
What three elements make a term Material?
1) If the term results in a surprise or hardship 2) if it substantially affects the economic risks or benefits of the contract 3) if it, in any way, limits the usual remedies for breach
Is an Arbitration clause a material term?
No, arbitration clauses are not considered material because they are so common place in commercial contracts that their inclusion would not result in a surprise or hardship.
Is a waiver of warranty such as ‘As-is” a Material term?
Always
Under UCC 2-207 (2), if at least one party is a non-merchant, what happens to an acceptance with additional terms?
The additional terms will be ignored and not become part of the contract. They will result in a proposal only but that proposal will require express assent by the other party.
What is the difference between an Acceptance with Additional Terms and a Conditional Acceptance?
The use of express conditional language such as “if, unless, as long as” constitutes a conditional acceptance and, therefore, a rejection and counter-offer.
Acceptance with Additional terms does not include any express conditional language and, as between merchants, is considered a valid acceptance of the initial offer (and a binding contract).
As between merchants, the additional terms will become part of the contract unless one of the three exceptions apply, the 1) offer limits acceptance to the terms of the offer 2) offeror objects to the additional terms within a reasonable time, or 3) the additional terms materially alter the contract.
If at least one party is a non-merchant, the acceptance of the initial offer is valid, but the additional terms constitute only a proposal which will require express assent by both parties.
What happens to an Acceptance with Different Terms?
The Different (differing) terms are knocked out of both the offer and acceptance. A valid contract is formed and UCC Gap fillers will then be used to make the contract reasonable.
UCC 2-207 (3) addresses the Last Shot Rule under the UCC. Does the Last Shot Rule apply to the UCC?
No, it only applies to Common law contracts. There is no “implied acceptance by performance” under the UCC.
Under UCC 2-207 (3), when parties exchange rejections and counter-offers and then one party does not return a rejection and counter-offer but instead performs, since there is no Last Shot Rule under the UCC and no “implied acceptance by performance”, what happens?
Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract, even if the writings of the parties do not establish a contract. In this case, the terms of the contract will be those on which the past writings of the parties agree.
